<PAGE>
As filed with the Securities and Exchange Commission on April 26, 2000
Registration No. 333-30674
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
AMENDMENT NO. 3
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
SUPPORT.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7389 94-3282005
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
575 Broadway
Redwood City, CA 94063
(650) 556-9440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
RADHA RAMASWAMI BASU
Chief Executive Officer
SUPPORT.COM, INC.
575 Broadway
Redwood City, CA 94063
(650) 556-9440
(Name, address, including zip code and telephone number, including area code,
of agent for service of process)
----------------
Copies to:
<TABLE>
<S> <C>
Jorge del Calvo, Esq. Mark A. Bertelsen, Esq.
Allison Leopold Tilley, Esq. Jose F. Macias, Esq.
Davina K. Kaile, Esq. Betsey Sue, Esq.
Pillsbury Madison & Sutro LLP Wilson Sonsini Goodrich & Rosati
2550 Hanover Street 650 Page Mill Road
Palo Alto, CA 94304 Palo Alto, CA 94304
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement numbers of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
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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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration filed with the Securities +
+and Exchange Commission is effective. This prospectus is not an offer to sell +
+securities and it is not soliciting offers to buy these securities in any +
+state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 26, 2000
Shares
(logo)
Common Stock
--------
Before this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on The
Nasdaq Stock Market's National Market under the symbol SPRT.
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Investing in our common stock involves risks. See Risk Factors on page 7.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Support.com
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about .
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Chase H&Q
Bear, Stearns & Co. Inc.
Wit SoundView
The date of this prospectus is .
<PAGE>
Graphic depicting Support.com's business:
Support.com Logo
eBusiness infrastructure software that automates, personalizes
and enhances user support over the Internet
<TABLE>
<S> <C> <C> <C>
Corporate information technology [GRAPHIC OF PERSON WEARING HEADSET] Internet [SUPPORT.COM LOGO]
departments use our software to Corporate Customers [GRAPHIC OF PERSON
provide support for the systems Information Technology Departments FACING A COMPUTER
and applications used by their TERMINAL]
employees, partners and customers.
Support outsourcers use our [GRAPHIC OF PERSON WEARING HEADSET]
software to meet customer service Support outsourcers
requirements for the complex
environments they support.
Internet service providers use our [GRAPHIC OF PERSON WEARING HEADSET] [SUPPORT.COM LOGO]
software to address Internet Internet Service [SUPPORT.COM LOGO] Extranet Partners
connectivity, email, browser and Providers Clients
other subscriber issues. Suppliers
Application service providers use [GRAPHIC OF PERSON WEARING HEADSET] Intranet [SUPPORT.COM LOGO]
our technology to enhance their Application Service Employees
web-based software delivery with Providers
automated, web-based support.
</TABLE>
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................. 3
Risk Factors........................ 7
Special Note About Forward-Looking
Statements......................... 17
Use of Proceeds..................... 18
Dividend policy..................... 18
Capitalization...................... 19
Dilution............................ 20
Selected Consolidated Financial
Data............................... 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 23
Business............................ 32
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management....................... 51
Related Party Transactions....... 62
Principal Stockholders........... 64
Description of Capital Stock..... 67
Recission Offer.................. 71
Shares Eligible for Future Sale.. 72
Underwriting..................... 74
Notice to Canadian Residents..... 77
Legal Matters.................... 78
Experts.......................... 78
Where You Can Find More
Information..................... 78
Index To Financial Statements.... F-1
</TABLE>
------------
Dealer Prospectus Delivery Obligation
Until 25 days after the commencement of this offering, all dealers that
participate in transactions with these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealer's obligation to deliver a prospectus when acting as an
underwriter and unsold allotments or subscriptions.
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully before making a decision
whether to purchase our common stock.
Support.com
We provide eBusiness infrastructure software that automates, personalizes
and enhances user support over the Internet. Our eSupport software is designed
to accelerate eBusiness growth by increasing the efficiency and capabilities of
support organizations that would otherwise constrain expanding Internet
initiatives. eBusiness refers to business conducted over the Internet and
eSupport is the automated delivery of user support over the Internet. Our
eSupport product suite offers customers automated problem avoidance through
system self-healing, call avoidance through user self-service portals and
improved problem resolution through intelligent online assisted support.
We sell our products and services to corporate information technology
departments, Internet service providers, application service providers and
support outsourcers. Our customers include Bear Stearns, Cisco, Compaq,
Computer Sciences Corporation, everdream, Excite@Home, Globo Cabo, JCPenney,
micronpc.com and Samsung.
Businesses are rapidly implementing Internet technologies to automate and
improve interactions between employees, customers, and their network of
suppliers, distributors and business partners. We believe high-quality user
support is essential to succeed in this environment. Organizations can deploy
eSupport solutions to transform support operations from inefficient cost
centers to highly productive and scalable competitive assets that increase
customer loyalty, improve operational efficiencies and generate incremental
revenue. IDC estimates that the market for these eSupport solutions will grow
to over $14 billion in 2003.
We believe technical support has become the most critical form of user
support, as businesses and users increasingly rely upon complex information
technology and the Internet to conduct business. The growing complexity of
information systems, the proliferation of electronic devices, and the
escalation in the number of users has made technical support increasingly
difficult to deliver. These complexities require a highly personalized,
automated and web-based approach to support that intelligently identifies and
resolves user problems.
Our eSupport solution is an integrated suite of web-based software
products--Healing Agent, Support Center, Support Portal, and Foundry--that can
deliver:
. reduced costs through the automation and personalization of the support
process.
. increased customer satisfaction through rapid problem resolution.
. accelerated eBusiness growth by converting the traditional call center
into a business services desk that increases the efficiency of the
support process and generates revenues.
We believe that our leadership in providing eSupport infrastructure software
gives us a competitive advantage as we develop solutions to address broader
customer service opportunities.
3
<PAGE>
We were incorporated in Delaware in December 1997 under the name Replicase,
Inc. We changed our name to Tioga Systems, Inc. in October 1998 and to
Support.com, Inc. in December 1999. Our principal executive offices are located
at 575 Broadway, Redwood City, California 94063, and our telephone number at
that address is (650) 556-9440. Our web site is located at www.support.com. The
information on our web site is not part of this prospectus.
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Support.com................ shares
Common stock to be outstanding after the offering.. shares
Use of proceeds.................................... For repayment of debt and
general corporate
purposes, including
working capital.
Proposed Nasdaq National Market symbol............. SPRT
</TABLE>
----------------
Unless otherwise indicated, the number of shares of our common stock to be
outstanding after this offering is based on the number of shares outstanding on
March 31, 2000 and assumes:
. no exercise of the underwriters' over-allotment option,
. the exercise of warrants to purchase 38,461 shares of our preferred stock
that will expire if not exercised before completion of this offering and
. conversion of all outstanding shares of preferred stock into common
stock,
and excludes:
. 2,139,784 shares issuable upon exercise of options outstanding at a
weighted average exercise price of $2.51 per share,
. 245,189 shares issuable upon exercise of warrants outstanding and
. 6,470,434 additional shares available for future issuance under our stock
plans.
5
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period from
incorporation on Three months
December 3, 1997 Year ended ended March 31,
to December 31, December 31, -----------------
1998 1999 1999 2000
---------------- ------------ ------- --------
(unaudited)
<S> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Total revenue................ $ 18 $ 3,315 $ 334 $ 2,413
Loss from operations......... (2,804) (14,464) (1,209) (9,909)
Net loss..................... (2,750) (14,294) (1,207) (9,849)
Accretion on redeemable
convertible preferred
stock....................... (214) (1,072) (101) (402)
Net loss attributable to
common stockholders......... (2,964) (15,366) (1,308) (10,251)
Net loss per share:
Basic and diluted.......... (0.57) (2.31) (0.20) (1.21)
Weighted average shares--
basic and diluted......... 5,227 6,643 6,481 8,442
Pro forma net loss per share:
Basic and diluted.......... (0.71) (0.41)
Weighted average shares--
basic and diluted......... 20,137 23,998
</TABLE>
<TABLE>
<CAPTION>
March 31, 2000
------------------------------
Proforma
Actual Proforma as Adjusted
-------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
investments................................... $ 11,773 $11,773
Working capital................................ 4,683 4,683
Total assets................................... 17,321 17,321
Long-term obligations, net of current portion.. 2,423 2,423
Redeemable convertible preferred stock......... 21,851 --
Stockholders' equity (deficit)................. $(18,452) $ 3,399
</TABLE>
----------------
The statement of operations for the year ended December 31, 1998 is
presented for the period from our incorporation on December 3, 1997. Operating
expenses totaled approximately $9,000 for the period from our incorporation on
December 3, 1997 to December 31, 1997.
Please see note 1 of the notes to the financial statements for an
explanation of the determination of the number of shares used in computing per
share data.
The pro forma as adjusted balance sheet data includes the sale of the
shares of common stock that we are offering under this prospectus at an
assumed initial public offering price of $ per share and after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
6
<PAGE>
RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus before deciding to invest in shares of our
common stock. If any of these risks actually occur, our business, results of
operations and financial condition would likely suffer. In these circumstances,
the market price of our common stock could decline, and you may lose all or
part of your investment.
Risks Related to Support.com
We have a history of losses and if we do not become profitable, we may not be
able to continue to operate.
We incurred net losses of approximately $26.9 million for the period from
December 3, 1997, through March 31, 2000. We expect to continue to incur
substantial net losses in the future. 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 continue to incur net losses, we may not be
able to increase our number of employees or our investment in capital
equipment, sales, marketing and research and development programs. We do not
know when or if we will become profitable. If we do achieve profitability, we
may not sustain or increase profitability in the future and may not be able to
continue to operate.
Our quarterly results are difficult to predict and may fluctuate. If we do not
meet quarterly financial expectations, our stock price would likely decline.
Because of our limited operating history, our quarterly revenue and
operating results are difficult to predict and may fluctuate from quarter to
quarter. Our operating results in some quarters may fall below the expectations
of securities analysts or investors, which would likely cause the market price
of our common stock to decline.
Several factors are likely to cause fluctuations in our operating results,
including:
. demand for our eSupport infrastructure software;
. the price and mix of products and services we or our competitors offer;
. our ability to retain customers; and
. the amount and timing of operating costs and capital expenditures
relating to expansion of our business, infrastructure and marketing
activities.
Our quarterly results depend on the size of a small number of orders, so the
delay or loss of any single large order during a quarterly period, and
especially an order for a perpetual license rather than a subscription license,
could harm that quarter's results and cause our stock price to decline.
Our operating results could suffer if any large orders are delayed or
cancelled in any future period. Each quarter, we derive a significant portion
of our license revenue from a small number of relatively large orders for the
licensing of our eSupport infrastructure software. We also license our eSupport
infrastructure software under perpetual and subscription licenses. Perpetual
licenses typically result in our recognition of a larger amount of revenue in
the quarter in which the license is granted as compared with subscription
licenses. Revenue from a perpetual license is generally
7
<PAGE>
recognized upon delivery of a product. Revenue from a subscription license is
recognized on a monthly basis over the term of the subscription, which is
typically three years. We expect that we will continue to depend upon a small
number of large orders for a significant portion of our license revenue.
Because a small number of customers has accounted for and may continue to
account for substantial portions of our revenue, our revenue could decline
because of delays of customer orders or the failure of existing customers to
renew licenses.
For the first quarter of 2000, Schlumberger accounted for 27% of our total
revenue, General Electric accounted for 15% of our revenue and Computer
Sciences Corporation accounted for 10% of our total revenue. No other single
customer accounted for 10% or more of our total revenue for the first quarter
of 2000. Because we have a small number of customers and a few customers are
likely to continue to account for a significant portion of our revenue, our
revenue could decline because of the loss or delay of a single customer order
or the failure of an existing customer to renew its subscription license. We
may not obtain additional customers. The failure to obtain additional
customers, the loss or delay of customer orders and the failure of existing
customers to renew licenses will harm our operating results.
We must achieve broad adoption and acceptance of our eSupport products and
services or we will not increase our market share or grow our business.
We must achieve broad market acceptance and adoption of our products and
services or our business and operating results will suffer. Specifically, we
must encourage our customers to transition from using traditional support
methods. To accomplish this, we must:
. continually improve the performance, features and reliability of our
products and services to address changing industry standards and customer
needs and
. develop integration with other support-related technologies.
We must attract and retain qualified personnel, which is particularly difficult
for us because we are headquartered in the San Francisco Bay Area, where
competition for personnel is extremely intense.
If we fail to retain and recruit the necessary personnel, our ability to
develop new products and services and to provide acceptable levels of customer
service could suffer. We currently plan to substantially increase our number of
employees over the next 12 months. Competition for these personnel is intense,
especially in the San Francisco Bay Area. We have had difficulty hiring
qualified personnel as quickly as we have desired. Specifically, we may be
unable to hire a sufficient number of qualified support, training and
engineering professionals. If we hire employees from our competitors, these
competitors may claim that we have engaged in unfair hiring practices. We could
incur substantial costs in defending ourselves against any of these claims,
regardless of their merits.
Our product innovations may not achieve the market penetration or price
stability necessary for profitability.
If we fail to develop, in a timely manner, new or enhanced versions of our
eSupport infrastructure software or to provide new products and services that
achieve rapid and broad market
8
<PAGE>
acceptance or price stability, we may not become profitable. We may fail to
identify new product and service opportunities successfully. Our existing
products will become obsolete if we fail to introduce new products or product
enhancements that meet new customer demands, support new standards or integrate
with new or upgraded versions of packaged applications. We may have little or
no control over the factors that might influence market acceptance of our
products and services. These factors include:
. the willingness of enterprises to transition to automated support and
eSupport and
. acceptance of competitors' automated support or eSupport solutions.
Our eSupport software may not operate with the hardware and software platforms
that are used by our customers now or in the future, and as a result our
business and operating results may suffer.
We currently serve a customer base with a wide variety of constantly
changing hardware, packaged software applications and networking platforms.
With the exception of our Support Portal, our eSupport infrastructure software
is currently available only on Microsoft Windows operating systems. If there is
widespread adoption of other operating system environments, or if we fail to
release versions of our eSupport infrastructure software that are compatible
with these other operating systems, our business and operating results will
suffer. Our future success also depends on:
. our ability to integrate our product with multiple platforms and to
modify our product as new versions of packaged applications are
introduced;
. the number of different operating systems and databases that our product
can work with; and
. our management of software being developed by third parties for our
customers or for use with our product.
We rely on third-party technologies and our inability to use or integrate
third-party technologies could delay product or service development.
We intend to continue to license technologies from third parties including
applications used in our research and development activities and technologies,
which are integrated into our products and services. Our inability to obtain or
integrate any of these licenses could delay product and service development
until equivalent technology can be identified, licensed and integrated. These
technologies may not continue to be available to us on commercially reasonable
terms or at all. We may fail to successfully integrate any licensed technology
into our products or services. This would harm our business and operating
results. Third-party licenses also expose us to increased risks that include:
. risks of product malfunction after new technology is integrated;
. the diversion of resources from the development of our own proprietary
technology; and
. our inability to generate revenue from new technology sufficient to
offset associated acquisition and maintenance costs.
We may engage in future acquisitions or investments that could dilute our
existing stockholders, or cause us to incur significant expenses.
We may acquire or invest in complementary businesses, technologies or
products. For example, we recently entered into an agreement to evaluate
technology that relates to problem identification,
9
<PAGE>
and as part of the agreement, we have an option to purchase this technology
for up to $11,350,000, which we may or may not exercise. If we are unable to
use or integrate any newly acquired entities or technologies effectively or
profitably, 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, which could harm our operating results. Additional funds to
finance any acquisitions may not be available on terms that are favorable to
us, or at all, and, in the case of equity financings, may dilute our
stockholders.
Our recent growth has placed a strain on our management systems, network
infrastructure and resources and our failure to manage growth could harm our
ability to provide adequate levels of service to our customers, disrupt our
operations and delay execution of our business plan.
Our rapid expansion in our personnel, facilities, systems and
infrastructure has placed, and we expect that it will continue to place, a
significant strain on our management controls, network infrastructure and
financial resources. Our failure to manage growth could harm our ability to
provide adequate levels of customer service, delay execution of our business
plan or disrupt our operations. We expect further significant expansion,
including expansion outside the San Francisco Bay Area. We will need to obtain
additional office space before the end of 2000, and if we fail to obtain
sufficient space, our business operations will be disrupted.
We have recently hired a number of new senior management personnel and their
failure to integrate effectively may interfere with our operations.
Over the last 12 months, we have hired a number of new officers, including
our chief executive officer, Radha R. Basu, our chief financial officer, Brian
M. Beattie, and our senior vice president of sales and business development,
Jim R. Hilbert. These individuals, who have worked together for only a short
period of time, must spend a significant amount of time learning our business
model and management system while performing their regular duties. The
integration of new personnel could disrupt our ongoing operations.
Because we do not have long-term employment agreements with most of our key
personnel, we may lose their services, which in turn would harm the market's
perception of our business.
Our success will depend on the skills, experience and performance of our
senior management, engineering, sales, marketing and other key personnel. We
do not have long-term employment agreements with many of our key employees.
The loss of the services of any of our senior management or other key
personnel, including our chief executive officer, Radha R. Basu, our chief
financial officer, Brian Beattie, our vice president of engineering, Scott W.
Dale, and our chief software officer, Cadir B. Lee, could harm the market's
perception of our business and our ability to achieve our business goals.
Our failure to establish and expand our strategic alliances would harm our
ability to achieve market acceptance of our eSupport infrastructure software.
If we fail to maintain, establish or successfully implement strategic
alliances, our ability to achieve market acceptance of our eSupport
infrastructure software will suffer and our business and operating results
will be harmed. Specifically, we must establish and extend existing
distribution alliances with specialized technology and services firms such as
support outsourcers. We must also
10
<PAGE>
establish and extend existing solutions alliances with leading providers of
complementary support technologies, including call center or help desk
management companies, knowledge management companies and systems management
firms.
Our eSupport products depend on and work with products containing complex
software and if our products fail to perform properly due to errors or similar
problems in the software, we may need to spend resources to correct the errors
or compensate for losses from these errors and our reputation could be harmed.
Our eSupport products depend on complex software, both internally developed
and licensed from third parties. Also, our customers may use our products with
other companies' products which also contain complex software. Complex software
often contains errors. These errors could result in:
. delays in product shipments;
. unexpected expenses and diversion of resources to identify the source of
errors or to correct errors;
. damage to our reputation;
. lost sales;
. product liability claims; and
. product returns.
Our system security is important to our customers and we may need to spend
significant resources to protect against or correct problems caused by security
breaches.
A fundamental requirement for online communications, transactions and
support is the secure transmission of confidential information. Third parties
may attempt to breach our security or that of our customers. We may be liable
to our customers for any breach in security and any breach could harm our
business and reputation. Also, computers are vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions, which could lead to
interruptions, delays or loss of data. We may be required to expend significant
capital and other resources to further protect against security breaches or to
correct problems caused by any breach.
We may face claims of invasion of privacy or inappropriate disclosure, use or
loss of our customers' information and any liability imposed could harm our
reputation and cause us to lose customers.
Our software contains features which may allow us or our customers to
control, monitor or collect information from computers running the software
without notice to the computing users. Therefore we may face claims about
invasion of privacy or inappropriate disclosure, use or loss of this
information. Any imposition of liability could harm our operating results.
Our sales cycle can be lengthy and if revenue forecasted for a particular
quarter is not realized in that quarter, significant expenses incurred may not
be offset by corresponding sales.
Our sales cycle for our eSupport infrastructure software can range from one
week to nine months or more and may vary substantially from customer to
customer. While our customers are
11
<PAGE>
evaluating our products and services, we may incur substantial sales and
marketing expenses and spend significant management effort. Any delay in
completing sales in a particular quarter could cause our operating results to
be below expectations.
We have limited experience in international operations and if our revenue from
international operations does not exceed the expense of establishing and
maintaining our international operations, our business could suffer.
We intend to expand further into international markets. We have limited
experience in international operations and may not be able to compete
effectively in international markets. If we do not generate enough revenue from
international operations to offset the expense of these operations, our
business could suffer. Risks we face in conducting business internationally
include:
. difficulties and costs of staffing and managing international operations;
. differing technology standards;
. longer sales cycles and collection periods;
. changes in currency exchange rates and controls; and
. dependence on local vendors.
Any system failure that causes an interruption in our customers' ability to use
our eSupport products or services or a decrease in their performance could harm
our relationships with our customers and result in reduced revenue.
Our eSupport software depends on the uninterrupted operation of our internal
and outsourced communications and computer systems. These systems are
vulnerable to damage or interruption from computer viruses, human error,
natural disasters and intentional acts of vandalism and similar events. We have
no formal disaster recovery plan and business interruption insurance may not be
enough to compensate us for losses that occur. These problems could interrupt
our customers' ability to use our eSupport products or services which could
harm our reputation and cause us to lose customers and revenue.
We may not obtain sufficient patent protection, and this could harm our
competitive position and increase our expenses which would harm our business.
Our success and ability to compete depend to a significant degree upon the
protection of our software and other proprietary technology. It is possible
that:
. our four pending patent applications may not be issued,
. competitors may independently develop similar technologies or design
around any of our patents,
. patents issued to us may not be broad enough to protect our proprietary
rights and
. issued patents could be successfully challenged.
12
<PAGE>
We rely upon trademarks, copyrights and trade secrets to protect our
proprietary rights and if these rights are not sufficiently protected, it could
harm our ability to compete and to generate revenue.
We also rely on a combination of laws, such as copyright, trademark and
trade secret laws, and contractual restrictions, such as confidentiality
agreements and licenses, to establish and protect our proprietary rights and
our ability to compete and grow our business could suffer if these rights are
not adequately protected. Our proprietary rights may not be adequately
protected because:
. laws and contractual restrictions may not prevent misappropriation of our
technologies or deter others from developing similar technologies and
. policing unauthorized use of our products and trademarks is difficult,
expensive and time-consuming, and we may be unable to determine the
extent of this unauthorized use.
Also, the laws of other countries in which we market our products may offer
little or no protection of our proprietary technologies. Reverse engineering,
unauthorized copying or other misappropriation of our proprietary technologies
could enable third parties to benefit from our technologies without paying us
for it, which would harm our competitive position and market share.
We may face intellectual property infringement claims that could be costly to
defend and result in our loss of significant rights.
Other parties may assert intellectual property infringement claims against
us and our products may infringe the intellectual property rights of third
parties. Intellectual property litigation is expensive and time-consuming and
could divert management's attention from our business. If there is a successful
claim of infringement, we may be required to develop non-infringing technology
or enter into royalty or license agreements which may not be available on
acceptable terms, if at all. Our failure to develop non-infringing technologies
or license the proprietary rights on a timely basis would harm our business.
Our products may infringe issued patents that may relate to our products. Also,
patent applications may have been filed which relate to our software products.
Industry Risks
We must compete successfully in the eSupport market or we will lose market
share and our business will fail.
The market for our products is intensely competitive, rapidly changing and
significantly affected by new product introductions and other market activities
of industry participants. Competitive pressures could reduce our market share
or require us to reduce the price of products and services and therefore our
gross margin, which could harm our business and operating results. Our
integrated software solution competes against various vendors' software
products designed to accomplish specific elements of a complete eSupport
solution. For example, in the market for automated development of support
solutions, we compete with companies such as Serena Software, Inc. In the
market for automated delivery of support solutions, we compete with Motive
Communications, Inc.
We may encounter competition from companies such as:
. customer communications software companies;
. question and answer companies;
. customer relationship management solution providers;
13
<PAGE>
. consolidated service desk solution vendors;
. Internet infrastructure companies; and
. operating systems providers.
Our potential competitors may have longer operating histories, significantly
greater financial, technical, and other resources or greater name recognition
than we do. Our competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements.
Because our eSupport infrastructure software is designed to support businesses
operating over the Internet, our success depends on the continued growth and
levels of performance of Internet usage.
Because a majority of our products are designed to support businesses
operating over the Internet, the success of our business will depend on the
continued improvement of the Internet as a convenient means of consumer
interaction and commerce, as well as an efficient medium for the delivery and
distribution of information by enterprises to their employees and extended
enterprise. Because global commerce on the Internet and the online exchange of
information is evolving, we cannot predict whether the Internet will continue
to be a viable commercial marketplace.
Governmental regulation and legal changes could impair the growth of the
Internet and decrease demand for our products or increase our cost of doing
business.
The laws and regulations that govern our business change rapidly. Any
changes in laws and regulations could impair the growth of the Internet and
could reduce demand for our products, subject us to liability or increase our
cost of doing business. The United States government and the governments of
other states and foreign countries have attempted to regulate activities on the
Internet and the distribution of software. Also, in 1998, Congress passed the
Internet Freedom Act, which imposes a three-year moratorium on state and local
taxes on Internet-based transactions. Failure to renew this moratorium would
allow various states to impose taxes on e-commerce. This might harm our
business directly and indirectly by harming the businesses of our customers,
potential customers and business alliances. The applicability to the Internet
of existing laws governing issues is uncertain and may take years to resolve.
Evolving areas of law that are relevant to our business include privacy law,
intellectual property laws, proposed encryption laws, content regulation and
sales and use tax laws and regulations.
Offering Risks
Our stock price may be volatile because we are an eBusiness software company,
and you may not be able to sell your shares at or above the offering price.
Before this offering, our common stock has not been publicly traded, and an
active trading market may not develop or be sustained after this offering. You
may not be able to sell your shares at or above the offering price. The price
at which our common stock will trade after this offering is likely to be highly
volatile and may fluctuate substantially because of:
. actual or anticipated fluctuations in our operating results,
. changes in or our failure to meet securities analysts' expectations,
14
<PAGE>
. conditions and trends in the Internet and other technology industries and
. fluctuations in stock market price and volume, which are particularly
common among securities of software and Internet-oriented companies.
After this offering, our directors, executive officers and principal
stockholders will own % of our common stock and this concentration of
ownership will allow them to elect most of our directors and could delay or
prevent a change in control of Support.com.
After this offering, our directors, executive officers and stockholders who
currently own over 5% of our common stock will collectively beneficially own
approximately % of our outstanding common stock. These stockholders, if
they vote together, will be able to significantly influence all matters
requiring stockholder approval. For example, they may be able to elect most of
our directors, delay or prevent a transaction in which stockholders might
receive a premium over the market price for their shares or prevent changes in
control or management.
Most of our outstanding shares of common stock may be sold in the market
shortly after this offering, which may cause our stock price to decline.
Sales of a substantial number of shares of common stock, including shares
issued upon the exercise of outstanding options and warrants, in the public
market after this offering or after the expiration of lockup and holding
periods could cause the market price of our common stock to decline. All the
shares sold in this offering will be freely tradable. The remaining
shares of common stock outstanding after this offering are under lock-up
agreements that prohibit the sale of the shares for 180 days after the date of
this prospectus. Any or all of these shares may be released before expiration
of the 180-day lockup period at the discretion of Credit Suisse First Boston
Corporation. Immediately after the 180-day lockup period, shares
will become available for sale.
Our stock price may decline significantly because of stock market fluctuations
that affect the prices of technology stocks. A decline in our stock price could
result in securities class action litigation against us, that could divert
management's attention and harm our business.
The stock market has experienced significant price and volume fluctuations
that have affected the market prices for the common stocks of technology
companies. These broad market fluctuations may cause the market price of our
common stock to decline. After 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 ability to execute
our business plan.
We may need additional capital and if funds are not available on acceptable
terms, we may not be able to hire and retain employees, fund our expansion or
compete effectively.
We believe that our existing capital resources, including the anticipated
proceeds of this offering, will enable us to maintain our operations for at
least the next 12 months. However, we may choose to, or be required to, raise
additional funds. If our capital requirements vary materially from those
currently planned, we may require additional financing sooner than anticipated.
This financing may not be available in sufficient amounts or on terms
acceptable to us and may be dilutive to existing stockholders. If adequate
funds are not available or are not available on acceptable terms,
15
<PAGE>
our ability to hire, train or retain employees, to fund our expansion, take
advantage of unanticipated opportunities, develop or enhance services or
products, or respond to competitive pressures would be significantly limited.
Our management has significant flexibility in using the net proceeds of this
offering, and you will not have the opportunity, as part of your investment
decision, to assess whether proceeds are being used appropriately. If our
management does not use the proceeds in a manner that increases our operating
results or market value, our business could suffer.
Our management will have significant flexibility in applying the net
proceeds of this offering. The net proceeds could be applied in ways that do
not increase our operating results. We intend generally to use the net proceeds
from this offering to repay $2.2 million in debt and for general corporate
purposes, including working capital. We also have an option to acquire
technology for $11.4 million which we may or may not exercise. We have not
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 the amount of cash used in or generated by our operations and the
market response to the introduction of any new product and service offerings.
Depending on future developments and circumstances, we may use some of the
proceeds for purposes other than those described above.
We may be required to repurchase or be liable under state securities laws for
shares issued, and option grants made, under our 1998 stock option plan in
violation of registration requirements of state securities laws.
Some of the shares issued and options granted under our 1998 stock option
plan violated state securities laws because these stock issuances and option
grants were not exempt from registration or qualification under state
securities laws and registration or qualification was not obtained. We could be
required to make total payments to the holders of these shares and options of
up to $215,000 plus statutory interest of 7% per year, if our offer to
repurchase options and common stock issued upon exercise of options is
accepted. If any or all of these holders reject the repurchase offer, we may
continue to be liable under state securities laws for up to a total amount of
approximately $215,000 plus statutory interest of 7% per year.
16
<PAGE>
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to our, and in some cases our customers' or alliance partners', future plans,
objectives, expectations, intentions and financial performance. In some cases,
you can identify forward-looking statements because they use terms such as
anticipates, believes, continue, could, estimates, expects, intends, may,
plans, potential, predicts, should or will or the negative of those terms or
other comparable words. These statements involve risks and uncertainties that
may cause industry trends or our actual results, activities or achievements to
be materially different from those expressed or implied by these statements.
These factors include those listed under Risk Factors, Business, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other sections in this prospectus.
Although we believe that expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements. We are
under no duty to update any of the forward-looking statements after the date of
this prospectus to conform these statements to actual results or changes in our
expectations. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus.
17
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $
million from the sale of shares of our common stock. If the
underwriters exercise their over-allotment option in full, we estimate that we
will receive total net proceeds of approximately $ . These net proceed
amounts are based on an initial public offering price of $ per share
less the estimated underwriting discounts, commissions and offering expenses
payable by us.
We intend to use the net proceeds of this offering to repay $2.2 million in
principal under secured and subordinated debt facilities and for general
corporate purposes, including working capital.
We may also use a portion of the net proceeds to acquire additional
businesses, products and technologies that we believe will complement our
business. We have a 90-day option, which we may or may not exercise, to
purchase technology related to problem identification for up to $11.4 million.
We may use some of the proceeds from this offering to purchase the technology.
We do not have more specific plans for the net proceeds from this offering.
The amounts and timing of any expenditures will vary depending on the amount of
cash generated by our operations, competitive and technological developments
and the rate of growth, if any, of our business. As a result, we will retain
broad discretion in the allocation of the net proceeds of this offering.
Pending the uses described above, we will invest the net proceeds of this
offering in short term interest bearing, investment-grade securities. We may
not invest the proceeds to yield a favorable return. We believe that our
available cash and the net proceeds of this offering will be sufficient to meet
our capital requirements for at least the next 12 months.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock and do not
anticipate paying any dividends. We expect to retain our earnings, if any, for
the development of our business. Our bank line of credit currently prohibits
the payment of dividends.
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<PAGE>
CAPITALIZATION
The table below lists our capitalization as of March 31, 2000:
. on an actual basis;
. on a pro forma basis assuming:
. the exercise of outstanding warrants to purchase an aggregate of 38,461
shares of preferred stock at an exercise price of $6.50 that expire
upon completion of this offering and
. the conversion of all outstanding shares of preferred stock into common
stock and changes to our authorized capital stock upon completion of
this offering;
. on the same pro forma basis as adjusted to include 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.
<TABLE>
<CAPTION>
March 31, 2000
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
(in thousands except share
data)
<S> <C> <C> <C>
Long-term obligations, excluding current
portion....................................... $ 2,423 $ 2,423 $
-------- -------- ----
Redeemable convertible preferred stock:
12,280,108 shares authorized:
series B--7,346,108 shares designated,
7,346,108 issued and outstanding actual,
none authorized, issued and outstanding pro
forma and pro forma as adjusted............. 5,741 -- --
series C--4,934,000 shares designated,
4,638,618 issued and outstanding actual,
none authorized, issued and outstanding pro
forma and pro forma as adjusted............. 16,110 -- --
Stockholders' equity (net capital deficiency):
series A preferred stock, 3,571,600 shares
designated, 3,571,600 shares issued and
outstanding actual, none authorized, issued
and outstanding pro forma and pro forma as
adjusted.................................... 1 -- --
common stock, 31,060,000 shares authorized,
13,569,596 shares issued and outstanding
actual; 150,000,000 shares authorized,
29,164,383 shares issued and outstanding pro
forma; shares issued and
outstanding pro forma as adjusted........... 1 3
Additional paid-in capital................... 27,168 49,268
Receivable from stockholders................. (2,121) (2,121)
Deferred compensation........................ (16,608) (16,608)
Accumulated deficit.......................... (26,893) (26,893)
-------- --------
Total stockholders' equity (deficit)....... (18,452) 3,649
-------- --------
Total capitalization....................... $ 5,822 $ 6,072
======== ========
</TABLE>
This table excludes:
. 245,189 shares of common stock issuable upon exercise of warrants that
will be outstanding after this offering at a weighted average exercise
price of $9.91 per share;
. 2,139,784 shares of common stock under options outstanding under our 1998
stock option plan as of March 31, 2000; and
. 6,470,434 shares of common stock reserved for issuance under our 1998
stock option plan, 2000 omnibus equity incentive plan and our 2000
employee stock purchase plan.
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<PAGE>
DILUTION
Pro forma net tangible book value
The pro forma net tangible book value of our common stock was approximately
$3.6 million, or approximately $0.13 per share, on March 31, 2000. We
calculated pro forma net tangible book value assuming that a warrant for 38,461
shares of preferred stock will be exercised and all outstanding shares of
preferred stock will convert into common stock when the offering is completed.
Pro forma net tangible book value per share represents the amount of our total
tangible assets less total liabilities divided by the number of shares of
common stock outstanding.
Dilution after this offering
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the net tangible book value per share of our common stock
immediately after this offering.
Assuming our sale of shares of common stock offered by this
prospectus at an assumed initial public offering price of $ per share, and
after deducting estimated underwriting discounts, commissions and offering
expenses, our pro forma net tangible book value at March 31, 2000 would have
been approximately $ million or $ per share. This represents an
immediate increase in net tangible book value of $ per share to the
existing stockholders and an immediate dilution of $ per share to new
investors purchasing common stock in this offering.
The table below illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
Pro forma net tangible book value per share at March 31, 2000....
Increase per share attributable to new investors.................
---
Pro forma net tangible book value per share after this offering...
----
Pro forma dilution per share to new investors..................... $
====
</TABLE>
Differences between new and existing stockholders in number of shares and
amount paid
The table below summarizes, on a pro forma basis, as of March 31, 2000, the
differences between the number of shares of common stock purchased from us, the
total consideration paid and the average price per share paid by existing
stockholders and by the new investors purchasing shares in this offering. We
used the assumed initial public offering price of $ per share, and we have
not deducted estimated underwriting discounts and commissions and estimated
offering expenses in our calculations.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 29,164,383 % $22,275,000 % $0.76
New investors.................. $ $
---------- ------ ----------- ------
Total........................ 100.00% $ 100.00%
========== ====== =========== ======
</TABLE>
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<PAGE>
This discussion and table assume no exercise of any outstanding stock
options. The exercise of options outstanding under our stock option plans
having an exercise price less than the offering price would increase dilution
to new investors.
If the underwriters exercise the over-allotment in full:
. the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our
outstanding common stock; and
. the number of shares held by new investors will increase to ,
or approximately % of the total number of shares of our common stock
outstanding after completion of this offering.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data for the period from our
incorporation on December 3, 1997 through December 31, 1998, and the year ended
December 31, 1999 and the consolidated balance sheet data at December 31, 1998
and 1999, are derived from our audited consolidated financial statements that
have been prepared based on generally accepted accounting principles. The
consolidated balance sheet data as of March 31, 2000 and the consolidated
statement of operations data for the three months ended March 31, 1999 and 2000
are derived from unaudited consolidated financial statements and include, in
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, that are necessary for the fair presentation of our financial
position and results of operations for those periods. Historical results are
not necessarily indicative of future results. The pro forma consolidated
balance sheet data as of March 31, 2000 is unaudited and reflects the assumed
conversion of all outstanding shares of preferred stock into common stock when
this offering is completed. This data 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 in this
prospectus.
<TABLE>
<CAPTION>
Period from
incorporation on Three months
December 3, 1997 Year ended ended March 31,
to December 31, December 31, ------------------
1998 1999 1999 2000
---------------- ------------ ------- ---------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
License fees............... $ 18 $ 2,746 $ 330 $ 1,618
Services................... -- 569 4 795
------- -------- ------- ---------
Total revenue............ 18 3,315 334 2,413
Costs and expenses:
Cost of license fees....... -- 4 1 36
Cost of services........... -- 965 73 882
Research and development... 1,132 2,401 373 1,647
Sales and marketing........ 1,197 8,974 862 5,291
General and
administrative............ 477 1,881 182 771
Amortization of deferred
compensation.............. 16 3,554 52 3,695
------- -------- ------- ---------
Total costs and
expenses................ 2,822 17,779 1,543 12,322
------- -------- ------- ---------
Loss from operations......... (2,804) (14,464) (1,209) (9,909)
Interest and other income
(expense), net.............. 54 170 2 60
------- -------- ------- ---------
Net loss..................... (2,750) (14,294) (1,207) (9,849)
Accretion on redeemable
convertible preferred
stock....................... (214) (1,072) (101) (402)
------- -------- ------- ---------
Net loss attributable to
common stockholders......... $(2,964) $(15,366) $(1,308) $ (10,251)
======= ======== ======= =========
Basic and diluted net loss
per share................... $ (0.57) $ (2.31) $ (0.20) $ (1.21)
======= ======== ======= =========
Shares used in computing
basic and diluted net loss
per share................... 5,227 6,643 6,481 8,442
======= ======== ======= =========
Unaudited pro forma basic and
diluted net loss per share.. $ (0.71) $ (0.41)
======== =========
Shares used in computing
unaudited pro forma basic
and diluted net loss per
share....................... 20,137 23,998
======== =========
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------- March
1998 1999 31, 2000
------- -------- --------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments..................................... $ 2,807 $ 12,489 $ 11,773
Working capital.................................. 2,979 9,698 4,683
Total assets..................................... 3,672 17,525 17,321
Long-term obligations, net of current portion.... 449 2,277 2,423
Redeemable convertible preferred stock........... 5,237 21,449 21,851
Total stockholders' equity (deficit)............. (2,423) (13,253) $(18,452)
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
General
We provide eSupport infrastructure software. From our incorporation in
December 1997 through the end of 1998, we primarily engaged in research
activities and developing and marketing our products. We first began generating
revenue from software license fees from the initial version of our products in
December 1998. During 1999, we continued to enhance the functionality of our
products, build our management team and operational infrastructure and began
shipping the second version of our products. In January 2000, we expanded our
eSupport Suite by introducing enhanced versions of our existing products as
well as the Support Portal and Foundry, which are new applications designed to
increase the level of support process automation we provide. During the first
quarter of 2000 we added 13 customers and hired 45 employees. As our revenue
increased we also incurred significant operating expenses as we expanded our
research and development organization, our direct sales force and professional
services department. At March 31, 2000, we had an accumulated deficit of
$26.9 million.
Revenue
We generate revenue primarily from software licenses and related
professional services. We market our products through a combination of direct
sales, resellers and support outsourcers. Through 1999, substantially all of
our revenue was derived from direct sales. We focused on building our indirect
sales channel in the fourth quarter of 1999. Although we expect direct sales to
continue to account for a majority of revenue in the future, we anticipate a
more significant portion of sales to be generated through our indirect channel.
In 1998, no revenue was generated from licenses to customers outside of North
America, in 1999, 2% of our revenue was generated from these customers and in
the first quarter of 2000, 11% of our revenue was generated from these
customers. We plan to expand our international operations significantly,
particularly in Europe and Asia.
Revenue Recognition
We license our software under subscription and perpetual licenses. Revenue
under subscription licenses is recognized monthly over the term of the
subscription period beginning upon delivery of the product. Subscription
licenses typically have a term of 36 months, with subscription pre-payments
generally made at the beginning of each 12 month period. For example if we
receive an order from a customer for a 36-month subscription license in
September of a year, we would recognize only four months of monthly license
fees for that same year even if that customer prepaid 12 months of the 36-month
term. We began licensing software under a subscription model in June 1999.
Because revenue under perpetual license agreements is recognized more
rapidly than subscription-based revenue, a majority of the revenue recognized
through March 31, 2000 has been derived from perpetual licenses. However, a
majority of the licenses executed were subscription-based. In determining
whether we recognize revenue for subscription and perpetual license fee
arrangements, we consider whether evidence of an arrangement exists, delivery
has occurred, the fee is fixed or determinable, and collection is probable. If
any of these criteria are not met, revenue recognition is deferred until all of
the criteria are met.
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<PAGE>
Subscription and perpetual licensing arrangements may include service
elements. Services revenue consists primarily of fees from professional
services, such as consulting services, maintenance and support. Consulting
services include a range of services including installation, implementation and
building of complex and non-complex interfaces for the customer's specific
application. Our maintenance arrangements provide technical support and include
the right to unspecified upgrades, if and when available.
We intend to continue to invest in product development and technologies to
enhance our products and services and develop new products and services. Also,
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. We expect to continue to incur substantial operating losses in the
future, and our expected increase in operating expenses will require
significant increases in revenue before we become profitable.
For purposes of this discussion, references to 1998 include the period from
our incorporation on December 3, 1997 to December 31, 1998.
Three Months Ended March 31, 1999 and 2000
Revenue
Revenue increased 622% from $334,000 for the three months ended March 31,
1999 to $2.4 million for the three months ended March 31, 2000. In the first
quarter of 1999, we generated revenue from five customers and in the first
quarter of 2000, we generated revenue from 31 customers. This increase was
because of greater market acceptance of our software products and expansion of
our product line.
License revenue
License revenue increased from $330,000 for the three months ended March 31,
1999 to $1.6 million for the three months ended March 31, 2000. This increase
reflects continued growth of revenue since the first quarter of 1999, the first
full quarter in which we licensed our products.
Services revenue
Service revenue increased from $4,000 for the three months ended March 31,
1999 to $795,000 for the three months ended March 31, 2000. This increase was
because of increased implementation and consulting services performed and the
growth in number and size of existing maintenance contracts.
Cost of revenue
Total cost of revenue increased from $74,000 for the three months ended
March 31, 1999 to approximately $918,000 for the three months ended March 31,
2000. This increase was primarily because of the growth in our professional
services organization.
Cost of license revenue
Cost of license revenue consists primarily of expenses incurred to
manufacture, package and distribute software products and related documentation
and license fees paid to third parties under
24
<PAGE>
technology license arrangements. Cost of license revenue increased from $1,000
for the three months ended March 31, 1999 to approximately $36,000 for the
three months ended March 31, 2000. For the first quarter of 2000, cost of
license revenue increased primarily because we licensed third party
technologies. We expect cost of license revenue to grow in absolute dollars as
we continue to license third party technologies.
Cost of services revenue
Cost of services revenue includes salaries and other expenses from our
customer support organization, related overhead expenses and payments made to
third parties for consulting services. Cost of services revenue increased from
$73,000 for the three months ended March 31, 1999 to approximately $882,000 for
the three months ended March 31, 2000. This increase was primarily because of
the growth in the number of employees in our customer support and professional
services organizations which grew from 2 employees at March 31, 1999 to 19
employees at March 31, 2000. We expect to continue to invest heavily in
customer support, professional services, consulting and training and expect
cost of services revenue to increase.
Operating expense
Research and development. Research and development expense consists
primarily of payroll expenses and related costs for research and development
personnel. Research and development expense is expensed as incurred. Research
and development expenses increased from approximately $373,000 for the three
months ended March 31, 1999 to approximately $1.6 million for the three months
ended March 31, 2000. This increase was primarily because of the growth in the
number of engineering personnel from 14 employees at March 31, 1999 to 42
employees at March 31, 2000. We expect research and development expense to
increase in absolute dollars in the future as we continue to hire additional
research and development personnel and spend additional amounts on third party
development efforts.
Sales and marketing. Sales and marketing expense consists primarily of
payroll expense, including salaries and commissions and related costs for sales
and marketing personnel and promotional expenses, including public relations,
advertising and trade shows. Sales and marketing expense increased from
approximately $862,000 for the three months ended March 31, 1999 to
approximately $5.3 million for the three months ended March 31, 2000.
This increase was primarily because of the growth in the number of sales and
marketing employees from 17 employees at March 31, 1999 to 62 employees at
March 31, 2000. Also, sales and marketing expense increased because of
commissions paid on increased sales. We expense sales commissions for the
entire committed amount of the order in the period the order is received, which
typically occurs before recognition of revenue. We also incurred additional
expenses during the first quarter of 2000 as we increased the number of
regional and international sales offices. We expect that sales and marketing
expense will continue to be a significant component of operating expense. We
expect sales and marketing expense will increase in absolute dollars as we
increase our sales and marketing activities.
General and administrative. General and administrative expense consists
primarily of payroll expense and related costs of administrative personnel and
professional fees for legal, accounting and other professional services.
General and administrative expense increased from approximately $182,000 for
the three months ended March 31, 1999 to approximately $771,000 for the three
months ended March 31, 2000. The increase was primarily because of the growth
in the number of general and administrative personnel from five employees at
March 31, 1999 to 19 employees at
25
<PAGE>
March 31, 2000. We expect general and administrative expense to increase as we
hire additional personnel to support the anticipated growth of our business and
our operations as a public company.
Amortization of deferred compensation. We have recorded deferred stock-based
compensation for stock options granted to employees and consultants through
March 31, 2000 of approximately $23.7 million. This amount represents the
difference between the exercise price of these stock option grants and the fair
value of the common stock at the time of grant as set by the board of
directors. Of this amount, we amortized approximately $7.1 million through
March 31, 2000. The remaining $16.6 million and the additional amount of stock-
based compensation from recent grants will be amortized over the remaining
vesting period of the options. Based on option grants through March 31, 2000,
we expect to amortize approximately $2.9 million in the second quarter of 2000,
$2.3 million in the third quarter of 2000 and $2.0 million in the fourth
quarter of 2000. We expect to recognize lower amounts in subsequent quarters.
Interest and other income (expense), net. Net interest income consists
primarily of interest earned on our cash, cash equivalents and short term
investments offset by interest expenses from our capital leases and equipment
advances. Net interest and other income was $2,000 for the three months ended
March 31, 1999 and approximately $60,000 for the three months ended March 31,
2000. The increase in net interest and other income was primarily from
increased average cash balances resulting from our equity financing in June
1999.
Years ended December 31, 1998 and 1999
Revenue
Total revenue increased from $18,000 in 1998 to $3.3 million in 1999. This
increase was because of greater market acceptance of our software products and
expansion of our product line.
License revenue
License revenue increased from approximately $18,000 in 1998 to $2.7 million
in 1999. This increase was primarily because our first sale of a product
occurred in December 1998.
Services revenue
Services revenue increased from $0 in 1998 to $569,000 in 1999. This
increase was primarily because of maintenance on new licenses and increased
implementation and consulting services performed with increased license sales
in 1999.
Cost of revenue
Total cost of revenue increased from $0 in 1998 to approximately $969,000 in
1999. This increase was primarily because of growth in our professional
services organization.
Cost of license revenue
Cost of license revenue increased from $0 in 1998 to approximately $4,000 in
1999. This increase was primarily because of increased costs to distribute our
software products and related documentation.
Cost of services revenue
Cost of services revenue increased from $0 in 1998 to approximately $965,000
in 1999. This increase was primarily because of the growth in the number of
employees in our customer support
26
<PAGE>
and professional services organizations from no employees at December 31, 1998
to 13 at December 31, 1999. Cost of services revenue exceeds services revenue
during 1999 because of the investment in our services organization.
Operating Expense
Research and development. Research and development expenses increased from
approximately $1.1 million in 1998 to approximately $2.4 million in 1999. This
increase was primarily because of the growth in the number of engineering
personnel from 10 at December 31, 1998 to 30 at December 31, 1999.
Sales and marketing. Sales and marketing expense increased from
approximately $1.2 million in 1998 to approximately $9.0 million in 1999. This
increase was primarily because of a $2.5 million increase in personnel costs,
$1.6 million in sales commissions from higher levels of sales during that
period and increased facilities expenses.
General and administrative. General and administrative expense increased
from approximately $477,000 in 1998 to approximately $1.9 million in 1999. The
increase was primarily because of the growth in the number of administrative
personnel from five at December 31, 1998 to 15 at December 31, 1999.
Amortization of deferred compensation. We have recorded deferred stock-based
compensation from stock options granted to employees and consultants through
December 31, 1999 of approximately $17.8 million. This amount represents the
difference between the exercise price of these stock option grants and the fair
value of the common stock at the time of grant as set by the board of
directors. Of this amount, we amortized approximately $3.5 million through
December 31, 1999. The remaining $14.3 million and the additional amount of
stock-based compensation from recent grants will be amortized over the
remaining vesting period of the options.
Interest and other income (expense), net. Net interest and other income was
approximately $54,000 in 1998 and approximately $170,000 in 1999. The increase
in net interest and other income was primarily because of increased average
cash balances resulting from our equity financing in June 1999.
Provision for income taxes. From our incorporation in December 1997 through
December 31, 1999, we incurred net losses for federal and state tax purposes
and have not recognized any tax provision or benefit. As of December 31, 1999,
we had $10.1 million of federal and state net operating loss carryforwards to
offset future taxable income. The net operating loss carryforwards begin to
expire on varying dates beginning in 2005 through 2019. With our limited
operating history, our losses incurred and the difficulty in accurately
forecasting our future results, management does not believe that the
realization of the related deferred income tax asset meets the criteria
required by generally accepted accounting principles. Therefore we have
recorded a 100% valuation allowance against the deferred income tax asset.
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<PAGE>
Quarterly Results of Operations
The table below shows our unaudited quarterly statement of operations data
for the five quarters ended March 31, 2000. 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 consolidated
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information for
the quarters presented. The operating results for any quarter are not
necessarily indicative of the operating results for any future period.
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------
Mar. June Sept. Dec.
31, 30, 30, 31, Mar. 31,
1999 1999 1999 1999 2000
------- ------- ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue
License fees................... $ 330 $ 492 $ 624 $ 1,300 $ 1,618
Services....................... 4 21 154 390 795
------- ------- ------- ------- -------
Total revenue................ 334 513 778 1,690 2,413
Costs and expenses
Cost of license fees........... 1 -- 2 1 36
Cost of services............... 73 128 240 524 882
Research and development....... 373 370 787 871 1,647
Sales and marketing............ 862 1,648 2,576 3,888 5,291
General and administrative..... 182 322 488 889 771
Amortization of deferred
compensation.................. 52 183 1,324 1,995 3,695
------- ------- ------- ------- -------
Total costs and expenses..... 1,543 2,651 5,417 8,168 12,322
------- ------- ------- ------- -------
Loss from operations............. (1,209) (2,138) (4,639) (6,478) (9,909)
Interest and other income
(expense), net.................. 2 (22) 88 102 60
------- ------- ------- ------- -------
Net loss......................... $(1,207) $(2,160) $(4,551) $(6,376) $(9,849)
======= ======= ======= ======= =======
</TABLE>
Our quarterly revenue increased sequentially through the first quarter of
2000 because of the introduction of and increased demand for our software
products as well as the growth of our direct sales force. In the second quarter
of 1999, we began generating services revenue which consists of the maintenance
components of our license agreements and consulting services of 1999. Services
revenue and related costs increased on a quarterly basis as we hired services
personnel and grew our customer base.
On a quarterly basis we have increased the level of spending throughout the
organization. Total operating expenses increased primarily because of expenses
associated with building a sales and marketing infrastructure, and increased
spending on research and development to support new products and product
enhancements. Specifically:
. Sales and marketing. During the third and fourth quarters of 1999 and the
first quarter of 2000, sales and marketing expenses increased because of
additional personnel costs, commissions and travel expenditures as we
expanded our direct sales force and indirect sales channel. We also
incurred expenses in the third and fourth quarters of 1999 from the
launch and branding of the Support.com name and web site.
. Research and development. In the third quarter of 1999 and the first
quarter of 2000, research and development costs increased because of
additional hiring of engineering personnel and related recruiting
expenses.
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<PAGE>
. General and administrative. In the fourth quarter of 1999, general and
administrative costs increased as we hired additional personnel to manage
our expanding operations and incurred expenses associated with executive
recruiting, information technology and other infrastructure developments.
Net interest and other income increased in the third and fourth quarters
primarily because of the financing we obtained in June 1999. We invested the
proceeds of the financing in short term investments.
We have incurred operating losses since we were founded in December 1997. In
the past, a significant portion of our sales have been realized near the end of
the quarter. A delay in an anticipated sale past the end of a particular
quarter could negatively impact our results of operations for that quarter. We
believe that future operating results will fluctuate on a quarterly basis.
Liquidity and Capital Resources
Financing Activities
Since our incorporation in December 1997, we have financed our operations
primarily through the private placement of our preferred stock, and to a lesser
extent through revenues, bank borrowings and capital equipment lease financing.
As of March 31, 2000, we had $11.8 million in cash, cash equivalents and short-
term investments. Net cash provided by financing activities was $0.9 million
for the three months ended March 31, 2000, $17.9 million in 1999 and $5.5
million in 1998. In all cases, the cash was primarily from the net proceeds
from the issuance of common and preferred stock.
We have both a secured and subordinated debt facility with a single lender
under which we are entitled to borrow up to $2.5 million, all of which has been
used. We intend to repay $2.2 million in principal under secured and
subordinated debt facilities with the proceeds of this offering. We also have a
total of $2.5 million available under equipment lease credit facilities, of
which $1.6 million is outstanding as of March 31, 2000. Under the equipment
lease line, we are entitled to lease equipment with payment terms extending 48
months. The ability to lease new equipment expires in July 2001. Amounts
outstanding under these facilities bear interest at rates ranging from 9.0% to
12.0% and are secured by substantially all of our tangible assets.
Operating Activities
Net cash used in operating activities was $2.4 million in 1998, $8.0 million
in 1999 and $1.5 million for the three months ended March 31, 2000. Cash used
in operating activities was primarily because of net losses offset by changes
in accounts receivable deferred revenue, accrued expenses and accounts payable.
Investing Activities
Net cash used in investing activities was $307,000 in 1998 and $8.7 million
in 1999. Net cash provided by investing activities was $2.3 million for the
three months ended March 31, 2000. Net cash provided by investing activities
for the three months ended March 31, 2000, included $8.4 million in sales of
short-term investment offset by $5.9 million in purchases of short term
investments.
Commitments
As of December 31, 1999, our principal commitments consisted of obligations
outstanding under notes payable, capital and operating leases. Although we have
no material commitments for capital expenditures, we anticipate a substantial
increase in our capital expenditures and lease commitments consistent with our
anticipated growth in operations, infrastructure and personnel. As of
December 31, 1999, future lease commitments for our office facility were $1.3
million in 2000 and
29
<PAGE>
$850,000 in 2001. We expect to require additional space to meet our needs in
the next 12 months. Adequate space may not be available on commercially
reasonable terms.
Working Capital and Capital Expenditure Requirements
We believe that the net proceeds from the sale of common stock in this
offering and our existing cash balances will be sufficient to meet our working
capital and capital expenditure requirements for at least the next 12 months.
We have no present understandings, commitments or agreements for any
acquisition of other businesses, products and technologies except for an
agreement under which we have an exclusive option to purchase technology
related to problem identification for up to $11.4 million. We evaluate
potential acquisitions of other businesses, products and technologies and may
in the future require additional equity or debt financings to accomplish any
potential acquisitions.
If we require additional capital resources to grow our business internally
or to acquire complementary technologies and businesses at any time in the
future, we may seek to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities could result in more dilution
to our stockholders. Financing arrangements may not be available to us, or may
not be available in amounts or on terms acceptable to us.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Financial
Instruments and for Hedging Activities, which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for all fiscal quarters for fiscal
years beginning after June 15, 2000 and is not anticipated to have a
significant impact on our operating results or financial condition when
adopted.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, or
SAB 101. SAB 101 summarizes some of the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
We are evaluating the impact of SAB 101. We believe our current practices
comply with SAB 101. However if we determine that a change in our accounting
policy is necessary, this change will be made in the second quarter of 2000 and
would result in a charge to results of operations for the cumulative effect of
the change. This amount, if recognized, would be recorded as deferred revenue
and recognized as revenue in future periods. Financial statements for prior
periods would not be restated.
Qualitative and Quantitative Disclosures about Market Risk
We develop products in the United States and market and sell in North
America, South American, Asia and Europe. As a result, our financial results
could be affected by factors such as changes in foreign currency exchange rates
or weak economic conditions in foreign markets. As all sales are currently made
in U.S. dollars, a strengthening of the dollar could make our products less
competitive in foreign markets. Our interest income is sensitive to changes in
the general level of U.S. interest rates, particularly since the majority of
our investments are in short-term instruments. Because of the nature of our
short-term investments, we have concluded that there is no material market risk
exposure.
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<PAGE>
Our investment policy requires us to invest funds in excess of operating
requirements in:
. obligations of the U.S. government and its agencies;
. investment grade state and local government obligations;
. securities of U.S. corporations rated A1 or AA by Standard and Poors or
the Moody's equivalent; and
. money market funds, deposits or notes issued or guaranteed by U.S. and
non-U.S. commercial banks, meeting credit rating and net worth
requirements with maturities of less than two years.
At March 31, 2000, our cash and cash equivalents consisted primarily of
demand deposits and money market funds held by large institutions in the U.S.
and our short-term investments were invested in corporate debt securities
maturing in less than one year.
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<PAGE>
BUSINESS
Overview
We provide eBusiness infrastructure software that automates, personalizes
and enhances user support over the Internet. Our eSupport software is designed
to accelerate eBusiness growth by increasing the efficiency and capabilities of
support organizations that would otherwise constrain expanding Internet
initiatives. Our software enables our customers to automate problem avoidance
through self-healing, promote call avoidance through user self-service and
improve problem resolution through online assisted support. We believe that by
deploying our eSupport infrastructure, customers can transform eBusiness
support operations from inefficient cost centers to highly productive and
scalable competitive assets that increase customer loyalty, improve operational
efficiencies and generate incremental revenue.
We sell our products and services to corporate information technology
departments, Internet service providers, application service providers and
support outsourcers. Our customers include Bear Stearns, Cisco, Compaq,
Computer Sciences Corporation, everdream, Excite@Home, Globo Cabo, JCPenney,
micronpc.com and Samsung.
Industry Background
User Support Is Critical for eBusiness
Businesses are increasingly relying on the Internet to sell more products
and services, drive efficiencies in supply chains and distribution channels,
establish and improve customer relationships and increase employee
productivity. Among these organizations are traditional businesses that are
increasingly conducting business over the Internet, companies that are formed
specifically to deliver products and services over the Internet, and Internet-
related technology vendors and service providers. To support their eBusiness
initiatives, businesses are deploying Internet, intranet and extranet
technology solutions that automate and improve the interaction between the
enterprise and its employees and customers, as well as the members of an
extended enterprise of suppliers, distributors and business partners.
We believe high-quality user support is essential to succeed in this
environment. As businesses increase their reliance on the Internet, user
support becomes a primary interface between a business and its employees,
supply chain partners and customers. High-quality, personalized and continuous
user support enables internal and external systems to run more efficiently,
improves employee productivity and increases customer acquisition, retention
and satisfaction. Therefore, deploying a comprehensive Internet-based support
infrastructure is becoming a competitive asset that enables a company to
differentiate its products and services and improve the efficiency of its
operations.
The Growing Difficulty in Delivering User Support
We believe technical support has become the most critical form of user
support, as businesses and users increasingly rely upon complex information
technology infrastructure and the Internet to conduct business. IDC estimates
that 59% of businesses either lose business, or are no longer able to conduct
business, if their system or network is not available. Delivering technical
support is increasingly complex and difficult as systems become more
sophisticated, different electronic devices proliferate and the number of users
and their demands grow.
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Millions of Individuals Are Using the Web. According to IDC, the number of
people using the web will grow from 196 million in 1999 to 502 million in 2003.
These users have a broad range of support requirements and levels of
sophistication. Supporting this growing demographic is further complicated by
each user's dependence on different applications and devices. These users also
face a proliferation of new web-based services and require real-time training
and electronic support.
Computing Environments Are Becoming More Complicated. A typical business
uses a broad range of operating systems, networking technologies, e-commerce
software, security solutions, server applications, packaged and internally
developed applications and productivity tools. In many cases, these
applications are integrated within the corporation and with the systems and
applications of the extended enterprise, through a variety of networks and
protocols.
Electronic Devices Are Proliferating. Businesses and consumers use many
different electronic devices to conduct business, access the Internet and
purchase products and services, such as personal computers, personal digital
assistants and other mobile devices. Each device bears an individual profile--a
different configuration of applications, operating system components, network
access protocols and personal settings. To illustrate this proliferation,
according to IDC, the number of shipped personal computers alone will grow from
approximately 112 million in 1999 to 190 million in 2003.
Applications Are Multiplying. Meta Group estimates that the number of
programs on the average personal computer has risen from approximately 200 in
1997 to over 600 in 1999. These applications are frequently upgraded, and
combinations will increase exponentially. Also, we believe that the variability
of device configurations will increase as customers download, install and use
thousands of programs from the Internet or access hosted applications.
Existing Support Solutions Are Inadequate
Existing approaches to user support are increasingly inefficient and costly
in today's rapidly evolving and dynamic Internet economy. Providing scalable,
personalized technical support is especially difficult. Businesses have
traditionally provided support to users on-site or remotely through call
centers and help desks. These methods are highly labor intensive because
support is typically provided through time consuming phone interaction, e-mail
or on-site visits. Also, call centers and help desks generally experience high
turnover and have difficulty scaling. Support professionals are provided with
limited knowledge of users, their systems and business needs and therefore
cannot properly and rapidly diagnose and resolve users' problems. Also, user
self-help options such as manuals and software help features have been of
limited effectiveness, as they are static and require intensive user effort.
The increasing complexity of support requires a highly personalized,
automated and web-based approach to the development and delivery of support.
Support infrastructure technology investments have primarily focused on making
incremental improvements to existing call center and help desk solutions. For
example, work-flow solutions, such as automated call-tracking, and web-based
applications, such as email response management systems, have increased the
efficiency of support delivery. However, these solutions do not reduce the need
for assisted support, offer automated support or provide web-based technologies
for personalized problem diagnosis or resolution.
The Growth of eSupport
According to the Gartner Group, the volume of non-financial goods and
services sold through business-to-business e-commerce is expected to reach over
$7 trillion worldwide in 2004. However,
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<PAGE>
most organizations lack an adequate support infrastructure to meet the demands
imposed by this increasing volume of Internet commerce. The inadequacy of
existing support infrastructure impedes the growth and rapid acceptance of
eBusiness. Therefore, businesses are seeking more effective and efficient ways
to deliver user support. Support solutions must deliver highly personalized
services that are able to automatically and intelligently identify and resolve
user problems and questions. Organizations need to transform eBusiness support
operations from inefficient cost centers to highly productive and scalable
competitive assets that increase customer loyalty, improve operational
efficiencies and generate incremental revenue. Businesses must fully build out
their web-based support infrastructure. The market for eSupport, the automated
delivery of user support over the Internet, is estimated by IDC to grow to
over $14 billion in 2003.
The Support.com Solution
We provide eBusiness infrastructure software that automates, personalizes
and enhances user support over the Internet. The core of our solution is an
Internet support infrastructure that automates information collection from the
user's system, enhances communication between support analysts and users, and
enables self-healing and automated problem resolution. Our web-based offerings
are available in a variety of configurations, including a full-service web
site, or support portal, that serves as the nexus of an eBusiness support
infrastructure.
The key features of our products include:
Personalized Support. Our software automatically discovers and tracks the
unique characteristics of each user's system and that system's components to
personalize and increase the efficiency of the support process.
Self-Healing. Our software recognizes, diagnoses and resolves potential
problems before they cause users to experience problems, without the need for
the user to request assistance.
Self-Service. Our software helps users to resolve their own problems
through a single, intuitive interface that provides adaptive, context-
sensitive resolution of problems and queries.
Assisted Service. Our solution is designed to ensure that when a problem or
query is escalated to the level at which it requires the assistance of a
support analyst, that analyst will have detailed information about the user's
system and access to sets of support actions to accelerate problem resolution.
Web Support Content Authoring. Our solution enables support analysts to
develop support actions that automatically implement problem diagnosis and
repair, user training and just-in-time help through the web. These actions are
made available to other support analysts and users to further automate the
support process.
Internet-Based Architecture. Our products are primarily web-based, meaning
that they can be delivered and updated through the Internet, are secure,
scalable and extendable. By structuring our software this way, we are able to
offer solutions to users, corporate information technology departments and
other support providers that are geographically unconstrained and easy to use
and deploy. By designing a new eSupport process that uses the Internet, we are
able to improve the effectiveness and efficiency of support with automated and
detailed information exchange.
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<PAGE>
Through the features, our solutions:
Accelerate eBusiness Growth. Our software's high degree of automation and
scalability provides our customers with a means for eliminating the support
bottlenecks that would constrain their rapidly expanding eBusiness initiatives.
Our products provide information-gathering capabilities that can help our
customers convert the traditional help desk into a revenue generating business
services desk.
Reduce Support Costs. Traditional support solutions involve multiple
instances of human interaction by telephone and in person. Our products can
enable fully automated problem and query resolution directly by users--that is,
without necessarily requiring remote or in-person assistance. We refer to this
user self-service as tier zero, and believe that it is an effective and
efficient means of providing support. By providing a 24-hour, seven-days-a-week
automated support button on systems, our software minimizes escalation of
problems from tier zero to levels requiring human interaction. As a result, our
customers can enhance their existing support infrastructure, reduce their
overall support costs, and create an internal environment that allows them to
attract and retain high-quality support analysts.
Increase Customer Satisfaction. Our products are personalized, context-
sensitive, and adapt to dynamically changing system environments. Our patented
DNA Probe, for example, recognizes individual system settings and provides our
eSupport solution with the information necessary to resolve technical problems
at tier zero. In situations where problems are not eliminated at tier zero, the
Support.com infrastructure provides support analysts with detailed user and
process information and problem history. Our approach resolves user problems
faster and more quickly than traditional support solutions, while increasing
user satisfaction and reducing the amount of time during which users experience
problems.
Rapidly Deploy and Integrate with Existing Solutions. Our products are
designed to reduce customer configuration deployment times and installation
costs. Our software helps customers to preserve their investments in and
deployments of call center and help desk products, workflow tools, knowledge
bases and other applications. Our solution can enhance these capabilities and
integrate them into a cohesive, automated and personalized Internet support
infrastructure. Our solution is also designed to effectively support third-
party software and does not require lengthy development, testing or maintenance
cycles.
Enable Businesses to Achieve Competitive Advantage. Our comprehensive
eSupport solution can accelerate problem resolution, reduce system downtime and
increase user productivity, each of which is important to maintaining a
competitive advantage in the Internet economy. We also offer our customers the
ability to differentiate their product offerings, improve their customer
satisfaction and enhance their online presence by enabling them to brand their
own version of our support portal.
Support.com Strategy
Our mission is to be the leading provider of comprehensive eSupport
infrastructure software. Key components of our strategy include:
Grow with eBusiness and the Internet. We believe that as businesses continue
to use the power of the Internet to realize efficiencies in their interactions
with customers, supply chain partners and employees, the opportunities to
provide web-based products that address the support needs of these
constituencies will be substantial. As companies increasingly use the Internet
to automate
35
<PAGE>
business processes, their contact with customers is progressively becoming
limited to those support interactions that occur when a user has a problem. Our
goal is to use our technologies and web-based architecture to help our
customers provide superior levels of customer care through the Internet.
Continue to Develop Advanced Support Technologies. Our eSupport product
offerings are based on patented technology and are designed to solve many
complex user support problems, primarily those revolving around technical
support. We intend to continue investing substantial resources in developing
innovative web-based technologies that enhance the personalization, automation
and overall effectiveness of our solutions. We also plan to continue developing
technologies to support additional platforms and applications and to address
the complex and evolving natures of corporate computing environments and the
Internet. We believe that our focus on providing technical support
infrastructure gives us a competitive advantage as we develop solutions to
address broader customer service opportunities.
Extend Market Leadership Position by Expanding Our Sales and Distribution
Capabilities. We plan to continue developing both our internal sales force and
our indirect sales channel of resellers, systems integrators, support
outsourcers and other service providers. We also intend to expand our web-based
sales strategies. We believe that our indirect sales channel and web sales will
add cost efficiencies to and increase the scalability of our sales process. We
believe that distribution of our products through Internet service providers
and application service providers, which typically have large numbers of
customers, will help promote recognition of our brand and enhance our market
penetration and position. We believe the combination of our existing base of
reference accounts and our consultative selling approach will assist us to
further penetrate our markets and to attract new customers.
Expand our Technology Relationships. Our relationships with key technology
vendors are important to delivering a comprehensive support solution and
increasing our brand recognition. We work with leading technology companies in
the areas of knowledge management, customer communications, call center and
help desk software to ensure that our offerings can be integrated with our
customers' existing infrastructure. We intend to strengthen our relationships
with these and other key technology providers in the future to support
additional platforms and applications and to increase the functionality and
applicability of our product offerings.
Continue to Increase Customer Return on Investment. We work in close
partnership with our customers to develop an in-depth understanding of their
businesses, and to effectively deploy our eSupport solution to increase their
return on investment. We intend to continue to provide a high level of customer
service and support through our services organization and by using our own
eSupport technologies. We will continue to work with our customers as they grow
with the Internet to improve the quality of our product offerings and to
identify and address their new support challenges.
These components of our strategy are part of our ongoing, overall business
plan. Because we intend to continue to pursue and revise these objectives on an
ongoing basis, we do not have definitive targeted implementation and completion
dates for each objective.
Products
Our eSupport infrastructure products and services can enable our customers
to support their customers, supply chain partners and employees automatically
and through the Internet, extranets or
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<PAGE>
intranets. Our software allows our customers to provide their users with
personalized, automated support solutions tailored to meet the needs of each of
their business environments. Support solutions generated by our products are
unique for each user and are intelligent because they are interactive,
adaptable and have the capability to automatically update themselves as the
user's support requirements change. Our products are web-based, which reduces
user deployment and installation expenses. This ease of deployment makes our
software scalable in corporate environments.
The table below highlights the features of our products:
<TABLE>
<CAPTION>
Product Description
<C> <S>
Healing Agent A comprehensive, context-sensitive user-based support
application that enables personalized self-service and makes
software self-healing by identifying and repairing problems
before they cause users to experience problems.
- -------------------------------------------------------------------------------
Support Center A centralized support infrastructure and a suite of software
components for remote assisted service, enterprise-wide
problem resolution and management and administration of the
overall support environment. Builds on the Healing Agent's
capabilities to rapidly resolve user requests that are
escalated to a support analyst.
- -------------------------------------------------------------------------------
Support Portal An interactive web platform that enables self-service and
assisted service. Works with the Internet-enabled Support
Center and Healing Agent to provide support organizations with
the components and infrastructure they need to provide
interactive, full-service and personalized online support.
- -------------------------------------------------------------------------------
Foundry A comprehensive application for authoring automated support
actions and managing support content that can then be utilized
by the Healing Agent, Support Center and Support Portal.
</TABLE>
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<PAGE>
Our eSupport suite consists of four products that provide a modular approach
to building comprehensive eSupport solutions. This diagram illustrates the
components of our eSupport Suite and how they interact:
[GRAPHIC APPEARS HERE]
Healing Agent
The Healing Agent provides users with self-healing and automated self-
service capabilities to resolve problems and questions that normally require a
call to the call center or help desk. The Healing Agent acts as the user's
personalized, context-sensitive support assistant, identifying and
automatically solving problems before they cause users to experience problems.
The Healing Agent provides a single source of information for addressing
software and system malfunctions and responding to users' queries. The Healing
Agent serves as the foundation for our comprehensive support infrastructure.
The Healing Agent includes:
Self-Healing Capabilities. By monitoring the applications and components of
a user's changing system, the Healing Agent can intelligently eliminate
problems before they cause downtime.
Automated Self-Service. Enables users to address support problems that
normally require calls to the call center or help desk. This reduces the number
of calls to the call center and provides users with an effective alternative to
contacting a support analyst.
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Support for Disconnected and Mobile Users. Allows users to solve problems
when they are completely disconnected from their networks. The solutions
critical to disconnected and mobile users reside locally on the user's
machine.
Undo Capability. Provides users with the ability to undo actions taken by
the Healing Agent.
Support Center
The Support Center provides a centralized support infrastructure and a
suite of software components for remote assisted service, enterprise-wide
problem resolution and management and administration of the overall support
environment. This product provides support analysts with the ability to
deliver context-sensitive diagnosis and resolution of user problems. The
Support Center builds on the Healing Agent's support capabilities in an effort
to rapidly resolve support requests that are escalated to the call center or
help desk. The Support Center provides support for a comprehensive range of
call types, including solving problems, answering questions and resolving
requests for system modifications.
The Support Center enables support analysts to provide enhanced assisted
service with a set of tools for diagnosing and resolving problems from remote
locations. By integrating the Healing Agent's knowledge and user history with
remote assisted service, the Support Center provides support analysts with
appropriate information that they would normally have to gather manually. The
Support Center allows support analysts to identify the fundamental causes of
problems and enable users and support staff to systematically and rapidly
resolve them without desktop visits or lengthy interactions between the user
and the analyst. The result is significant reductions in call times, which can
lead to improved service to users and lower support costs.
The enterprise healing capabilities of the Support Center enable the
support organization to solve problems for a large number of users across the
organization before user productivity becomes impaired. Enterprise healing
allows the support organization to identify problems that could affect large
numbers of users and repair them before users suffer downtime.
The administration and management capabilities of the Support Center
provide centralized user management, usage and status reporting, storage
maintenance, security administration and instructions for the Healing Agent.
The Support Center manages characteristics and privileges for users and
support analysts and reports on support activities. For instance, periodic
maintenance can be performed from the Support Center to manage security
parameters and storage requirements. The Support Center provides centralized
instructions for the Healing Agents, which control their behavior and
activity.
The Support Center includes:
Knowledge-Driven Remote Diagnosis. Provides the support analyst with the
knowledge and tools to remotely diagnose problems on a user's system. The
Support Center provides support analysts with information about the
configuration of a user's system, a history of all prior actions taken to
resolve the user's problems and tools to present context-sensitive solutions
to the support analyst. This allows for analysis of problems based on the
status of the user's system and personalized support requirements and results
in quicker diagnosis of the fundamental cause of the problem and its solution.
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Remote Repair. Enables the support analyst to remotely solve problems with
no user interaction. This reduces desktop visits and costly, time-consuming
interaction with users. Remote repair allows the support analyst to initiate
online chat sessions with users, edit their files and execute commands on their
systems.
Reporting. Provides support organizations with information for monitoring
support transactions, identifying trends and potential problems and measuring
the effectiveness of our eSupport suite.
Extensibility. Provides an open architecture to enhance and extend the
capabilities of the Support Center to meet changing support needs. The Support
Center enables support organizations to transfer and use information with
knowledge bases and automatically transfers information into call tracking
databases.
Security. The user can control which activities are allowed or disallowed by
the support analyst. Also, support administrators manage overall user and group
security. All support activity occurs using industry standard security,
including encryption and the use of digital certificates.
Undo capabilities. Provides support analysts with the ability to undo
actions taken from the Support Center.
Support Portal
The Support Portal is an interactive web platform that enables businesses to
add to or enhance self-service or assisted service capabilities. The Support
Portal works with the Internet-enabled Support Center and Healing Agent to
provide support organizations with the components and infrastructure they need
to build interactive, full-service, context-sensitive and personalized online
support. The Support Portal enhances existing support solutions, such as
knowledge bases and call tracking systems, by delivering context-sensitive
information that allows for better solution matching and automated problem
resolution. The Support Portal interacts with the user, the system and other
support technologies to provide a personalized solution to the user's support
request.
The Support Portal includes these features:
Web-Based Solution. The Support Portal serves as a single point of
integration for all support content, technologies and processes.
Interactive, Context-Sensitive Support. Interacts with users' systems to
guide those users through the complexities of their specific environments,
offering them context-sensitive, personalized support.
Support Process Automation. Connects users to support providers and
automates and reduces inefficiencies in the support process. This includes:
. self-service;
. routing of support requests to the support organization;
. user identification and privilege verification;
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. problem description;
. diagnosis and repair; and
. logging of actions taken by all parties involved in the support
transaction.
Foundry
The Foundry is a development environment for authoring support actions and
managing support content that can be utilized by the Healing Agent, Support
Center and Support Portal. The Foundry's authoring capabilities enable support
organizations to create automated solutions, or SupportActions, that support
user applications and operating system components, automate common support
activities and schedule jobs to manage user systems. SupportActions can be
created for a complete range of support requests.
The Foundry includes:
Content Creation and Content Management. The Foundry enables support
organizations to create, publish, integrate and maintain automated
SupportActions. The Foundry is a platform for authoring automated
SupportActions from a point-and-click interface. This includes support content
automation and the ability to easily integrate existing support content into a
database of solutions and content.
Personalization. The Foundry enables the support organization to create
personalized support content. Using the Foundry's capabilities, a company can:
. create support solutions that automatically identify and address the
unique support requirements of each user.
. deliver automated support solutions to a single user or set of users
based on the unique characteristics of their systems and the history of
their support needs.
Technology
We believe that our core technologies provide the foundation for a scalable
support infrastructure. The intelligent nature of our core technologies enables
our products to automatically adapt to varying environments and to reduce the
manual labor in the support process.
DNA Probe--Personalized Support
The DNA Probe provides detailed data about each user, their system and the
software on their system. The patented DNA Probe technology automatically
identifies the characteristics of each user's software applications and
operating system components and tracks them over time. This personalized data
can be used to quickly sift through large amounts of information, compare
historical data and highlight potential fundamental causes of problems. For
example, the DNA Probe technology automatically identifies all of the network
settings for each individual user, including the network address, machine name,
Internet configuration and the specific drivers for their network card.
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<PAGE>
In contrast to other support process methodologies, which involve authoring
generic solutions and attempting to apply those to numerous unique users,
support organizations can use the DNA Probe's ability to learn about each
dynamic environment to efficiently provide users with personalized support
solutions.
ContextResponse--Context-Sensitive Support
ContextResponse analyzes the data gathered by the DNA Probe, identifies and
diagnoses the most relevant information, and then delivers a solution for a
user's problem or question. It is the ability to gather, analyze and transmit
context-sensitive information which efficiently automates the support process.
ContextResponse personalizes and automates the support process by:
. automatically gathering information that normally requires a time-
consuming and frequently complex interaction between the user and the
support analyst. For example, rather than asking a user to identify their
specific operating system parameters and software versions,
ContextResponse automatically gathers this information and electronically
relays the information to the support analyst.
. analyzing information to identify potential problems. ContextResponse is
designed to identify the fundamental cause of a problem by analyzing the
results of diagnostic programs or comparing the user's system
configuration to a previous working configuration, a reference
configuration or another user's configuration.
SupportAction--Point and Click Development and Delivery
Many custom support solutions can be packaged as SupportActions, which
enable the automation of common support activities such as solving problems or
answering questions. Support analysts use the Foundry to create custom
SupportActions using a point-and-click interface. Support organizations can
integrate existing programs, commands and content into SupportActions to turn
static information into automated knowledge. For example, the support
organization could integrate frequently asked questions or a diagnostic program
into a SupportAction so that the user can automatically perform the steps
described by the answers to the frequently asked questions or the diagnostics
program. SupportActions can accomodate many scripting languages and a wide
range of content.
Change Management Infrastructure
Our change management infrastructure provides a common mechanism for the
distribution and application of changes to one or more machines. This
infrastructure is used across our products so that changes made to a user's
machine are consistent, reversible and recorded. Repair to a user's machine,
comparison of one machine to another, installation, modification and
distribution can all be achieved using our common change management
infrastructure. Support solutions are easier to develop with this
infrastructure because steps that are done manually and are potentially error-
prone are replaced by automatic and consistent mechanisms. This can facilitate
rapid development and reduce the cost of on-going maintenance.
Nexus--Enhanced Communication Infrastructure
Our products communicate directly with each other using secure protocols,
but firewalls and other network components often restrict direct communication
across the Internet. If a firewall or
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other device prevents direct communication between remote parties, our products
are designed to communicate indirectly using our Nexus technology as an
intermediary. Our Nexus technology allows communication to take place between
parties in circumstances where direct communication is unreliable or
impossible.
Software Vaults--Efficient Storage Management
Once a user's problem is diagnosed, the solution is delivered to the user
from the Software Vault. Support solutions generally require access to a large
amount of support content, in the form of files, programs and other
information, which must be available locally or across a network. Our patent-
pending Software Vault provides storage, retrieval and management of this
support content. Files and programs for supported applications, operating
system components and all SupportActions are stored in the Software Vault.
The Software Vault provides a redundant, distributed mechanism for this
support content. For example, if a particular file on a user's system has been
corrupted and needs to be replaced, one or more Software Vaults will be
accessed in a logical sequence until the needed file has been found. Software
Vaults reside on servers to support thousands of users, and portions of
Software Vaults can also be placed locally on a user's system to provide
support for critical applications and operating system components when the user
is completely disconnected from the network.
The Software Vault's file storage mechanism is efficient. By storing each
unique file only once, the Software Vault minimizes disk space, communications
and bandwidth requirements. For example, if a number of users have multiple
applications that all use a particular version of a file or program, only one
copy of that file is kept in the Software Vault.
Services and Support
Our services organization provides a range of support offerings from
architectural design to on-going customer support and is critical to our focus
on customer satisfaction. Our services group customizes solutions for our
customers that can be used across all or parts of their organization. Our
services and support capabilities are divided into three areas:
. Implementation--Provides architectural design, transformation, product
integration and deployment services to our customers. Each implementation
is customized according to the customer's organizational and technical
requirements.
. Education--Trains our customers and those parties with whom we have
alliances in the design, implementation and use of our products.
. Technical Support--Responds to design, feature, implementation and
deployment questions.
Under a maintenance contract, our customers receive generally available new
releases, corrections, enhancements, updates and other changes to the products
they have licensed.
As of March 31, 2000, we had 19 employees engaged in services and support
activities.
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Customers
We market and sell our eSupport solutions to corporate information
technology departments, support outsourcers, Internet service providers,
application service providers and other businesses that use the Internet.
In 1998, Charles Schwab accounted for 64% of our total revenue and Morgan
Stanley accounted for 36% of our total revenue. In 1999, Bear Stearns accounted
for 53% of our total revenue and CompuCom accounted for 10% of our total
revenue. For the three months ended March 31, 2000, Schlumberger accounted for
27% of our total revenue, General Electric accounted for 15% of our revenue and
Computer Sciences Corporation accounted for 10% of our total revenue.
Below is a representative list of companies who have purchased our products
and services organized by our customer focus categories. We have listed our
customers who have placed orders with us of at least $100,000.
<TABLE>
<CAPTION>
Customer Focus Category Customers
-----------------------------------------------------------------------------
<S> <C>
Corporate information technology departments
can use our Bear Stearns
software to support users of internal
software and software Broadcom
used by external customers and partners. Cadence Design Systems
Chase H&Q
Cisco
Equifax
JCPenney
KBA Marketing
McKesson HBOC
-----------------------------------------------------------------------------
Support outsourcers can use our software to
meet customers Compaq
service levels for the complex environments
they support. CompuCom
Computer Sciences Corporation
Inacom
Samsung
Schlumberger
Xerox Connect
-----------------------------------------------------------------------------
Internet service providers can use our
software to resolve Excite@Home
questions or problems of their subscribers,
included those Globo Cabo
related to Internet connectivity, email and
browser use.
-----------------------------------------------------------------------------
Application service providers can use our
technology to add everdream
web-based support for the software and
systems they provide Jamcracker
their customers. micronpc.com
</TABLE>
License revenue from three of the customers listed in the table was
recognized when the product was delivered. We recognize license revenue from
all of the other customers listed in the table on a monthly basis. Our eSupport
Suite consists of four products--Support Portal, Healing Agent, Support Center
and Foundry. All of the customers listed in the table have license rights to
the Support Center and Healing Agent. In the first quarter of 2000, we
introduced two new products to the eSupport Suite--the Support Portal and
Foundry. Seven of the customers listed in the table have licensed rights to one
or both of these new products.
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Case Studies
The case studies below illustrate how our customers integrate our solution.
These case studies are intended only to illustrate how companies have used our
solution and should not be viewed by investors as an endorsement or promotion
of our products and services by these customers:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Customer Description
<C> <S>
Excite@Home Excite@Home is a global media company that provides
high-speed Internet access to over 1,200,000 consumer
and small business users. Excite@Home needed a
solution to better manage calls related to
connectivity difficulties, one of their most common
support calls. They chose the Support.com Healing
Agent, which is installed as a standard part of
Excite@Home's service. The Healing Agent supports
personal computer, network and Internet
configurations, provides continuous support for
network components and client software, and can
automatically solve user's connection problems. The
Support.com solution also delivers the information the
support team needs to perform remote diagnosis. As a
result, Excite@Home has seen a reduction in the number
of connection related calls to the help desk, as well
as a reduction in the time it takes to solve calls
that do reach the help desk.
- -------------------------------------------------------------------------------
JCPenney JCPenney, the worldwide leader in the retail industry,
was seeking a solution to enhance its support process
while providing a better service level to its
employees. JCPenney uses our software to provide a
full range of eSupport solutions focused on automating
the support process and improving the user community
experience with the help desk.
- -------------------------------------------------------------------------------
Compaq Compaq Professional Services, a division of Compaq
Computer Corporation, operates one of the world's
largest and leading multi-lingual help desks,
providing service to some of Compaq's corporate
clients. Compaq was looking for a solution to resolve
user problems as quickly as possible and decrease
overall support costs. The eSupport solution for
Compaq is a part of the Compaq Professional Services
global help desk and provides comprehensive self-
healing, self-service and assisted service over the
Internet.
- -------------------------------------------------------------------------------
everdream everdream is an application service provider that
delivers hardware, software, networking infrastructure
and support to small business customers, offering its
customers a single point of support. With the
integration of our self-healing, self-service and
assisted service technology on the everdream platform,
everdream is able to increase the number of technical
problems solved for its customers and decrease the
time it takes to solve them. As a result, everdream's
customers can experience increased productivity and
cost savings.
</TABLE>
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Strategic Alliances
An important element of our sales and marketing strategy is to expand our
strategic alliances with industry leaders to increase market awareness,
acceptance and distribution of our products and services. We have established
formal and informal distribution and solutions alliances with industry leaders
to help us to deliver comprehensive solutions and allow us to focus on our core
area of expertise: developing eSupport software. We employ this network of
alliances to expand our sales, service and marketing capabilities and to extend
the technical and functional application of our eSupport solutions.
Distribution Alliances
We have established distribution alliances with specialized technology and
services firms that deliver our solutions to specific market segments. These
distribution relationships allow us to benefit from the marketing and lead
generation capabilities of these firms and are intended to increase geographic
sales coverage and to address small- to-medium-sized businesses and large
corporate customers. Also, the companies with which we have distribution
alliances can enhance their product and service offerings and increase customer
satisfaction with our products while effectively managing costs of providing
support to their customers.
The table below illustrates our formal distribution alliances:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Target Category Company
<S> <C>
Support Outsourcers deliver outsourced Compaq
technical support and
help desk capabilities to large corporations. CompuCom
Computer Sciences Corporation
Cotelligent
Inacom
Samsung
Service911.com
Sykes Enterprises
Xerox Connect
- --------------------------------------------------------------------------------
Internet Service Providers offer their Excite@Home
customers Internet access.
Globo Cabo
- --------------------------------------------------------------------------------
Personal Computer Vendors provide support to Omni Tech
their customers
with their hardware product offerings. Premio Computer
- --------------------------------------------------------------------------------
Application Service Providers offer hardware, everdream
software,
networking infrastructure with Internet Jamcracker
accessible applications
and support to small- and medium-sized micronpc.com
companies.
- --------------------------------------------------------------------------------
Support Integrators provide strategic Support Technologies
consulting and implementation services to
organizations building their
support infrastructure.
</TABLE>
Solutions Alliances
We have established solutions alliances with leading providers of
complementary support technologies such as call center/help desk management
companies, knowledge management companies and systems management firms. Our
relationships with these technology providers help us deliver comprehensive
solutions to our customers and allow us to adapt our solutions to our
customers' needs. We also seek to generate referral sales from these alliances.
By establishing alliances with Support.com, these technology providers can
provide a more comprehensive support solution to their customers while
informing and educating their customers about new support products and
technologies.
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<PAGE>
The table below illustrates our formal and informal solutions alliances:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Target Category Company
<S> <C>
Call Center/Help Desk Management solution providers HP OpenView
offer software that allows organizations to respond to Peregrine Systems
service call requests and monitor support activity. Remedy
- -------------------------------------------------------------------------------
Knowledge Management companies provide solutions that Inference
collect, organize and share an enterprise's support
data. ServiceWare
- -------------------------------------------------------------------------------
Email Management solutions providers enable help Kana Communications
desk/customer service departments to route, track and
respond to high volumes of customer email.
- -------------------------------------------------------------------------------
Systems Management solutions providers enable global Computer Associates
organizations to control their information technology Tivoli
resources, increase application availability and
improve customer service.
- -------------------------------------------------------------------------------
Password Reset companies provide solutions to automate Courion
the reset and synchronization of user passwords.
- -------------------------------------------------------------------------------
Content Providers deliver support-related content. MyHelpdesk.com
Shaman Corporation
- -------------------------------------------------------------------------------
Hardware Diagnostics solutions providers offer utilities PC-Doctor
to accurately determine the cause of hardware problems.
</TABLE>
Research and Development
The emerging market for eSupport solutions is characterized by rapid
technological change, new product introductions and enhancements, evolving
customer requirements and rapidly changing industry standards. We devote a
substantial portion of our resources to developing new and enhanced versions of
our eSupport infrastructure software, conducting product testing and quality
assurance testing and improving our core technologies.
As of March 31, 2000, we had 42 employees in research and development
activities. Our research and development expenditures were approximately $1.1
million in 1998 and $2.4 million in 1999. We expect to continue to devote
significant resources to research and development for the next several years.
Sales and Marketing
We sell our eSupport software through a combination of direct and indirect
sales channels. Our direct sales efforts to corporate customers are focused on
several industries, including financial services, telecommunications, retail
and manufacturing. Our indirect sales channel to corporate customers consists
of outsourcers, live support providers and system integrators. We primarily
sell to Internet service providers and application service providers through
our direct sales channel. We plan to establish a telephone and web sales
organization that will be responsible for lead management, customer follow-up,
add-on business and new sales over the web to existing customers and new market
segments.
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We maintain direct and indirect sales personnel in North America covering
the United States, Canada and Latin America, in the United Kingdom covering
Europe, the Middle East and Africa, and in Singapore covering the Asia Pacific
region.
Our sales strategy utilizes partner relationships and consultative selling
techniques and incorporates a comprehensive communication infrastructure for
both our direct and indirect sales forces. We plan to continue to invest and
increase the size and geographical locations of both our direct and indirect
sales model on a global basis.
Our marketing efforts include needs assessment and market analysis, brand
awareness, category education and lead generation, and educating organizations
in our target markets.
As of March 31, 2000, approximately 62 of our employees were engaged in
sales and marketing activities.
Competition
Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements. Our potential competitors
may have longer operating histories, significantly greater financial, technical
and other resources or greater name recognition than we do. Competition could
seriously harm our ability to sell additional software, maintenance renewals
and services on terms favorable to us. Competitive pressures could also reduce
our market share or require us to reduce the price of products and services,
which could harm our business, financial condition and operating results.
Existing Competition
The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Although we do not believe there is one
dominant competitor in the market for all aspects of our eSupport solution,
there are vendors who offer products and services with features that compete
with specific elements of our eSupport solution. These elements include
automated development of support solutions, automated delivery of support
solutions, and an Internet support infrastructure. For example, in the market
for automated development of support solutions, we compete with companies such
as Serena Software, Inc. In the market for automated delivery of support
solutions, we compete with Motive Communications, Inc.
Future Competition
We may encounter competition from other software companies to the extent
that we enter each other's market. These companies may include:
. customer communications software companies, including Kana
Communications, Inc. and eGain Communications, Inc.;
. question and answer companies, including Ask Jeeves;
. customer relationship management, or CRM, solutions companies, including
Siebel Systems, Inc., Oracle Corporation and Silknet Software, Inc.;
. consolidated service desk solution vendors, including Clarify, Inc.,
Peregrine Systems, Inc. and Remedy Corporation; and
. operating systems providers, including Microsoft Corporation.
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We believe that the principal competitive factors in our market include:
. establishing a significant base of reference customers;
. demonstrating ongoing value and return-on-investment;
. product functionality, quality and performance;
. introducing new products to the market in a timely manner;
. customer service and support; and
. pricing.
Although we believe our solutions compete favorably in each of these
factors, the market for our products is new and rapidly evolving. We may not be
able to maintain our market position against competitors, especially those with
greater resources.
Intellectual Property
Patents
We have one patent in the general area of automated discovery of dynamic
configurations. We have four patent applications pending in the United States,
and we may seek additional patents in the future. We do not know if our patent
applications or any future patent application will result in a patent being
issued with the scope of the claims we seek, if at all. Also, we do not know
whether any patents we have or may receive will be challenged or invalidated.
It is difficult to monitor unauthorized use of technology, particularly in
foreign countries where the laws may not protect our proprietary rights as
fully as in the United States, and our competitors may independently develop
technology similar to ours.
Copyright, Trademark and other Proprietary Rights
Our trademarks include Support.com, the Support.com logo, ContextResponse
Technology, Self-Healing, SupportAction, DNA Probe and TierZero. Third parties
may infringe or misappropriate our copyrights, trademarks and similar
proprietary rights. We rely on a combination of copyright, trade secret,
trademark and contractual protection to establish and protect our proprietary
rights that are not protected by patent. We also enter into confidentiality
agreements with our employees and consultants involved in product development.
We routinely require our employees, customers and potential business partners
to enter into confidentiality agreements before we will disclose any sensitive
aspects of our business. Also, we require employees to agree to surrender to us
any proprietary information, inventions or other intellectual property they
generate or come to possess while employed by us. Despite these efforts,
unauthorized parties may attempt to copy or obtain and use our products or
technology. These precautions may not prevent misappropriation or infringement
of our intellectual property.
Our Infringement of Others' Intellectual Property
We may be involved in legal proceedings and claims in the ordinary course of
our business, including claims of alleged infringement of the patents,
trademarks and other intellectual property rights of third parties. Our
products may infringe issued patents that may relate to our products. Also,
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<PAGE>
patent applications may have been filed which relate to our software products.
Intellectual property litigation is expensive and time-consuming and could
divert management's attention away from running our business. This litigation
could also require us to develop non-infringing technologies or enter into
royalty or license agreements. These royalty or license agreements, if
required, may not be available on acceptable terms, if at all. Our failure or
inability to develop non-infringing technologies or license the proprietary
rights on a timely basis would harm our business.
Employees
As of March 31, 2000, we had 142 full-time employees, including 42 in
research and development, 19 in services, 62 in sales and marketing and 19 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 face claims and
legal actions arising in the ordinary course of business.
Facilities
Our corporate headquarters are located in Redwood City, California, where we
lease approximately 23,200 square feet under a lease that expires in August
2001. As of March 31, 2000, we also leased office space in nine other cities
for our sales and support personnel. The terms of these leases expire beginning
in April 2000 and ending in July 2001, and automatically renew unless earlier
terminated. We also lease approximately 10,000 square feet of office space in
Palo Alto, California. This lease expires in July 2001.
We expect to require additional space to meet our needs in the next 12
months. We are pursuing our options to obtain additional facilities. Adequate
space may not be available on commercially reasonable terms.
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MANAGEMENT
Directors and Executive Officers
Our directors, executive officers and key employees and their ages as of
March 31, 2000 are:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Radha R. Basu.................. 49 Chief Executive Officer, President and Director
Mark J. Pincus................. 34 Chairman of the Board
Brian M. Beattie............... 46 Chief Financial Officer, Senior VP of Finance and
Administration
Jim R. Hilbert................. 39 Senior Vice President of Sales and Business
Development
Scott W. Dale.................. 30 Vice President of Engineering
Cadir B. Lee................... 28 Chief Software Officer
Lucille K. Hoger............... 46 Vice President of Operations
Anthony C. Rodoni.............. 35 Vice President of Marketing
Matthew T. Cowan............... 28 Director
Manuel Diaz.................... 65 Director
William L. Dunn................ 63 Director
Bruce Golden................... 40 Director
Edward S. Russell.............. 39 Director
Roger J. Sippl................. 44 Director
</TABLE>
Radha R. Basu. Ms. Basu has served as president, chief executive officer
and as a director of Support.com since July 1999. Ms. Basu worked at Hewlett-
Packard Company, a computing and imaging solutions provider company, from
November 1978 to January 1999, and held various general management positions,
most recently the general manager of the electronic business software
organization. Ms. Basu also serves as chairman of the board of directors of
Seec, Inc., an eBusiness solutions company. Ms. Basu holds a B.S. in
engineering from the University of Madras, a masters degree in electrical
engineering and computer science from the University of Southern California
and is a graduate of the Stanford University executive management program.
Mark J. Pincus. Mr. Pincus co-founded, and has served as the chairman of
Support.com since December 1997. Mr. Pincus served as the chief executive
officer and president of Support.com since its founding until July 1999. Mr.
Pincus is also a part-time employee of Support.com. From 1995 to 1997, Mr.
Pincus was a co-founder and chief executive officer of FreeLoader, Inc., a
web-based push technology service. From 1994 to 1995, he served as vice
president with Columbia Capital, a venture capital firm. From 1993 to 1994, he
served as manager at Tele-Communications, Inc. now AT&T Cable. Mr. Pincus
holds a B.S. in economics from Wharton, University of Pennsylvania and an MBA
from Harvard Business School.
Brian M. Beattie. Mr. Beattie has served as executive vice president of
finance and administration and chief financial officer of Support.com since
October 1999. From May 1998 to May 1999, he served as vice president of
finance, mergers and acquisitions of Nortel Networks Corporation, a voice and
data networking company. From July 1996 to April 1998, Mr. Beattie served as
group vice president of meridian solutions of Nortel Networks Corporation.
From February 1993 to June 1996, Mr. Beattie served as vice president of
finance, enterprise networks, for Nortel Networks Corporation. Mr. Beattie
holds a bachelor of commerce and an MBA from Concordia University in Montreal.
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<PAGE>
Jim R. Hilbert. Mr. Hilbert has served as senior vice president of sales and
business development of Support.com since December 1999. From December 1998 to
December 1999, he served as vice president and general manager of Tivoli
Systems, Inc., a provider of systems management software and subsidiary of
International Business Machines Corporation. From March 1997 to December 1998,
he served as vice president of sales of Tivoli Systems, Inc. From 1987 to 1997,
he served in several senior management positions in sales and marketing for
Amdahl Corporation, a computer company. Mr. Hilbert holds a B.S. in computer
science from the University of Texas.
Scott W. Dale. Mr. Dale co-founded Support.com and has served as the chief
technical officer of Support.com since its incorporation in December 1997 and
recently assumed the role of vice president of engineering. From January 1997
to December 1997, Mr. Dale served as a software consultant for M&I Data
Services, a financial transaction software company. From July 1992 to January
1997, Mr. Dale served as a software consultant to Hewlett-Packard Company, a
computing and imaging solutions provider company. Mr. Dale holds a B.S. in
computer science from Stanford University.
Cadir B. Lee. Mr. Lee co-founded Support.com and has served as the chief
software officer of Support.com since its incorporation in December 1997. From
1995 to 1997, Mr. Lee served as a software consultant to Hewlett-Packard
Company, a computing and imaging solutions provider company. Mr. Lee holds a
B.S. in biological sciences and a B.A. in music from Stanford University.
Lucille K. Hoger. Ms. Hoger has served as the vice president of operations
of Support.com since February 2000. From 1996 to 2000, Ms. Hoger served as the
chief operating officer at ConnectInc.com, an e-commerce software company. From
1992 to 1995, she served as a principal for Gemini Consulting, an affiliate of
Cap Gemini, a consulting company. Ms. Hoger holds a B.A. in accounting from
Southwest Texas State University.
Anthony C. Rodoni. Mr. Rodoni has served as vice president of marketing of
Support.com since June 1998. From March 1988 to June 1998, Mr. Rodoni served in
a variety of management positions, most recently as general manager of the data
warehouse business unit, at Informix Software, Inc., a database software
company. Mr. Rodoni holds a B.S. in computer science from the University of
California at Santa Barbara and an MBA from Santa Clara University.
Matthew T. Cowan. Mr. Cowan has served as a director of Support.com since
June 1999. From September 1998 to the present, Mr. Cowan has served as general
partner of Bowman Capital Management, an institutional investor specializing in
both public and private technology growth companies. From July 1994 to
September 1998, Mr. Cowan served as director, corporate business development of
Intel Corporation. Mr. Cowan holds a B.A. degree in political science from
Tufts University.
Manuel F. Diaz. Mr. Diaz has served as a director of Support.com since April
2000. Mr. Diaz worked at Hewlett-Packard Company, a computing and imaging
solutions provider company, from November 1982 to February 1999, and held
various general management positions, most recently the vice president for
customer advocacy. Mr. Diaz holds a B.S. in electrical engineering from the
University of Havana, a masters degree in solid-state physics from the
University of Cincinnati and is a graduate of the Stanford University executive
management program.
52
<PAGE>
William L. Dunn. Mr. Dunn has served as a director of Support.com since
April 1998. From 1961 to 1989, Mr. Dunn served as an executive vice-president
of Dow-Jones & Company, a publishing company. Mr. Dunn holds a B.A. in
economics from Drake University.
Bruce Golden. Mr. Golden has served as a director of Support.com since June
1998. Since September 1997, Mr. Golden has served initially as entrepreneur-in-
residence and then as a partner at Accel Partners, a venture capital firm. From
1993 to August 1996, Mr. Golden served as a vice president of marketing at
Illustra Information Technology, which was acquired by Informix Corporation, a
database company, in 1996. Mr. Golden was employed by Informix Corporation
after the acquisition. Mr. Golden holds a B.A. in political science from
Columbia University.
Edward S. Russell. Mr. Russell has served as a director of Support.com since
June 1998. Since October 1996, Mr. Russell served as a general partner at
Softbank Technology Ventures, Inc. From 1988 to October 1996, Mr. Russell
served as the executive director at SBC Warburg. Mr. Russell is a director of
Buy.com, a multi-category Internet superstore. Mr. Russell received his B.S. in
computer science from Carnegie Mellon University and an executive MBA from
London School of Business.
Roger J. Sippl. Mr. Sippl has served as a director of Support.com since
January 1999. Since August 1995, Mr. Sippl has served as the managing partner
of Sippl Macdonald Ventures, a venture capital firm. From 1980 to 1989, Mr.
Sippl was the founder and served as chief executive officer and chairman of the
board of Informix Corporation, a database company. From 1989 to 1993, Mr. Sippl
served as chairman of the board of Informix Corporation. From December 1990 to
1996, he co-founded and served as a director of The Vantive Corporation, a
customer relationship management solutions company. From 1996 to 1998, he
served as chairman of the board of The Vantive Corporation. From February 1993
until March 1998, Mr. Sippl was the founder and served as the chief executive
officer and chairman of the board of Visigenic Software, Inc., a software tools
provider company. From March 1998 to July 1998, he served as chief technology
officer of Borland International, Inc. Mr. Sippl holds a B.S. in computer
science from the University of California at Berkeley.
There are no family relationships among any of our directors or executive
officers.
Board Committees
Our board of directors has a compensation committee and an audit committee.
Our compensation committee is responsible for determining salaries,
incentives and other forms of compensation for our directors and executive
officers and administering various incentive compensation and benefit plans.
Our board of directors established executive compensation levels for 1999.
Bruce Golden and Roger J. Sippl are the members of the compensation committee.
Radha R. Basu, our chief executive officer, will participate in decisions about
salaries and incentive compensation for non-executive employees and
consultants.
Our audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
Edward S. Russell, Matthew T. Cowan and William L. Dunn are the members of the
audit committee.
Compensation Committee Interlocks and Insider Participation
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.
53
<PAGE>
Director Compensation
Except for the grant of stock options and the grant of common stock under
restricted stock purchase agreements, we do not compensate our directors for
their services as directors. Our directors are eligible to participate in our
2000 omnibus equity incentive plan and our directors who are employees of
Support.com are eligible to participate in our 2000 employee stock purchase
plan. We also reimburse each member of our board of directors for out-of-pocket
expenses incurred by attending board meetings.
We have granted options or restricted stock to these directors:
<TABLE>
<CAPTION>
# of Shares Exercise
Name Underlying Options Price
---- ------------------ --------
<S> <C> <C>
Bruce Golden..................................... 50,000 $0.10
William Dunn..................................... 80,000 $0.10
Roger Sippl...................................... 100,000 $0.10
Manuel Diaz...................................... 60,000 $9.00
</TABLE>
Mr. Golden exercised his option in 1999. Mr. Dunn and Mr. Sippl purchased
their restricted stock in 1999. We have a right to repurchase these shares and
this repurchase right lapses over time as the options vest.
Executive Compensation
The table below provides summary information concerning compensation earned
by or paid to our chief executive officer, our former chief executive officer
and to our three other most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000, for services provided in all
capacities to Support.com during 1999. These individuals are referred to as the
named executive officers. Other than the salary and bonus described below,
Support.com did not pay any executive officer named in the summary compensation
table any fringe benefits, perquisites or other compensation in excess of 10%
of that executive officer's salary and bonus during 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation(1) Security
------------------------- Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
- --------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Radha R. Basu............................ 1999 $ 94,744 $45,834 1,680,189
President and Chief Executive Officer
Mark J. Pincus(1)........................ 1999 146,692 -- 500,000
Chairman of the Board
Scott W. Dale............................ 1999 120,833 -- 250,000
Chief Technical Officer
Cadir B. Lee............................. 1999 120,833 -- 250,000
Chief Software Officer
Anthony C. Rodoni........................ 1999 135,000 30,000 25,000
Vice President of Marketing
</TABLE>
- --------
(1) Mr. Pincus served as our chief executive officer until July 15, 1999.
54
<PAGE>
Option Grants in Last Fiscal Year
The percentage of total options granted is based on a total of 6,328,639
options granted in 1999. The exercise price on the date of grant was equal to
the fair market value on the date of grant as determined by the board of
directors. Options have a maximum term of 10 years but may be terminated
earlier for specified events related to termination of employment. The 5% and
10%, assumed rates of appreciation are required by the rules of the Securities
and Exchange Commission and do not represent Support.com's estimate or
projection of the future stock price.
The values reflected in the table may never be achieved. The dollar values
have been calculated by determining the difference between the fair market
value of the securities underlying the options at December 31, 1999 and the
exercise prices of the options. Solely for purposes of determining the value of
the options at December 31, 1999, we have assumed that the fair market value of
shares of common stock issuable upon exercise of options was $ per share,
the assumed initial public offering price, since the common stock was not
traded in an established market before the offering.
These stock options were granted under the 1998 stock option plan and are
immediately exercisable. We have a right to repurchase at cost any shares which
have been exercised but remain unvested at the time the officer's employment
ends. Ms. Basu's options vest at a rate of 25% upon the first anniversary of
her vesting start date and then at a rate of 1/48 per month. If we merge or
consolidate with another entity or sell all or substantially all of our assets
and Ms. Basu is terminated without justification or if she terminates her
employment under specified circumstances after a merger, consolidation or sale
of all or substantially all of our assets, all of her remaining unvested shares
will vest. Under the terms of Mr. Pincus's amended offer letter, only 88,541 of
these options will vest.
Of Mr. Pincus' 500,000 options, 250,000 options vest at a rate of 1/48 per
month. Under the terms of Mr. Pincus's amended offer letter, only 88,541 of
these options will vest. The additional 250,000 options vest at a rate of 1/12
per month over one year. If we merge or consolidate with another entity or sell
all or substantially all of our assets and Mr. Pincus is terminated without
justification or if he terminates his employment under specified circumstances
after a merger, consolidation or sale of all or substantially all of our
assets, all of his remaining unvested shares will vest.
Mr. Dale's and Mr. Lee's options vest at a rate of 25% upon the first
anniversary of their vesting start dates and then at a rate of 1/48 per month.
Mr. Rodoni's options were fully vested on the date of grant.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------- Potential Realizable Value at
Number of % of Assumed Annual Rates of
Shares Total Options Exercise Stock Price Appreciation for
Underlying Granted to or Base Option Term
Options Employees in Price Expiration -------------------------------
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ----------- ------------- --------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Radha R. Basu........... 1,680,189 26.55% $0.40 7/15/09
Mark J. Pincus.......... 500,000 7.90 0.99 7/22/09
Scott W. Dale........... 250,000 3.95 0.90 7/22/09
Cadir B. Lee............ 250,000 3.95 0.90 7/22/09
Anthony C. Rodoni....... 7,500 0.12 0.10 2/11/09
</TABLE>
55
<PAGE>
The table below assumes a per-share fair market value equal to $ ,
the mid-point of the initial public offering range.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired on Value Options at FY-End (#) FY-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Radha R. Basu........... -- $ -- 1,680,189/-- $ /
Mark J. Pincus.......... 500,000 --/-- /
Scott W. Dale........... -- -- 250,000/--
Cadir B. Lee............ -- -- 250,000/--
Anthony C. Rodoni....... 286,944 170,556/--
</TABLE>
1998 Stock Option Plan
General
The board of directors in October 1998 adopted our 1998 stock option plan.
Our 1998 stock option plan provides for the grant of incentive stock options as
defined in Section 422 of the Internal Revenue Code to employees and the grant
of nonstatutory stock options to employees, non-employee directors and
consultants. An incentive stock option means an option granted to a company's
employee if:
. the option is granted under a plan approved by the stockholders of the
company within 12 months before or after the plan is adopted;
. the option is granted within 10 years from the earlier of the date the
plan is adopted or the date the plan was approved by the stockholders;
. the option is not exercisable after 10 years from the date of grant;
. the option price is at least 100% of the fair market value of the
underlying stock on the date of grant; and
. the option holder, at the time the option is granted, does not own stock
equal to 10% or more of the total combined voting power of all classes of
stock of the company.
A total of 9,424,434 shares of common stock have been reserved for issuance
under our 1998 stock option plan as of March 31, 2000. As of March 31, 2000,
. 7,010,466 shares of common stock have been issued upon the exercise of
options; and
. 470,434 shares were available for future awards.
Administration
Our compensation committee and our non-insider option committee administer
our 1998 stock option plan. Our compensation committee consists of at least two
directors who are non-employee directors, as defined in Rule 16b-3 of the
Securities Exchange Act of 1934. The board of directors
56
<PAGE>
may amend our 1998 stock option plan as desired without further action by
Support.com's stockholders except as required by applicable law. Our 1998 stock
option plan will continue until terminated by the board or for a term of
10 years from its amendment and restatement date, whichever is earlier.
The consideration for each award under our 1998 stock option plan will be
established by the compensation committee, but the option price for incentive
stock options will not be less than 100% of the fair market value of the stock
on the date of grant. Awards will have the terms and be exercisable in the
manner and at the 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.
Vesting
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. If there are specified changes in control of Support.com, the
acquiring or successor corporation may assume or substitute for options
outstanding under the 1998 stock option plan, or these options will terminate.
Some options granted to our executive officers provide for partial acceleration
upon a change in control of Support.com.
2000 Omnibus Equity Incentive Plan
General
The 2000 omnibus equity incentive plan was adopted by our board of directors
on February 15, 2000 and was approved by our stockholders.
Administration
The 2000 omnibus equity incentive plan will be administered by our
compensation committee. The 2000 omnibus equity incentive plan provides for the
direct award or sale of shares of common stock and for the grant of options to
purchase shares of common stock. The 2000 omnibus equity incentive plan
provides for the grant of incentive stock options as defined in Section 422 of
the Internal Revenue Code and the grant of nonstatutory stock options and stock
purchase rights to employees, non-employee directors, advisors and consultants.
A non-employee director is a director who:
. is not an officer or otherwise employed by Support.com;
. does not receive compensation from us in any capacity other than as
director except for an amount that does not exceed $60,000; and
. does not have an interest in any transaction or has not engaged in a
related party transaction.
The board of directors will be able to amend or modify the 2000 omnibus
equity incentive plan at any time, subject to any required stockholder
approval.
Authorized Shares
4,000,000 shares of common stock have been authorized for issuance under the
2000 omnibus equity incentive plan. However, no participant in the 2000 omnibus
equity incentive plan can receive
57
<PAGE>
option grants or direct stock issuances for more than 1,000,000 shares total
per fiscal year. The number of shares reserved for issuance under the 2000
omnibus equity incentive plan will be increased on the first day of each of our
fiscal years from 2000 through 2009 by the lesser of:
. 2,000,000;
. 5% of our outstanding common stock on the last day of the immediately
preceding fiscal year; or
. the number of shares determined by the board of directors.
Plan Features
Under the 2000 omnibus equity incentive plan:
. Qualified employees will be eligible for the grant of incentive stock
options to purchase shares of common stock;
. Qualified non-employee directors will be eligible to receive automatic
option grants to purchase shares of common stock at an exercise price
equal to 100% of the fair market value of those shares on the date of
grant;
. The compensation committee will determine the exercise price of options
or the purchase price of stock purchase rights, but the option price for
incentive stock options will not be less than 100% of the fair market
value of the stock on the date of grant;
. The exercise price or purchase price may, at the discretion of the
compensation committee, be paid in cash, cash equivalents, full-recourse
promissory notes, past services or future services.
Vesting
The 2000 omnibus equity incentive plan will include change in control
provisions that may result in the accelerated vesting of outstanding option
grants and stock issuances. The committee may grant options or stock purchase
rights in which all or some of the shares shall become vested if there is a
change in control of Support.com. Change in control is defined under the 2000
omnibus equity incentive plan as:
. a change in the composition of the board of directors, as a result of
which fewer than one-half of the incumbent directors are directors who
either:
. had been directors of Support.com 24 months before the change; or
. were elected, or nominated for election, to the board with the
affirmative votes of at least a majority of the directors who had been
directors 24 months before the change and who were still in office at
the time of the election or nomination; or
. an acquisition or aggregation of securities by a person, including two or
more persons acting together, as a result of which the person becomes the
beneficial owner of 20% or more of the voting power of Support.com's
outstanding securities.
2000 Employee Stock Purchase Plan
General
The board of directors adopted our 2000 employee stock purchase plan on
February 15, 2000, to be effective upon completion of this offering. Our
stockholders have approved our 2000 employee
58
<PAGE>
stock purchase plan. A total of 2,000,000 shares of common stock have been
reserved for issuance under our employee stock purchase plan. The number of
shares reserved for issuance under the 2000 employee stock purchase plan will
be increased on the first day of each of our fiscal years from 2000 through
2009 by the lesser of:
. 2,000,000;
. 3% of our outstanding common stock on the last day of the immediately
preceding fiscal year; or
. the number of shares determined by the board of directors.
Administration
Our 2000 employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees, including
officers and employee directors of Support.com but excluding 5% or greater
stockholders, are eligible to participate if they are customarily employed for
more than 20 hours per week and for at least five months in any calendar year.
Our 2000 employee stock purchase plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 15% of an
employee's total compensation. The maximum number of shares a participant may
purchase during a single participation period is 1,000 shares.
Offering and Participation Periods
The 2000 employee stock purchase plan will be implemented by a series of
overlapping offering periods of 24 months' duration, with new offering periods,
other than the first offering period, beginning in January and July of each
year. The board of directors will establish participation periods for our 2000
employee stock purchase plan, none of which will exceed six months. During each
participation period, payroll deductions will accumulate, without interest. On
the purchase dates set by the board of directors for each participation period,
accumulated payroll deductions will be used to purchase common stock. The
initial offering period is expected to begin on the date of this offering and
end on December 31, 2001. The initial participation period is expected to begin
on the date of this offering and end on June 30, 2000.
The purchase price will be equal to 85% of the fair market value per share
of common stock on either the first day of the participation period or on the
last day of the participation period, whichever is less. Employees may withdraw
their accumulated payroll deductions at any time. Participation in our 2000
employee stock purchase plan ends automatically on termination of employment
with Support.com. Immediately before the effective time of a corporate
reorganization, the participation period then in progress shall terminate and
stock will be purchased with the accumulated payroll deductions, unless the
2000 employee stock purchase plan is assumed by the surviving corporation or
its parent corporation under the plan of merger or consolidation.
401(k) Plan
We have established a tax-qualified employee savings and retirement plan for
which Support.com's employees will generally be eligible. Under our 401(k)
plan, employees may elect to reduce their compensation and have the amount of
this reduction contributed to the 401(k) plan. Support.com has made no matching
contributions. The 401(k) plan is intended to qualify under Section 401 of the
Internal Revenue Code of 1986, 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 any contributions by Support.com
will be deductible by Support.com when made.
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<PAGE>
Employment Agreements
Officer Offer Letters
We have offer letters with our chief executive officer, our chief financial
officer, our senior vice president of sales and business development, our
chairman, our vice president of marketing and our vice president of operations.
All of these officers may leave or be terminated at any time.
The table below summarizes the basic terms of each of these offer letters.
Under each of these letters, if the officer is terminated other than after a
merger or sale of substantially all the assets of Support.com, the officer is
only entitled to post-termination salary and benefits if the officer is not
employed at least 50% of the time by another employer and:
. was terminated by us without justification or
. resigns for justifiable reasons.
If the officer is terminated because of a merger or sale of substantially all
the assets of Support.com, each officer is entitled to post-termination salary
and benefits for the period indicated below.
<TABLE>
<CAPTION>
Total Post-Termination Salary and Benefits upon
Potential Exercise Price Salary and Merger or Sale of
Name Salary Bonus Options per Share Benefits Substantially all Assets
<S> <C> <C> <C> <C> <C> <C>
Radha Basu $200,000 $100,000 1,680,189 $0.40 12 months plus 12 months
pro rata share of plus pro rata
bonus under share of
specified bonus
circumstances
- -----------------------------------------------------------------------------------------------------------------
Brian Beattie 180,000 87,000 560,000 0.90 6 months 6 months
plus pro rata
share of bonus
and 50% of
unvested
options vest
immediately
- -----------------------------------------------------------------------------------------------------------------
Mark Pincus 180,000 N/A 338,540 0.99 12 months 100% of unvested
shares vest
immediately
- -----------------------------------------------------------------------------------------------------------------
Jim Hilbert 150,000 incentive 500,000 0.90 6 months 6 months
bonus plus pro rata
share of bonus
and 50% of
unvested
options vest
immediately
- -----------------------------------------------------------------------------------------------------------------
Anthony Rodoni 135,000 25,000 shares 425,000 0.10 N/A 50% of
(paid in 1999) unvested
and $30,000 shares vest
immediately
- -----------------------------------------------------------------------------------------------------------------
Lucy Hoger 160,000 20,000 300,000 plus 2.00 6 months 6 months
50,000 on plus pro rata
Jan. 20, 2001 share of bonus
and 50% of
unvested
shares vest
immediately
</TABLE>
60
<PAGE>
Officer Employment Agreements
We have formal employment agreements with Scott Dale, our vice president of
engineering, and Cadir Lee, our chief software officer. Both agreements are for
an initial term of one year and are automatically renewed for three successive
one-year terms unless terminated with 30 days notice. Both agreements also
contain non-competition provisions.
Under these agreements, Mr. Dale and Mr. Lee are each entitled to:
. annual salary of $150,000;
. benefits and bonus tied to criteria established by our board of
directors;
. salary and benefits through date of termination if terminated for
justifiable reasons;
. salary and benefits for three months after termination if terminated for
disability; and
. 250,000 options at an exercise price of $0.90 per share.
Limitation of Liability and Indemnification Matters
Delaware Law
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.
Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws provide that we will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. Our bylaws
also permit us to purchase insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his actions as an
officer, director, employee or agent of ours, regardless of whether the bylaws
would permit indemnification.
Indemnification Agreements
We are also entering into agreements to indemnify our directors and
executive officers. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
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<PAGE>
RELATED PARTY TRANSACTIONS
Since we were founded, we have not been a party to any transaction or series
of transactions in which:
. the amount involved exceeded or exceeds $60,000 and
. any director, executive officer or 5% stockholder or any of their
immediate family had or will have a material interest.
Prior Sales of Equity
Between December 1997 and June 1999, we issued and sold the securities
listed below:
. December 8, 1997 and June 22, 1998: 6,428,880 shares of common stock to
Mark Pincus, Scott Dale and Cadir Lee for a total consideration of $646,
. December 8, 1997 to March 19, 1998: 3,571,600 shares of series A
preferred stock at a price of $0.07 per share,
. June 22, 1998: 7,346,108 shares of series B preferred stock at a price of
$0.68747 per share and
. June 14, 1999: 4,638,618 shares of series C preferred stock at a price of
$3.27148 per share.
When this offering is completed, each share of series A, series B and series
C preferred stock will convert into one share of common stock.
Transactions with Management and 5% Stockholders
The table below summarizes purchases, valued in excess of $60,000, of shares
of our capital stock by our directors, executive officers and entities that
were 5% stockholders before they purchased the stock:
<TABLE>
<CAPTION>
Shares
----------------------
Series A Series C
--------- --------
<S> <C> <C> <C>
Directors and Executive Officers:
Mark J. Pincus......................................... 1,535,788 --
Roger J. Sippl (1)..................................... -- 305,672
5% Stockholders Affiliated with Directors:
Entities affiliated with Accel VI L.P. (2)............. -- 775,394
Entities affiliated with Softbank Technology Ventures
IV (3)................................................ -- 697,465
</TABLE>
- --------
(1) Roger J. Sippl, one of our directors, is a managing partner of venture
funds associated with Sippl MacDonald Ventures, a venture fund related to
Sippl MacDonald Ventures II, L.P. and its related entities.
(2) Bruce Golden, one of our directors, is a partner of venture funds
associated with Accel Partners, a venture fund related to Accel VI L.P.
and its related entities.
(3) Edward S. Russell, one of our directors, is a general partner of venture
funds related to Softbank Technology Ventures, Inc. and its related
entities.
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<PAGE>
These affiliates purchased the securities described above at the same price
and on the same terms and conditions as the unaffiliated investors in the
private financings.
Indebtedness of Management
If there is a proposed transaction between us and our officers, directors,
5% stockholders or their affiliates, that transaction must be approved by a
majority of the disinterested directors, must be on terms at least as favorable
to us as those that could be obtained from unaffiliated parties and must be
reasonably expected to benefit us.
The individuals listed below elected to pay the exercise price for some of
their outstanding options with full recourse promissory notes secured by the
common stock underlying the options. The notes bear interest at 5.86% per year
and payment on the notes is shown below. As of March 31, 2000, the principal
amounts of these notes have not been repaid. As of December 31, 1999, the
original total principal amounts of the promissory notes executed by each
executive officer in favor of Support.com are:
<TABLE>
<CAPTION>
Total
Original
Executive Officer Note Amount
----------------- -----------
<S> <C>
Mark J. Pincus/Chairman of the Board......................... $ 99,999.90(1)
Mark J. Pincus/Chairman of the Board......................... $147,500.10(2)
Mark J. Pincus/Chairman of the Board......................... $247,500.00(2)
Brian M. Beattie/Chief Financial Officer..................... $504,000.00(3)
Jim R. Hilbert/Senior Vice President......................... $449,950.00(3)
Radha R. Basu/Chief Executive Officer........................ $672,075.60(4)
</TABLE>
- --------
(1) 50% of the principal and interest will be due and payable on the earlier
of our initial public offering or two years from the date of the note. The
remaining 50% will be due upon the earlier of our initial public offering
or four years from the date of the note.
(2) 50% of the principal and interest will be due and payable on the earlier
of the date nine months following the effective date of our initial public
offering or two years from the date of the note. The remaining 50% will be
due upon the earlier of the date nine months after the effective date of
our initial public offering or four years from the date of the note.
(3) 50% of the principal and interest will be due and payable on the earlier
of one year from the effective date of our initial public offering or two
years from the date of the note. The remaining 50% will be due upon the
earlier of one year from the effective date of our initial public offering
or four years from the date of the note.
(4) 50% of the principal and interest will be due and payable on the earlier of
one year from the effective date of our initial public offering or two
years from the date of the note. The remaining 50% will be due upon the
earlier of two years from the effective date of our initial public offering
or four years from the date of the note.
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PRINCIPAL STOCKHOLDERS
The table below provides information about the beneficial ownership of
common stock as of March 31, 2000, by:
. each person or entity known to us to own beneficially more than 5% of our
common stock;
. each of the named executive officers;
. each of our directors; and
. all executive officers and directors as a group.
The table below assumes no exercise of the underwriters' over-allotment
option. Applicable percentage ownership is based on 29,125,922 shares of common
stock outstanding as of March 31, 2000 and shares outstanding
immediately after completion of this offering.
Beneficial ownership is determined based on 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
exercisable or exercisable within 60 days of March 31, 2000 are counted as
outstanding. These shares, however, are not counted as outstanding for the
purposes of computing the percentage ownership of any other person. Except as
indicated in the footnotes to this table and the applicability community
property laws, each stockholder named in the table has sole voting and
investment power for the shares listed opposite that stockholder's name.
Unless otherwise indicated, the address for these stockholders is c/o
Support.com, Inc., 575 Broadway, Redwood City, California 94063.
<TABLE>
<CAPTION>
Percentage of
Common Stock
Total Shares ---------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ ----------- --------
<S> <C> <C> <C>
5% Stockholders:
Entities affiliated with Accel VI L.P.
(1)....................................... 4,428,397 15.2%
c/o Accel Partners, 428 University Avenue,
Palo Alto, California 94301
Entities affiliated with Softbank
Technology Ventures IV (2)................ 3,952,299 13.6
333 W. San Carlos St., Suite 1225, San
Jose, California 95110
Entities affiliated with Spinnaker Founders
Fund, L.P. (3)............................ 1,574,359 5.4
c/o Bowman Capital Management, 1875 South
Grand Street, Suite 600, San Mateo,
California 94402
Executive Officers and Directors:
Radha R. Basu (4).......................... 1,680,189 5.8
Mark J. Pincus (5) ........................ 4,970,728 17.1
Scott W. Dale (6).......................... 2,497,114 8.5
Cadir B. Lee (7)........................... 2,510,114 8.5
Anthony C. Rodoni (8)...................... 457,500 1.6
Matthew T. Cowan (3)....................... 1,574,359 5.4
Manuel Diaz................................ -- --
William L. Dunn (9)........................ 103,000 less than 1%
Bruce Golden (1)........................... 4,478,397 15.4
Edward S. Russell (2)...................... 3,952,299 13.6
Roger J. Sippl (10)........................ 436,172 1.5
All directors and executive officers as a
group (11)................................ 24,019,872 81.1%
</TABLE>
- --------
(1) Includes 3,604,714 shares held by Accel VI L.P. Accel VI Associates L.L.C.
is the general partner of Accel VI L.P. and has the sole voting and
investment power. Arthur C. Patterson,
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<PAGE>
ACP Family Partnership L.P., James R. Swartz, James W. Breyer, The Breyer
1995 Trust dated 10/4/95, Swartz Family Partnership L.P., J. Peter Wagner,
and G. Carter Sednaoui are the managing members of Accel VI Associates
L.L.C. and share these powers.
Also includes 460,553 shares held by Accel Internet Fund II L.P. Accel
Internet Fund II Associates L.L.C., or AIF2A, is the general partner of
Accel Internet Fund II L.P. and has the sole voting and investment
power. Arthur C. Patterson, ACP Family Partnership L.P., James R.
Swartz, James W. Breyer, Swartz Family Partnership L.P., J. Peter
Wagner, and G. Carter Sednaoui are the managing members of AIF2A and
share these powers.
Also includes 57,570 shares held by Accel Keiretsu VI L.P. Accel Keiretsu
VI Associates L.L.C. is the general partner of Accel Keiretsu VI L.P. and
has the sole voting and investment power. Arthur C. Patterson, James R.
Swartz, James W. Breyer, J. Peter Wagner, and G. Carter Sednaoui are the
managing members of Accel Keiretsu VI Associates L.L.C. and share these
powers.
Also includes 305,560 shares held by Accel Investors '98 L.P. Arthur C.
Patterson, James R. Swartz, James W. Breyer, J. Peter Wagner, and G.
Carter Sednaoui are the general partners of Accel Investors '98 L.P. and
therefore share the voting and investment powers. Bruce Golden, a partner
at Accel Partners and one of our directors, disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest in entities
affiliated with Accel Partners.
(2) Includes:
.3,874,090 shares held by Softbank Technology Ventures IV, L.P. and
.78,209 shares held by Softbank Technology Advisors Fund, L.P.
. Edward S. Russell, a general partner at Softbank Technology Ventures,
Inc. is one of our directors. Mr. Russell disclaims beneficial
ownership of these shares except to the extent of his pecuniary
interest in entities affiliated with Softbank Technology Ventures,
Inc.
(3) Includes:
. 481,057 shares held by Spinnaker Founders Fund, L.P.,
. 382,643 shares held by Spinnaker Technology Fund, L.P., 379,267 shares
held by Spinnaker Technology Offshore Fund, Ltd.,
. 270,257 shares held by Spinnaker Offshore Founders Fund, Ltd. and
. 61,135 shares held by Spinnaker Clipper Fund, L.P.
. Mr . Cowan is a general partner of Bowman Capital Management and one
of our directors. Mr . Cowan disclaims beneficial ownership of all
these shares except to the extent of his pecuniary interest in
entities affiliated with Spinnaker Founders Fund, L.P.
(4) Includes 1,680,189 shares of common stock subject to our right of
repurchase.
(5) Includes 291,800 shares of common stock which we have a right to
repurchase.
(6) Includes 250,000 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase. Also
includes 200,000 shares of common stock held by SDK Limited Partnership.
Mr. Dale and Kelly Plater Dale are general partners of SDK Limited
Partnership.
(7) Includes 250,000 shares of common stock issuable under immediately
exercisable options and which we have a right to repurchase. Also
includes 300,000 shares of common stock held by Cadir Lee Limited
Partnership. Mr. Lee is the general partner of Cadir Lee Limited
Partnership.
(8) Includes 218,951 shares of common stock which we have a right to right
of purchase.
(9) Includes 58,368 shares of common stock which we have a right to
repurchase.
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<PAGE>
(10) Includes:
. 230,500 shares of common stock held by Sippl MacDonald Ventures II,
L.P.,
. 105,672 shares of common stock held by Sippl Investments LLC and
. 72,960 shares of common stock held by Mr . Sippl which we have a
right to repurchase.
. Mr. Sippl is a managing partner of Sippl MacDonald Ventures and one
of our directors. Mr. Sippl disclaims beneficial ownership of the
shares held by Sippl MacDonald Ventures II, L.P. and Sippl
Investments LLC, except to the extent of his pecuniary interest in
those entities.
(11) Includes:
. 3,682,268 shares of common stock which we have a right to repurchase
and
. 500,000 shares of common stock issuable under immediately exercisable
options and which we have a right to repurchase.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
When this offering is completed and after the conversion of all outstanding
preferred stock into common stock and the amendment of our certificate of
incorporation, our authorized capital stock will consist of 150,000,000 shares
of common stock and 5,000,000 shares of preferred stock.
Common Stock
As of March 31, 2000, there were 29,125,922 shares of common stock
outstanding held by approximately 159 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:
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 may determine.
Voting. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders, including the election of
directors, and will not have cumulative voting rights unless Support.com is
subject to Section 2115 of the California Corporations Code.
Cumulative voting for the election of directors is not authorized by our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.
Preemptive rights, conversion and redemption. The common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Liquidation, dissolution and winding-up. Upon liquidation, dissolution or
winding-up of Support.com, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation of any preferred stock.
Preferred Stock
The board of directors is authorized, without action by the stockholders, to
designate and issue up to 5,000,000 shares of preferred stock in one or more
series. The board of directors can fix the rights, preferences and privileges
of the shares of each series and any qualifications, limitations or
restrictions on these shares.
The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock.
The issuance of preferred stock could delay, defer or prevent a change in
control of Support.com. We have no plans to issue any shares of preferred
stock.
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<PAGE>
Warrants
We issued these warrants to purchase a total of 283,650 shares of series C
preferred stock:
. 98,511 shares at an exercise price of $1.979 per share,
. 38,461 shares at an exercise price of $6.50 per share,
. 27,511 shares at an exercise price of $3.27 per share, and
. 119,167 shares at an exercise price of $18.00 per share.
The 38,461 warrants expire upon completion of this offering.
Registration Rights
Upon completion of this offering, the holders of 15,839,976 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 based on:
. Demand Registration Rights. At the earlier of June 14, 2002 or six months
after this offering, one or more holders of 30% of the common stock
issued upon conversion of series A, B or C preferred stock may request
that we register their shares.
. Piggyback Registration Rights. The holders of registrable securities may
request to have their shares registered anytime we file a registration
statement to register any of our securities for our own account or for
the account of others subject to a pro rata cutback to a minimum of 20%
of any offering other than our initial public offering.
. S-3 Registration Rights. The holders of at least 5% of registrable
securities have the right to request registrations on Form S-3 if we are
eligible to use Form S-3 and have not already registered shares on an S-3
registration within the past six months and if the total proceeds are at
least $1,000,000.
Registration of shares of common stock because of the exercise of demand
registration rights, piggyback registration rights or S-3 registration rights
under the Securities Act would result in the holders being able to trade these
shares without restriction under the Securities Act when the registration
statement is declared effective. Support.com will pay all registration
expenses, other than underwriting discounts and commissions, related to any
registration. The registration rights terminate five years after completion of
this offering, or, for an individual holder when the holder can sell all of the
holder's shares in any 90-day period under Rule 144 under the Securities Act.
Section 2115
We are subject to Section 2115 of the California General Corporation Law.
Section 2115 provides that, regardless of a company's legal domicile, some
provisions of California corporate law will apply to that company if more than
50% of its outstanding voting securities are held of record by persons having
addresses in California and the majority of the company's operations occur in
California. For example, while we are subject to Section 2115, stockholders may
cumulate votes in electing directors. This means that each stockholder may vote
the number of votes equal to the number of candidates multiplied by the number
of votes to which the stockholder's shares are normally entitled in favor of
one candidate. This potentially allows minority stockholders
68
<PAGE>
to elect some members of the board of directors. When we are no longer subject
to Section 2115, cumulative voting will not be allowed and a holder of 50% or
more of our voting stock will be able to control the election of all directors.
Section 2115 also:
. enables removal of directors with majority stockholder approval;
. places limitations on the distribution of dividends;
. extends additional rights to dissenting stockholders in any
reorganization, including a merger, sale of assets or exchange of shares;
and
. provides for information rights and required filings if there is a sale
of assets or a merger.
We anticipate that our common stock will be qualified for trading as a
national market security on the Nasdaq National Market and that we will have at
least 800 stockholders of record by the record date for our 2000 annual meeting
of stockholders. If these two conditions occur, then we will no longer be
subject to Section 2115 as of the record date for our 2000 annual meeting of
stockholders.
Delaware Anti-Takeover Law and Charter Provisions
Delaware Takeover Statute
We are governed by Section 203 of the Delaware General Corporation Law,
which prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that the stockholder became an interested stockholder,
unless:
. before 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 completion 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 began, excluding for purposes of determining the number
of shares outstanding those shares owned by or which can be issued under:
. persons who are directors and also officers, and
. 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 after this date, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66-2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
In general, Section 203 defines an interested stockholder as any entity or
person who, with affiliates and associates owns, or within three years, did own
beneficially 15% or more of the outstanding voting stock of the corporation.
Section 203 defines business combination to include:
. any merger or consolidation involving the corporation and the interested
stockholder and
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder.
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<PAGE>
. subject to specified 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 increases the
proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
Certificate of Incorporation and Bylaws
Undesignated Preferred Stock. Under our certificate of incorporation, the
board of directors has the power to authorize the issuance of up to 5,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
further vote or action by the stockholders. The issuance of preferred stock
may:
. delay, defer or prevent a change in control of Support.com;
. discourage bids for the common stock at a premium over the market price
of our common stock;
. adversely affect the voting and other rights of the holders of our common
stock; and
. discourage acquisition proposals or tender offers for our shares and, as
a consequence, inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts.
Advance Notice Provisions. Our bylaws establish advance notice procedures
for stockholder proposals and nominations of candidates for election as
directors other than nominations made by or at the direction of the board of
directors or a committee of the board.
Special Meeting Requirements. Our bylaws provide that special meetings of
stockholders be called by the chief executive officer or the board of
directors.
Cumulative Voting. Both our certificate of incorporation and our bylaws do
not provide for cumulative voting in the election of directors.
These provisions may only be amended by approval of the holders of at least
66 2/3% of the outstanding common stock and may deter a hostile takeover or
delay a change in control or management of Support.com.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American
Securities Transfer & Trust.
Nasdaq National Market Listing
We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol SPRT.
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<PAGE>
RESCISSION OFFER
Reasons for the Offer
Option grants made between October 1998 and June 1999 under our 1998 stock
option plan were not exempt from registration or qualification under California
state securities laws. These option grants and the stock issuances under these
grants violated the registration requirements of California state securities
laws because registration or qualification was not obtained. Although we were
able to rely on Rule 701 exemption under the federal securities law, we were
unable to rely on the exemption provided by Section 25102(f) of the California
Corporation Code because these options were granted, and these shares were
issued, to more than 35 persons during a 12-month period. We were also unable
to rely on the exemption provided by Section 25102(o) of the California
Corporation Code because the required filing under that section was not made.
Terms of the Offer
We intend to make a repurchase offer to the holders of these shares and
options. This offer will be held open for 30 days after the date of the offer
to repurchase. These holders will be able to accept our repurchase offer before
the expiration date of the offer by returning to us shares to be repurchased
and an election notice that we will deliver to the holders with the preliminary
prospectus. If accepted, our repurchase offer could require us to make total
payments to the holders of these shares and options of up to approximately
$200,455 plus statutory interest.
Shares Subject to the Offer
This repurchase offer will cover a total of 2,932,900 shares issuable under
options granted under the 1998 stock option plan, of which 1,730,983 shares
were issued upon option exercises and 1,201,917 shares were never exercised. We
will offer to repurchase these prior sales at the price per share paid for them
under the 1998 stock option plan, plus interest at a statutory rate from the
date of purchase by the purchaser to the expiration of the repurchase offer.
Also, we will offer to repurchase these prior option grants not exercised at a
price of 20% of the exercise price per share. If any or all of these holders
reject the repurchase offer, we may continue to be liable under state
securities laws for up to a total amount of approximately $215,000 plus
statutory interest of 7% per year.
We are not aware of any repurchase claims against us.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before 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. 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.
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 a person that directly or indirectly controls, is
controlled by or is under common control with, us. These persons are considered
to be affiliates of ours under Rule 144 of the Securities Act of 1933. The
remaining 29,164,383 shares are restricted, which means they were originally
sold in offerings that were not registered under 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, including Rule 144.
Lock-up Agreements
The holders of shares of common stock have agreed to a 180-day
lock-up of these shares. This generally means that they cannot sell these
shares during the 180 days after the date of this prospectus. After the 180-day
lock-up period, these shares may be sold under Rule 144. Credit Suisse First
Boston may release some or all of these shares before the expiration of the
lock-up period.
Rule 144
In general, under Rule 144, a person or persons whose shares are aggregated,
who has beneficially owned restricted securities for at least one year,
including the holding period of any holder who is not an affiliate, is entitled
to sell within any three-month period a number of our shares of common stock
that does not exceed the greater of:
. 1% of the outstanding shares of our common stock at that time, which will
equal approximately shares upon completion of this offering;
or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks before 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 public information about us. Under Rule 144 and
subject to volume limitations, of the restricted shares will be
eligible for sale beginning 180 days after the date of the final prospectus and
the remaining restricted shares will become eligible for resale at various
times after 180 days after the date of the final prospectus.
Rule 144(k)
A person who is not an affiliate of Support.com at any time during the 90
days before a sale and who has beneficially owned shares for at least two
years, including the holding period of any prior
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owner who is not an affiliate, would be entitled to sell shares following this
offering under Rule 144(k) complying with 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 of Rule 144. Any employee, officer or
director or consultant who purchased his shares under a written compensatory
plan or contract may rely on the resale provisions of Rule 701. Under Rule 701:
. affiliates can sell Rule 701 shares without complying with the holding
period requirements of Rule 144;
. non-affiliates can sell these shares in reliance on Rule 144 without
having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144; and
. Rule 701 shares must be held at least 90 days after the date of this
prospectus before they can be resold.
However, all shares issued by us under Rule 701 are subject to lock-up
provisions and will only become eligible for sale 180 days after the date of
this prospectus.
Registration
After this offering, we intend to file a registration statement under the
Securities Act covering shares of common stock subject to outstanding options
or issued or issuable under our 1998 stock plan, our 2000 stock incentive plan
and our 2000 employee stock purchase plan. Based on the number of shares which
can be issued upon the exercise of outstanding options at March 31, 2000, and
reserved for issuance under these plans, this registration statement would
cover approximately 15,424,434 shares.
This registration statement will automatically become effective upon filing.
Shares registered under this registration statement will be available for sale
in the open market immediately after the expiration of the 180-day lock-up
agreements although sales of shares held by our affiliates will be limited by
Rule 144 volume limitations. Holders of 15,713,954 shares of common stock will
be entitled to registration rights.
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UNDERWRITING
Underwriting agreement
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Chase Securities
Inc., Bear, Stearns & Co. Inc. and Wit SoundView Corporation, are acting as
representatives, the following numbers of shares of common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Chase Securities Inc...............................................
Bear, Stearns & Co. Inc............................................
Wit SoundView Corporation..........................................
---
Total..........................................................
===
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
Offering structure
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The table below summarizes the compensation and estimated expenses we will
pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
Lock-up agreements
For a period of 180 days after the date of this prospectus, we and our
officers and directors and all of our stockholders have agreed not to do any of
the following without the prior written consent of Credit Suisse First Boston
Corporation:
. offer to transfer or transfer any of our common stock or securities
convertible into any of our common stock, except, in our case, common
stock issued upon the exercise of employee stock options outstanding as
of the date of this prospectus;
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. in our case file with the Securities and Exchange Commission a
registration statement under the Securities Act relating to our common
stock or securities convertible into any of our common stock;
. in the case of our stockholders enter into any swap, hedge or other
arrangement that transfers any part of the economic consequences of
ownership of our common stock, whether any of these transactions are to
be settled by delivery of our common stock, other securities, cash, or
other consideration; or,
. publicly disclose the intention to make any offer, sale, pledge or
disposition.
Directed share program
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. This group may include , who have
expressed an interest in acquiring up to shares of common stock in the
offering, based upon an assumed initial public offering price of $ per share.
The number of shares available for sale to the general public in the offering
will be reduced to the extent these persons purchase the reserved shares. Any
reserved shares not purchased will be offered by the underwriters to the
general public on the same terms as the other shares.
Indemnification
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or to contribute to payments which the underwriters may be
required to make for these liabilities.
Nasdaq Stock Market listing
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol SPRT.
Factors in determining the offering price
Before this offering, there has been no public market for the common stock.
The initial public offering price will be determined by negotiation between us
and the representatives. The principal factors to be considered in determining
the public offering price include:
. the information included in this prospectus;
. market conditions for initial public offerings;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for our future earnings;
. the present state of our development and our financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
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Transactions with the underwriters
In June 1999, we sold 61,135 shares of our series C preferred stock in a
private placement at $3.27148 per share to several entities affiliated with
Chase Securities Inc. We also sold 244,538 shares of our series C preferred
stock in this private placement at $3.27148 per share to Access Technology
Partners, L.P. In February 2000, one of our stockholders sold 9,200 shares of
his own series A preferred stock at $10 per share to several entities
affiliated with Chase Securities Inc. This stockholder also sold 36,800 shares
of his own series A preferred stock at $10 per share to Access Technology
Partners, L.P. Chase Securities Inc. is one of our customers. Access Technology
Partners, L.P. is a fund that is managed by an affiliate of Chase Securities
Inc. This affiliate has an 1% ownership interest in Access Technology Partners,
L.P.
In November 1999, we granted a right to purchase 6,500 shares of our common
stock at $0.40 per share to an individual employed by Chase Securities Inc.
In June 1999, we sold 15,000 shares of our common stock at $0.10 per share
to an individual employed by Bear, Stearns & Co. Inc. In June 1999, we sold
17,642 shares of our series C preferred stock at $3.27148 per share in a
private placement to two individuals employed by Bear, Stearns & Co. Inc. Bear,
Stearns & Co. Inc. is one of our customers, accounting for 53% of our total
revenue of $3.3 million in 1999.
Syndicate activities
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in compliance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed to cover
syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would be in
the absence of these transactions. These transactions may be executed on the
Nasdaq National Market or may be executed on any other trading markets that our
common stock may be traded upon in the future, and, if these stabilizing
transactions, syndicate covering transactions or penalty bids are initiated by
the underwriters, these transactions may be discontinued at any time.
Internet distribution
A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Distribution will be
allocated by the underwriters that may make Internet distributions on the same
basis as other allocations.
76
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws, which will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice before any resale of the common stock.
Representations of Purchasers
By purchasing the common stock in Canada and accepting a purchase
confirmation, a purchaser is representing to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (2) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (3) the purchaser has reviewed the text above under Resale
Restrictions.
Rights of Action--Ontario Purchasers
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or such persons outside of Canada.
Notice to British Columbia Residents
A purchaser of the common stock to whom the Securities Act of British
Columbia applies is advised that the purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any common stock acquired by the purchaser in this offering. The report must be
in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one report must be
filed for common stock acquired on the same date and under the same prospectus
exemption.
Taxation and Eligibility for Investment
Canadian purchasers of the common stock should consult their own legal and
tax advisors about the tax consequences of an investment in the common stock in
their particular circumstances and about the eligibility of the common stock
for investment by the purchaser under relevant Canadian legislation.
77
<PAGE>
LEGAL MATTERS
Selected legal matters relating to the validity of the common stock offered
by this prospectus are being passed upon for Support.com by Pillsbury Madison &
Sutro LLP, Palo Alto, California. Some partners of Pillsbury Madison & Sutro
LLP beneficially own an aggregate of 35,142 shares of Support.com common stock.
The underwriters have been represented by Wilson Sonsini Goodrich & Rosati,
Palo Alto, California.
EXPERTS
Ernst & Young, LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1999 and for the period from
incorporation on December 3, 1997 to December 31, 1998 and the year ended
December 31, 1999, as shown 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 on their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act for the common stock offered by this prospectus. This
prospectus, which is a part of the registration statement, does not contain all
of the information in the registration statement or the exhibits and schedules
which are part of the registration statement.
For more information about Support.com and the common stock offered by this
prospectus, we refer you to the registration statement and the exhibits and
schedules filed as part of the registration statement. You may read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from the SEC's web site at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities and Exchange Act and 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.
78
<PAGE>
SUPPORT.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit).......................................... F-5
Consolidated Statements of Cash Flows.................................... F-7
Notes to Consolidated Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Support.com, Inc.
We have audited the accompanying consolidated balance sheets of Support.com,
Inc. as of December 31, 1998 and 1999, and the related consolidated statements
of operations, redeemable convertible preferred stock and stockholders' equity
(deficit), and cash flows for the period from incorporation on December 3, 1997
to December 31, 1998 and for the year ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Support.com,
Inc. at December 31, 1998 and 1999, and the results of its operations and its
cash flows for the period from incorporation on December 3, 1997 to December
31, 1998 and for the year ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Palo Alto, California
February 15, 2000
F-2
<PAGE>
SUPPORT.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
<TABLE>
<CAPTION>
December 31, March 31, 2000
----------------- --------------------
1998 1999 Historical Pro Forma
------- -------- ---------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......... $ 2,807 $ 4,023 $ 5,823
Short-term investments............ -- 8,466 5,950
Accounts receivable, less
allowance of $10, $40 and $100,
respectively..................... 65 3,450 2,747
Prepaids and other current
assets........................... 516 451 1,073
------- -------- --------
Total current assets............ 3,388 16,390 15,593
Property and equipment, net........ 256 881 1,469
Other assets....................... 28 254 259
------- -------- --------
$ 3,672 $ 17,525 $ 17,321
======= ======== ========
Liabilities and stockholders'
equity (deficit)
Current liabilities:
Notes payable, current portion.... $ 50 $ 921 $ 983
Capital lease obligations,
current portion.................. -- 274 428
Accounts payable.................. 98 1,227 1,334
Accrued compensation.............. 60 1,168 2,126
Other accrued liabilities......... 159 494 941
Deferred revenue.................. 42 2,608 5,098
------- -------- --------
Total current liabilities....... 409 6,692 10,910
Notes payable, net of current
portion........................... 449 1,478 1,223
Capital lease obligations, net of
current portion................... -- 799 1,200
Deferred revenue--long-term
portion........................... -- 360 589
Commitments
Redeemable convertible preferred
stock; 7,346,108 shares
designated at December 31, 1998,
12,280,108 shares authorized at
December 31, 1999 and March 31,
2000, $0.0001 par value,
issuable in series:
Series B redeemable convertible
preferred stock; 7,346,108
shares designated, issued and
outstanding, and none pro forma
(liquidation preference of
$5,668 and $5,769 at December
31, 1999 and March 31, 2000,
respectively).................... 5,237 5,641 5,741
Series C redeemable convertible
preferred stock; 4,934,000
shares designated; 4,638,618
shares issued and outstanding at
December 31, 1999, and March 31,
2000 and none pro forma
(liquidation preference of
$15,844 and $16,147 at
December 31, 1999 and March 31,
2000, respectively).............. -- 15,808 16,110
Stockholders' equity (deficit):
Series A convertible preferred
stock; par value $0.0001,
3,571,600 shares designated,
3,571,600 shares issued and
outstanding at December 31, 1998
and 1999 and March 31, 2000, and
none pro forma (liquidation
preference at December 31, 1999
and March 31, 2000 of $250)...... 1 1 1 $ --
Common stock; par value $0.0001,
31,060,000 shares authorized,
6,468,880, 10,874,374, and
13,569,596 shares issued and
outstanding at December 31, 1998
and 1999, and March 31, 2000,
respectively; 150,000,000
authorized, 29,125,922 shares
issued and outstanding pro
forma............................ 1 1 1 3
Additional paid-in capital........ 478 19,491 27,168 49,018
Receivable from stockholders...... -- (1,450) (2,121) (16,608)
Deferred compensation............. (153) (14,252) (16,608) (2,121)
Accumulated deficit............... (2,750) (17,044) (26,893) (26,893)
------- -------- -------- --------
Total stockholders' equity
(deficit)...................... (2,423) (13,253) (18,452) 3,399
------- -------- -------- --------
Total liabilities and
stockholders' equity
(deficit)...................... $ 3,672 $ 17,525 $ 17,321 $ 3,399
======= ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Period from Three months ended
incorporation on March 31,
December 3, 1997 to Year ended ---------------------
December 31, 1998 December 31, 1999 1999 2000
------------------- ----------------- ------------ --------
(unaudited)
<S> <C> <C> <C> <C>
Revenue:
License fees....................................... $ 18 $ 2,746 $ 330 $ 1,618
Services........................................... -- 569 4 795
------- -------- ------- --------
Net revenues..................................... 18 3,315 334 2,413
------- -------- ------- --------
Costs and expenses:
Cost of license fees............................... -- 4 1 36
Cost of services................................... -- 965 73 882
Research and development........................... 1,132 2,401 373 1,647
Sales and marketing................................ 1,197 8,974 862 5,291
General and administrative......................... 477 1,881 182 771
Amortization of deferred compensation (1).......... 16 3,554 52 3,695
------- -------- ------- --------
Total costs and expenses......................... 2,822 17,779 1,543 12,322
------- -------- ------- --------
Loss from operations................................. (2,804) (14,464) (1,209) (9,909)
Interest income...................................... 105 501 25 162
Interest expense..................................... (51) (331) (23) (102)
------- -------- ------- --------
Net loss............................................. (2,750) (14,294) (1,207) (9,849)
Accretion on redeemable convertible preferred stock.. (214) (1,072) (101) (402)
------- -------- ------- --------
Net loss attributable to common stockholders......... $(2,964) $(15,366) $(1,308) $(10,251)
======= ======== ======= ========
Basic and diluted net loss per share................. $ (0.57) $ (2.31) $ (0.20) $ (1.21)
======= ======== ======= ========
Shares used in computing basic and diluted net loss
per share........................................... 5,227 6,643 6,481 8,442
======= ======== ======= ========
Pro forma basic and diluted net loss per share
(unaudited)......................................... $ (0.71) $ (0.41)
======== ========
Shares used in computing pro forma basic and diluted
net loss per share (unaudited)...................... 20,137 23,998
======== ========
- --------
(1) Amortization of deferred compensation relates to the following:
<CAPTION>
Three months
ended
Year ended March 31,
December 31, 1999 2000
----------------- ------------
(unaudited)
<S> <C> <C> <C> <C>
Cost of services......................................................... $ 53 $ 163
Research and development................................................. 742 728
Sales and marketing...................................................... 1,122 1,327
General and administrative............................................... 1,637 1,477
-------- -------
Total.................................................................. $ 3,554 $ 3,695
======== =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Redeemable
Convertible Convertible Notes
Preferred Stock Preferred Stock Common Stock Additional Receivable Deferred
------------------ ---------------- ----------------- Paid-In From Stock Accumulated
Shares Amount Shares Amount Shares Amount Capital Stockholders Compensation Deficit
---------- ------- --------- ------ ---------- ------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
common stock to
founders at
$0.0001,
$0.0077, and
$0.0155 per
share for cash.. -- $ -- -- $ -- 6,428,880 $ 1 $ -- $ -- $ -- $ --
Issuance of
Series A
convertible
preferred stock
at $0.07 per
share for cash,
net of issuance
costs of $6..... -- -- 3,571,600 1 -- -- 244 -- -- --
Issuance of
Series B
redeemable
convertible
preferred stock
at $0.68747 per
share for cash
and receivable,
net of issuance
costs of $27.... 7,346,108 5,023 -- -- -- -- -- -- -- --
Issuance of
common stock
upon exercise of
stock options... -- -- -- -- 40,000 -- 4 -- -- --
Issuance of
warrants........ -- -- -- -- -- -- 249 -- -- --
Issuance of
stock options to
non-employees... -- -- -- -- -- -- 26 -- -- --
Accretion on
redeemable
convertible
preferred
stock........... -- 214 -- -- -- -- (214) -- -- --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 169 -- (169) --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 16 --
Net loss........ -- -- -- -- -- -- -- -- -- (2,750)
---------- ------- --------- ---- ---------- ---- ------- ------- -------- ---------
Balances at
December 31,
1998............ 7,346,108 5,237 3,571,600 1 6,468,880 1 478 -- (153) (2,750)
Issuance of
Series C
redeemable
convertible
preferred stock
at $3.271 per
share for cash,
net of issuance
costs of $36.... 4,638,618 15,140 -- -- -- -- -- -- -- --
Issuance of
common stock
upon exercise of
options to
employees and to
consultants for
cash and
promissory
notes........... -- -- -- -- 4,131,994 -- 1,914 (1,450) -- --
Issuance of
common stock for
services........ -- -- -- -- 51,500 -- 132 -- -- --
Issuance of
warrants........ -- -- -- -- -- -- 94 -- -- --
Issuance of
restricted stock
to non-
employees....... -- -- -- -- 222,000 -- 37 -- -- --
Expense on
issuance of
restricted stock
and stock
options to non-
employees....... -- -- -- -- -- -- 255 -- -- --
Accretion on
redeemable
convertible
preferred
stock........... -- 1,072 -- -- -- -- (1,072) -- -- --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 17,653 -- (17,653) --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 3,554 --
Net loss........ -- -- -- -- -- -- -- -- -- (14,294)
---------- ------- --------- ---- ---------- ---- ------- ------- -------- ---------
Balances at
December 31,
1999............ 11,984,726 $21,449 3,571,600 $ 1 10,874,374 $ 1 $19,491 $(1,450) $(14,252) $(17, 044)
<CAPTION>
Total
Stockholders'
Equity
(Deficit)
-------------
<S> <C>
Issuance of
common stock to
founders at
$0.0001,
$0.0077, and
$0.0155 per
share for cash.. $ 1
Issuance of
Series A
convertible
preferred stock
at $0.07 per
share for cash,
net of issuance
costs of $6..... 245
Issuance of
Series B
redeemable
convertible
preferred stock
at $0.68747 per
share for cash
and receivable,
net of issuance
costs of $27.... --
Issuance of
common stock
upon exercise of
stock options... 4
Issuance of
warrants........ 249
Issuance of
stock options to
non-employees... 26
Accretion on
redeemable
convertible
preferred
stock........... (214)
Deferred
compensation
related to grant
of stock
options......... --
Amortization of
deferred
compensation.... 16
Net loss........ (2,750)
-------------
Balances at
December 31,
1998............ (2,423)
Issuance of
Series C
redeemable
convertible
preferred stock
at $3.271 per
share for cash,
net of issuance
costs of $36.... --
Issuance of
common stock
upon exercise of
options to
employees and to
consultants for
cash and
promissory
notes........... 464
Issuance of
common stock for
services........ 132
Issuance of
warrants........ 94
Issuance of
restricted stock
to non-
employees....... 37
Expense on
issuance of
restricted stock
and stock
options to non-
employees....... 255
Accretion on
redeemable
convertible
preferred
stock........... (1,072)
Deferred
compensation
related to grant
of stock
options......... --
Amortization of
deferred
compensation.... 3,554
Net loss........ (14,294)
-------------
Balances at
December 31,
1999............ $(13,253)
</TABLE>
See accompanying notes.
F-5
<PAGE>
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)--(Continued)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Redeemable
Convertible Convertible Notes
Preferred Stock Preferred Stock Common Stock Additional Receivable
------------------ ---------------- ----------------- Paid-In From
Shares Amount Shares Amount Shares Amount Capital Stockholders
---------- ------- --------- ------ ---------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1999
(continued)..... 11,984,726 $21,449 3,571,600 $ 1 10,874,374 $ 1 19,491 $(1,450)
Issuance of
common stock
upon exercise of
options for cash
and promissory
notes, net of
repurchases
(unaudited)..... -- -- -- -- 2,638,645 -- 1,852 (671)
Issuance of
common stock to
consultants for
services
(unaudited)..... -- -- -- -- 3,577 -- 16 --
Expense on
issuance of
stock options to
non-employees
(unaudited)..... -- -- -- -- -- -- 218 --
Issuance of
restricted stock
to non-
employees, net
of repurchases
(unaudited)..... -- -- -- -- 53,000 -- 9 --
Issuance of
warrants
(unaudited)..... -- -- -- -- -- -- 131 --
Accretion on
redeemable
convertible
preferred stock
(unaudited)..... -- 402 -- -- -- -- (402) --
Deferred
compensation
related to grant
of stock options
(unaudited)..... -- -- -- -- -- -- 5,853 --
Amortization of
deferred
compensation
(unaudited)..... -- -- -- -- -- -- -- --
Net loss
(unaudited)..... -- -- -- -- -- -- -- --
---------- ------- --------- --- ---------- --- ------- -------
Balances at
March 31, 2000.. 11,984,726 $21,851 3,571,600 $ 1 13,569,596 $ 1 $27,168 $(2,121)
- --------------------------------------------------
========== ======= ========= === ========== === ======= =======
<CAPTION>
Total
Deferred Stockholders'
Stock Accumulated Equity
Compensation Deficit (Deficit)
------------ ----------- -------------
<S> <C> <C> <C>
Balances at
December 31,
1999
(continued)..... $(14,252) $(17,044) $(13,253)
Issuance of
common stock
upon exercise of
options for cash
and promissory
notes, net of
repurchases
(unaudited)..... -- -- 1,181
Issuance of
common stock to
consultants for
services
(unaudited)..... -- -- 16
Expense on
issuance of
stock options to
non-employees
(unaudited)..... -- -- 218
Issuance of
restricted stock
to non-
employees, net
of repurchases
(unaudited)..... -- -- 9
Issuance of
warrants
(unaudited)..... -- -- 131
Accretion on
redeemable
convertible
preferred stock
(unaudited)..... -- -- (402)
Deferred
compensation
related to grant
of stock options
(unaudited)..... (5,853) -- --
Amortization of
deferred
compensation
(unaudited)..... 3,497 -- 3,497
Net loss
(unaudited)..... -- (9,849) (9,849)
------------ ----------- -------------
Balances at
March 31, 2000.. $(16,608) $(26,893) $(18,452)
- --------------------------------------------------
============ =========== =============
</TABLE>
See accompanying notes.
F-6
<PAGE>
SUPPORT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period from Three months
incorporation on ended March 31,
December 3, 1997 to Year ended ----------------
December 31, 1998 December 31, 1999 1999 2000
------------------- ----------------- ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net loss.............. $(2,750) $(14,294) $(1,207) $(9,849)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization....... 23 294 26 219
Amortization of
deferred
compensation....... 16 3,554 52 3,497
Other............... 39 425 22 365
Changes in assets
and liabilities:
Accounts
receivable, net.. (65) (3,385) (473) 703
Prepaids and other
current assets... (29) (129) 274 (622)
Accounts payable.. 98 1,129 108 107
Accrued
compensation..... 60 1,108 56 958
Other accrued
liabilities...... 159 335 (13) 447
Deferred revenue.. 42 2,926 207 2,719
------- -------- ------- -------
Net cash used in
operating
activities........... (2,407) (8,037) (948) (1,456)
------- -------- ------- -------
Investing activities
Purchases of property
and equipment........ (279) (89) -- (178)
Proceeds from sale of
equipment............ -- 99 -- --
Other assets.......... (28) (226) (6) (5)
Purchases of short-
term investments..... -- (12,266) -- (5,915)
Sales of short-term
investments.......... -- 3,800 -- 8,431
------- -------- ------- -------
Net cash provided by
(used in) investing
activities........... (307) (8,682) (6) 2,333
------- -------- ------- -------
Financing activities
Proceeds from notes
payable.............. 500 2,000 1,501 --
Proceeds from sale-
leaseback............ -- 183 247 --
Proceeds from issuance
of preferred stock,
net.................. 5,017 15,390 -- --
Proceeds from
issuances of common
stock................ 5 501 9 1,226
Repurchase of common
stock................ -- -- -- (36)
Repayment of notes
payable.............. (1) (100) -- (193)
Principal payments
under capital lease
obligations.......... -- (39) -- (74)
------- -------- ------- -------
Net cash provided by
financing
activities........... 5,521 17,935 1,757 923
------- -------- ------- -------
Net increase in cash and
cash equivalents....... 2,807 1,216 803 1,800
Cash and cash
equivalents at
beginning of period.... -- 2,807 2,807 4,023
------- -------- ------- -------
Cash and cash
equivalents at end of
period................. $ 2,807 $ 4,023 $ 3,610 $ 5,823
======= ======== ======= =======
Supplemental disclosure
of noncash financing
activities
Note received from
stockholder in
exchange for
preferred stock...... $ 250 $ -- -- --
======= ======== ======= =======
Note received from
stockholders in
exchange for common
stock................ $ -- $ 1,450 $ -- $ 671
======= ======== ======= =======
Equipment acquired
under capital lease
obligation........... $ -- $ 1,112 $ 107 $ 629
======= ======== ======= =======
Supplemental schedule of
cash flow information
Interest paid......... $ 39 $ 249 22 102
======= ======== ======= =======
</TABLE>
See accompanying notes.
F-7
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
1. Organization and Summary of Significant Accounting Policies
Nature of Operations
Support.com, Inc. ("Support.com"), formerly known as Tioga Systems, Inc. and
Replicase, Inc., was incorporated in the state of Delaware on December 3, 1997.
Support.com is a provider of eBusiness infrastructure software that automates,
personalizes and enhances of user support over the Internet. Support.com's
suite of eSupport software products and services is designed to accelerate
eBusiness growth by increasing the efficiency and capabilities of support
organizations that would otherwise constrain expanding internet initiatives.
Support.com sells its products primarily in the United States and, to a lesser
extent in Europe, Asia, and Latin America through its direct and indirect sales
force.
Support.com commenced operations in December 1997. Operations through
December 31, 1997 consisted of initial development activities. Operating
expenses were approximately $9,000 for the period from incorporation on
December 3, 1997 to December 31, 1997. As such activities were not significant,
the results have been included in operations for the period ended December 31,
1998.
Support.com has incurred operating losses to date and had an accumulated
deficit of $26,893,000 at March 31, 2000. Support.com's activities have been
primarily financed through private placements of equity securities and capital
lease financings. Support.com may need to raise additional capital through the
issuance of debt or equity securities and capital lease financings. Such
financing may not be available on terms satisfactory to Support.com, if at all.
If adequate funds are not available, Support.com may be required to reduce its
level of spending.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The Company has export sales from the United
States and has operations in Singapore and the United Kingdom. All significant
intercompany transactions and balances have been eliminated.
Interim Financial Information
The financial information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited but includes all adjustments,
consisting of only normal recurring adjustments, that in the opinion of
management is necessary for a fair presentation of the Company's financial
position, operating results, and cash flows for such periods. Operating results
for the three month period ended March 31, 2000 are not necessarily indicative
of results to be expected for the full fiscal year of 2000 or any future
period.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Actual results could differ materially
from these estimates.
F-8
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject Support.com to concentration
of credit risk consist principally of cash investments and trade receivables.
Support.com invests cash which is not required for immediate operating needs
principally in money market funds and commercial paper, which incur minimal
risk. Support.com's customers are currently concentrated in the United States.
Support.com performs ongoing evaluations of its customers' financial condition
and generally does not require collateral. Support.com maintains reserves for
credit losses, and such losses have been within management's expectations.
For the year ended December 31, 1999, two customers accounted for 53% and
10% of revenue. For the three months ended March 31, 2000, three customers
accounted for 27%, 15% and 10% of revenue.
Fair Value of Financial Instruments
The fair value of notes payable is estimated by discounting the future cash
flows using the current interest rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
The carrying value of the notes payable approximated its fair value. The fair
value of short-term and long-term capital lease obligations is estimated based
on current interest rates available to Support.com for debt instruments with
similar terms, degrees of risk and remaining maturities. The carrying values of
these obligations approximate their fair values.
Cash, Cash Equivalents and Short-Term Investments
Support.com considers all highly liquid, low-risk debt instruments with an
original maturity at the date of purchase of three months or less to be cash
equivalents. Through December 31, 1998, Support.com maintained cash and cash
equivalents in money market accounts with major financial institutions for
which the carrying amount approximated its fair value. Upon the completion of
the Series C Financing (see Note 4), Support.com invested some of its proceeds
in short-term investments with original maturities of greater than three
months. At December 31, 1999 and March 31, 2000, cash equivalents and short-
term investments consist primarily of commercial paper, other debt instruments
and money market funds. Support.com's cash equivalents and short-term
investments are classified as available-for-sale in accordance with the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."
Currently, Support.com classifies its securities as available-for-sale,
which are reported at amortized cost which approximated fair value at December
31, 1998 and 1999 and March 31, 2000. Material unrealized gains and losses, if
any, are reported in stockholders' equity (deficit) and included in other
comprehensive loss. The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity, both of which
are included in interest income. Realized gains and losses are recorded using
the specific identification method. For the period from incorporation on
December 3, 1997 to December 31, 1998, the year ended December 31, 1999 and for
the three months ended March 31, 2000, gross unrealized gains and losses on
available-for-sale securities were immaterial.
F-9
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
The following is a summary of available-for-sale securities at cost, which
approximates fair value (in thousands):
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Cash and cash equivalents
Cash............................................. $ 699 $ 296
Money market funds............................... 2,108 2,729
Municipal bonds.................................. -- 998
------ ------
$2,807 $4,023
====== ======
Short-term investments
Municipal bonds.................................. $ -- $6,466
Auction backed securities........................ -- 2,000
------ ------
$ -- $8,466
====== ======
</TABLE>
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
which is provided using the straight-line method over the estimated useful
lives of the assets, generally three years.
Revenue Recognition
Revenue from subscription licenses is recognized ratably over the term of
the subscription beginning upon the delivery of the licensed product. Revenue
from arrangements with resellers is recognized upon delivery and is based upon
guaranteed minimum amounts due under the arrangement and sell through activity.
Revenue from perpetual license fees is recognized when persuasive evidence of
an agreement exists, delivery of the product has occurred, no obligations
remain, the fee is fixed or determinable and collectibility is probable.
License revenue is comprised of fees for subscription and perpetual licenses of
Support.com's software by corporate customers and resellers. If the fee due
from the customer is not fixed or determinable, revenue is recognized as
payments become due from the customers. If collectibility is not considered
probable, revenue is recognized when the fee is collected.
Services revenue is primarily comprised of revenue from professional
services, such as consulting services, maintenance and support. Consulting
services include a range of services including installation, implementation and
building of complex and non-complex interfaces for the customer's specific
application. Maintenance agreements provide for technical support and include
the right to unspecified upgrades on an if-and-when-available basis.
In all cases, Support.com assesses whether the service element of the
arrangement is essential to the functionality of the other elements of the
arrangement. In this determination, Support.com focuses on whether the software
is off-the-shelf software, whether the services include significant alterations
to the features and functionality of the software, whether the services involve
the building of complex interfaces, the timing of payments and the existence of
milestones. Judgement is required in
F-10
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
the determination of whether the building of interfaces to the customer's
existing applications constitute complex interfaces. In making this
determination Support.com considers the following: (1) the relative fair value
of the services compared to the software, (2) the amount of time and effort
subsequent to delivery of the software until the interfaces or other
modifications are completed, (3) the degree of technical difficulty in building
of the interface, (4) the services are available from other vendors or could be
performed by the customer, (5) the degree of involvement of customer personnel,
and (6) any contractual cancellation, acceptance, or termination provisions for
failure to complete the interfaces.
In those instances where Support.com determines that the service elements
are essential to the other elements of the arrangement, Support.com accounts
for the entire arrangement in accordance with Accounting Research Bulletin
(ARB) No. 45, "Long--Term Construction--Type Contracts," using the relevent
guidance in SOP 97-2, and in SOP 81-1, "Accounting for Performance of
Construction-Type and Certain Production-Type Contracts."
For those arrangements for which Support.com has concluded that the service
element is not essential to the other elements of the arrangement, Support.com
determines whether the services are available from other vendors, do not
involve a significant degree of risk or unique acceptance criteria, and whether
Support.com has sufficient experience in providing the service to be able to
separately account for the service. When the service qualifies for separate
accounting and Support.com has vendor-specific objective evidence of fair value
(VSOE) for the service, Support.com (1) recognizes revenue for the fees
associated with a perpetual license using the residual method in accordance
with SOP 98-9, regardless of any separate prices stated within the contract for
each element or, (2) recognizes revenue for the fees associated with a
subscription license on a monthly basis over the remaining term of the
subscription period. VSOE of services in multiple element arrangements is based
upon hourly rates which Support.com has charged in stand alone contracts for
services.
Maintenance is not priced or offered separately in subscription licensing
arrangements and is therefore recognized as part of the subscription fee over
the subscription period. For perpetual licensing arrangements, in accordance
with paragraph 57 of SOP 97-2, VSOE for maintenance is determined by reference
to the price the customer will be required to pay when it is sold separately,
that is, the renewal rate which is the price established by management having
the relevant authority. VSOE for maintenance contracts under perpetual license
arrangements is based upon Support.com's pricing practice that maintenance
renewal fees are based upon a percentage of the quoted license fees in the
related contract. Each contract typically offers additional renewal periods at
a stated price. Maintenance revenue is deferred and recognized on a straight-
line basis as services revenue over the life of the related agreement, which is
typically one year.
To date Support.com has not entered into arrangements solely for license of
products and, therefore, Support.com has not demonstrated VSOE for the license
element. In those instances where perpetual licenses are bundled with other
elements, Support.com has used the residual method following the guidance in
SOP 98-9. Support.com accounts for such license fees when VSOE exists
F-11
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
for all undelivered elements in the arrangement and when the fair value of all
the undelivered elements is less than the arrangement fee. Support.com defers
the total fair value of the undelivered elements, until such time as they are
delivered, and recognizes as revenue the difference between the total
arrangement and the amount deferred for the undelivered elements.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.
Support.com adopted Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), and Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue Recognition" ("SOP
98-4"), as of January 1, 1998. SOP 97-2 and SOP 98-4 provide guidance for
recognizing revenue on software transactions and supersede SOP 91-1, "Software
Revenue Recognition." Full implementation guidelines for these standards have
not yet been issued. Once available, the current revenue accounting practices
may need to change and such changes could affect Support.com's future revenues
and results of operations. In December 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-9, "Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions" ("SOP 98-9"). SOP 98-9 amends SOP 98-4 to extend the deferral of
the application of certain passages of SOP 97-2 provided by SOP 98-4 through
fiscal years beginning on or before March 15, 1999. All other provisions of SOP
98-9 are effective for transactions entered into in fiscal years beginning
after March 15, 1999. Support.com does not expect the final adoption of SOP 98-
9 to have a material impact on its future revenues or results of operations.
Research and Development
Research and development expenditures are generally charged to operations as
incurred. Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed,"
requires the capitalization of certain software development costs subsequent to
the establishment of technological feasibility. Based on Support.com's product
development process, technological feasibility is established upon the
completion of a working model. Costs incurred by Support.com between the
completion of the working model and the point at which the product is ready for
general release have been insignificant. Accordingly, Support.com has charged
all such costs to research and development expense in the accompanying
statement of operations. Support.com did not incur any cost related to software
developed or obtained for internal use as defined SOP 98-1.
Advertising Costs
Advertising costs are recorded as sales and marketing expense in the period
in which they are incurred. Advertising expense for the period from
incorporation on December 3, 1997 to December 31, 1998 was $0, for the year
ended December 31, 1999 was $70,675 and for the three months ended March 31,
2000 was $226,970.
F-12
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
Stock-Based Compensation
Support.com accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), and has adopted the disclosure only
alternative of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123").
Any deferred stock compensation calculated according to APB 25 is amortized
over the vesting period of the individual options, generally four years, using
the graded vesting method. The graded vesting method provides for vesting of
portions of the overall awards at interim dates and results in greater vesting
in earlier years than straight-line.
All stock-based awards to non-employees are accounted for at their fair
value, as calculated using the Black-Scholes model, in accordance with FAS 123
and Emerging Issues Task Force Consensus No. 96-18 ("EITF 96-18"). The options
and restricted stock purchase arrangements are subject to periodic re-valuation
over their vesting terms.
Net Loss Per Share
Basic and diluted net loss per share are presented in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS
128"), for all periods presented. Pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin No. 98, ordinary shares and convertible
preferred shares issued or granted for nominal consideration prior to the
anticipated effective date of Support.com's initial public offering must be
included in the calculation of basic and diluted net loss per share as if they
had been outstanding for all periods presented. To date, Support.com has not
had any issuances or grants for nominal consideration.
Basic and diluted net loss per share has been computed using the weighted-
average number of shares of common stock outstanding during the period. Had
Support.com been in a net income position, diluted earnings per share would
have included the shares used in the computation of basic net loss per share as
well as the impact of common shares outstanding subject to repurchase and
outstanding options and warrants to purchase an additional 2,306,761,
7,586,002, and 8,075,604 shares, prior to the application of the treasury stock
method, for the period from incorporation on December 3, 1997 to December 31,
1998, the year ended December 31, 1999 and the three months ended March 31,
2000. Such shares have been excluded because they are antidilutive for all
periods presented. Shares of convertible preferred stock have been excluded
from the computation.
Comprehensive Loss
Support.com adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130"), at December 31, 1998. Under FAS
130, Support.com is required to display comprehensive income and its components
as part of the financial statements. Other comprehensive income includes
certain changes in equity that are excluded from net loss.
F-13
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
Support.com has no material components of other comprehensive loss and, as a
result, the comprehensive loss is the same as the net loss for all periods
presented.
Segment Information
Support.com operates in one segment. For the year ended December 31, 1999,
revenue from customers located outside the United States was approximately
$46,000 and was derived from customers in Canada and the United Kingdom. For
the three months ended March 31, 2000, revenue from customers located outside
the United States was approximately $273,000 and was derived from customers in
Brazil, Korea, and the United Kingdom.
Pro Forma Net Loss Per Share (Unaudited)
Pro forma net loss per share is computed using the weighted-average number
of shares of common stock outstanding, including the pro forma effects of the
automatic conversion of Support.com's convertible preferred stock into shares
of common stock, effective upon the closing of Support.com's initial public
offering as if such conversion occurred at the date of original issuance. Pro
forma stockholders' equity at March 31, 2000, as adjusted for the conversion of
the convertible preferred stock, is disclosed on the balance sheet.
F-14
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
A reconciliation of shares used in the calculation of basic and diluted and
pro forma net loss per share follows (in thousands except per share data):
<TABLE>
<CAPTION>
Period from Three months
incorporation on ended March 31,
December 3, 1997 to Year ended -----------------
December 31, 1998 December 31, 1999 1999 2000
------------------- ----------------- ------- --------
<S> <C> <C> <C> <C>
Net loss attributable to
common stockholders.... $(2,964) $(15,366) $(1,308) $(10,251)
======= ======== ======= ========
Basic and diluted:
Weighted-average
shares of common
stock outstanding.... 6,432 7,166 6,481 13,066
Less weighted-average
shares subject to
repurchase........... (1,205) (523) -- (4,624)
------- -------- ------- --------
Shares used in
computing basic and
diluted net loss per
share................ 5,227 6,643 6,481 8,442
======= ======== ======= ========
Basic and diluted net
loss per share......... $ (0.57) $ (2.31) $ (0.20) $ (1.21)
======= ======== ======= ========
Pro forma:
Net loss.............. $(14,294) $ (9,849)
======== ========
Shares used above..... 6,643 8,442
Unaudited pro forma
adjustment to reflect
weighted effect of
assumed conversion of
convertible preferred
stock................ 13,494 15,556
-------- --------
Shares used in
computing unaudited
pro forma basic and
diluted net loss per
share................ 20,137 23,998
======== ========
Unaudited pro forma
basic and diluted net
loss per share......... $ (0.71) $ (0.41)
======== ========
</TABLE>
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standard No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which will be effective for the year ending December 31, 2001. This
statement establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. Support.com believes the adoption of SFAS 133 will
not have a material effect on the financial statements, since it currently does
not invest in derivative instruments and engage in hedging activities.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements", or
SAB 101. SAB 101 summarizes
F-15
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
certain of the SEC Staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. The Company is
currently evaluating the impact of SAB 101. The Company believes their current
practices comply with SAB 101; however, should the Company determine that a
change in accounting policy is necessary, such a change will be made in the
second quarter of 2000 and would result in a charge to results of operations
for the cumulative effect of the change. This amount, if recognized, would be
recorded as deferred revenue and recognized as revenue in future periods.
Financial statements for prior periods would not be restated.
2. Property and Equipment
Property and equipment are stated at cost and consist of the following (in
thousands):
<TABLE>
<CAPTION>
December
31,
------------
1998 1999
---- ------
<S> <C> <C>
Computer and software equipment................................ $168 $1,193
Furniture and equipment........................................ 106 5
Leasehold improvements......................................... 5 --
---- ------
279 1,198
Accumulated depreciation and amortization...................... (23) (317)
---- ------
$256 $ 881
==== ======
</TABLE>
As of December 31, 1999, property and equipment included amounts acquired
under capital leases of approximately $1,112,000, with related accumulated
amortization of approximately $267,000. This includes property and equipment
with a net book value of approximately $122,000 at December 31, 1999 that was
acquired in 1998 and financed in 1999 through a sale-leaseback transaction.
3. Capital Leases, Borrowings and Commitments
In October 1998, Support.com entered into a loan and security agreement, a
subordinated loan and security agreement and a lease agreement with a financial
institution. In connection with each of these agreements, Support.com issued
warrants to the financial institution (see Note 4). Additionally, Support.com
cannot declare or pay any cash dividends or make a distribution on any class of
stock without the consent of the lender.
The loan and security agreement allows Support.com to borrow up to
$1,500,000 in minimum installments of $500,000 evidenced by secured promissory
notes. Each promissory note bears interest at the rate of 9% per year, is
payable in 36 monthly installments, and is secured by substantially all of
Support.com's assets. At December 31, 1999, Support.com had borrowed $1,500,000
under this agreement. Remaining principal payments under these notes are
approximately $639,000 in 2000, $699,000 in 2001 and $61,000 in 2002.
The subordinated loan and security Agreement allows Support.com to borrow up
to $1,000,000 in two installments of $500,000 evidenced by subordinated secured
promissory notes. Each promissory note bears interest at the rate of 12.5% per
year, is payable in 9 monthly installments of interest only followed by
33 monthly installments of principal and interest. Each note is secured by
substantially all of Support.com's assets. At December 31, 1999, Support.com
had borrowed
F-16
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
$1,000,000 under this agreement. Principal payments due are approximately
$282,000 in 2000, $362,000 in 2001 and $356,000 in 2002.
The lease agreement allows Support.com to borrow up to $2,500,000.
Support.com can borrow under this agreement until 2001 and advances may only be
used to finance purchases of equipment, software and tenant improvements,
subject to certain limitations. Advances are secured by the assets acquired.
Each equipment advance is payable in 48 monthly installments of principal and
interest, computed at the monthly rate of 2.9% of the principal balance. At
March 31, 2000, Support.com had borrowed approximately $1,740,000 under this
agreement.
Support.com leases its facilities under noncancelable operating lease
agreements which expire at various dates from 2000 to 2001. Rent expense was
approximately, $433,000 for the three months ended March 31, 2000, $783,000 for
the year ended December 31, 1999 and approximately $184,000 for the period from
incorporation on December 3, 1997 to December 31, 1998. Support.com received
sublease rental income of approximately $90,000 for the three months ended
March 31, 2000, approximately $162,000 for the year ended December 31, 1999 and
approximately $45,000 for the period from incorporation on December 3, 1997 to
December 31, 1998.
As of December 31, 1999, minimum payments under noncancelable lease
agreements were as follows (in thousands):
<TABLE>
<CAPTION>
Years ending Capital Operating
December 31, Leases Leases
------------ ------- ---------
<S> <C> <C>
2000.................................................... $ 336 $1,349
2001.................................................... 344 850
2002.................................................... 344 --
2003.................................................... 187 --
------ ------
Total minimum lease and principal payments............ 1,211 $2,199
======
Amount representing interest............................. (138)
------
Present value of future payments......................... 1,073
Current portion of capital lease obligations............. 274
------
Noncurrent portion....................................... $ 799
======
</TABLE>
4. Redeemable Convertible Preferred Stock and Stockholders' Equity
Preferred Stock
Each share of preferred stock is, at the option of the holder, convertible
into one share of common stock, subject to certain adjustments for dilution, if
any, resulting from future stock issuances. The outstanding shares of preferred
stock automatically convert into common stock immediately prior to the closing
of an underwritten public offering of common stock under the Securities Act of
1933 in which Support.com receives at least $15,000,000 in gross proceeds and
the market valuation for Support.com is at least $125,000,000. Each class of
preferred stock automatically converts into common stock at the election of
holders of at least a majority of the outstanding shares.
F-17
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
As of December 31, 1999, convertible preferred stock consisted of the
following:
<TABLE>
<CAPTION>
Non-
cumulative Liquidation
Shares Shares Dividend Preference
Authorized Outstanding Per Share Per Share
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Series A....................... 3,571,600 3,571,600 $ -- $0.070
Series B....................... 7,346,108 7,346,108 $0.550 $0.687
Series C....................... 4,934,000 4,638,618 $0.262 $3.271
---------- ----------
15,851,708 15,556,326
========== ==========
</TABLE>
The holders of Series B and C preferred stock are entitled to receive
dividends payable in preference and priority to any payment of any dividend on
Series A preferred stock and common stock. No dividends have been declared as
of December 31, 1999.
The liquidation preference of the convertible preferred stock is subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination, or other similar recapitalization affecting such share and, in
addition, an amount equal to all declared but unpaid dividends on the shares of
preferred stock. The liquidation preference of the Series B and C preferred
stock is increased at the rate, without compounding, of 8% per year, such rate
to be prorated over the length of any partial year. Any remaining assets would
then be distributed on a pro rata basis among the holders of common stock.
The majority of the holders of Series B redeemable convertible preferred
stock can require Support.com to redeem one-third, two-thirds, and all of the
outstanding Series B redeemable convertible preferred stock, together with a 8%
annual rate of return, at any time after June 19, 2003, June 19, 2004 and June
19, 2005. The carrying amount of Series B redeemable convertible preferred
stock is being increased by periodic accretions so that its carrying amount
will equal the redemption amount at the redemption date.
The majority of the holders of Series C redeemable convertible preferred
stock can require Support.com to redeem one-third, two-thirds, and all of the
outstanding Series C redeemable convertible preferred stock, together with a 8%
annual rate of return, at any time after June 14, 2004, June 14, 2005 and June
14, 2006. The carrying amount of Series C redeemable convertible preferred
stock is being increased by periodic accretions so that its carrying amount
will equal the redemption amount at the redemption date.
The preferred stockholders have voting rights equal to the common shares
issuable upon conversion of their preferred shares.
At December 31, 1998, Support.com had a receivable from a stockholder for
$250,229 in connection with the purchase of Series B preferred stock. The
receivable was included in prepaids and other currents assets. Support.com
collected the receivable during 1999.
F-18
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
Common Stock
Support.com has reserved shares of common stock for issuance at March 31,
2000 as follows:
<TABLE>
<S> <C>
Stock Plans....................................................... 8,610,218
Warrants.......................................................... 283,650
Conversion of preferred stock..................................... 15,556,326
----------
24,450,194
==========
</TABLE>
Through March 31, 2000, certain option holders have exercised options to
purchase 3,240,189 shares of common stock at prices ranging from $0.40 to
$0.99, with a weighted-average exercise price of $0.65 per share in exchange
for four-year, full recourse promissory notes. The notes bear interest at 5.9%
and expire on various dates through 2003. Support.com has the right to
repurchase all unvested shares purchased by the notes at the original exercise
price in the event of employee termination. The number of shares subject to
this repurchase right decreases as the shares vest under the original option
terms, generally over four years.
Stock Warrants
In October 1998 and July 1999, Support.com issued warrants to a financial
institution in conjunction with the loan and security agreement, subordinated
loan and security agreement and the master lease agreement (see Note 3). The
warrant issued in October 1998 allows the financial institution to purchase
98,511 shares of Support.com's Series C preferred stock at an exercise price
of $1.98 per share. The warrant issued in July 1999 allows the financial
institution to purchase 27,511 shares of Support.com's Series C preferred
stock at an exercise price of $3.27 per share. The warrants became exercisable
in June 1999 and July 1999, respectively. The warrants granted in July 1999
shall be exercisable for a period of seven years or three years from the
effective date of Support.com's initial public offering, whichever is longer.
The warrants granted in October 1998 will expire 7 years from issuance or at
the time of Support.com's initial public offering. The warrants were valued
using the Black-Scholes model. In applying the Black-Scholes model,
Support.com used an expected dividend yield of zero, a risk-free interest rate
of 6.5% and a volatility factor of 0.5. The value of approximately $249,000 on
the warrant issued in 1998 and $59,000 on the warrant issued in 1999 is being
amortized to interest expense over the term of the financing agreements.
In August 1999, Support.com issued warrants to a lessor in conjunction with
a sublease agreement. The warrant allows the lessor to purchase 38,461 shares
of Support.com's Series C preferred stock at an exercise price of $6.50 per
share. The warrant is immediately exercisable and expires in November 2001 or
at the time of Support.com's initial public offering. The warrants were valued
using the Black-Scholes model. In applying the Black-Scholes model,
Support.com used an expected dividend yield of zero, a risk-free interest rate
of 6.5% and a volatility factor of 0.5. The total value of approximately
$35,000 is being amortized to interest expense over the term of the lease
agreements.
F-19
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
In February 2000, Support.com issued warrants to a customer in conjunction
with a license agreement. The warrant allows the customer to purchase 119,167
shares of Support.com's Series C preferred stock at an exercise price of $18.00
per share. The warrant is immediately exercisable and expires in August 2002.
The value of the warrants was estimated to be approximately $131,000 and was
based upon a Black-Scholes valuation model with the following assumptions: risk
free interest rate of 6.5%, dividend yield of 0%, volatility of 50%, expected
life of 30 months, exercise price of $18.00 and fair value of $8.42. The value
of the warrants will be recorded as a reduction to license revenues as the
related revenues are recognized under the agreement.
Restricted Common Stock and Options to Non-Employees
Support.com granted the right to purchase 205,500 shares of restricted
common stock in 1999 and 80,000 shares of restricted common stock in 1998 to
non-employees and members of the board of directors. During 1999, non-employees
and members of the board of directors purchased 222,000 shares of restricted
common stock. Support.com has the right to repurchase all unvested shares
purchased at the original exercise price. The number of shares subject to this
repurchase right decreases as the shares vest under the original terms of the
restricted stock purchase agreements, generally over four years. As of
December 31, 1999, there were 201,029 shares subject to repurchase. The
restricted stock was purchased at prices ranging from $0.10 to $0.90, with a
weighted-average exercise price of $0.17 per share.
The rights to purchase restricted stock granted to the directors were valued
using the intrinsic value method prescribed in APB 25. The restricted stock and
options granted to non-employees were valued using the Black-Scholes model
prescribed in FAS 123 and EITF 96-18. In applying the Black-Scholes model,
Support.com used an expected dividend yield of zero, a risk-free interest rate
of 6.5%, a volatility factor of 0.5 and the deemed fair value of Support.com's
common stock on the date such restricted stock or option became vested. The
restricted stock and options granted to non-employees are subject to periodic
re-valuation over the vesting period. Support.com recognized compensation
expense from restricted stock and options to non-employees relating to services
performed in 1999 of approximately $255,000 and in the three months ended March
31, 2000 of approximately $218,000.
1998 Stock Option Plan
During fiscal 1998, Support.com adopted the 1998 stock option plan (the
"plan"). Under the plan, up to 9,424,434 shares of Support.com's common stock
may be granted as options or sold to eligible participants. Under the plan,
options to purchase common stock may be granted at no less than 85% of the fair
value on the date of the grant (110% of fair value in certain instances), as
determined by the board of directors. Options under the plan are immediately
exercisable; however, shares issued are subject to Support.com's right to
repurchase such shares at the original issuance price, which lapses in a series
of installments measured from the vesting commencement date of the option.
Options generally vest and the repurchase rights lapse over a 48-month period
from the date of grant and have a maximum term of 10 years.
F-20
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
Pro forma information regarding net loss is required by FAS 123 and has been
determined as if Support.com had accounted for its employee stock options under
the fair value method of FAS 123. The fair value of these options was estimated
at the date of grant using the minimum value method with the following
weighted-average assumptions: risk-free interest rates of 6.5%; a dividend
yield of 0%; and a weighted-average expected life of the option of 4.5 years
for the years ended December 31, 1998 and 1999 and the three months ended March
31, 2000.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using a
graded vesting method. The effects of applying FAS 123 for pro forma
disclosures are not likely to be representative of the effects on reported net
loss for future years.
Support.com's pro forma information follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Period from incorporation
on December 3, 1997 to Year ended Three months ended
December 31, 1998 December 31, 1999 March 31, 2000
------------------------- ----------------- ------------------
<S> <C> <C> <C>
Net loss attributable to
common stockholders:
As reported........... $(2,964) $(15,366) $(10,251)
Pro forma............. (2,969) (15,468) (10,334)
Basic and diluted net
loss per share:
As reported........... $ (0.57) $ (2.31) $ (1.21)
Pro forma............. (0.57) (2.33) (1.22)
</TABLE>
Information with respect to stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding Weighted
Options ----------------------- Average
Available Number of Price Per Exercise
for Grant Shares Share Price
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Shares authorized.............. 2,929,434 -- -- --
Options granted................ (2,343,250) 2,343,250 $ 0.10 $0.10
Options exercised.............. -- (40,000) $ 0.10 $0.10
Options canceled............... 95,000 (95,000) $ 0.10 $0.10
---------- ---------- -----------
Balance at December 31, 1998... 681,184 2,208,250 $ 0.10 $0.10
Shares authorized.............. 5,195,000 -- -- --
Options granted................ (6,326,139) 6,326,139 $0.10-$0.99 $0.57
Options exercised.............. -- (4,131,994) $0.10-$0.99 $0.46
Options canceled............... 457,500 (457,500) $0.10-$0.90 $0.23
---------- ---------- -----------
Balance at December 31, 1999... 7,545 3,944,895 $0.10-$0.90 $0.47
Shares authorized.............. 1,300,000 -- -- $ --
Options granted................ (1,236,361) 1,236,361 $2.00-$9.00 $4.41
Options exercised.............. -- (2,838,472) $0.10-$8.00 $0.67
Options canceled............... 203,000 (203,000) $0.10-$0.90 $0.11
Shares repurchased............. 196,250 $0.10-$0.90 $0.18
---------- ---------- ----------- -----
Balance at March 31, 2000...... 470,434 2,139,784 $0.10-$9.00 $2.51
========== ========== ===========
</TABLE>
F-21
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
At March 31, 2000, 5,771,337 shares which had been issued upon exercise of
options were subject to repurchase. At December 31, 1998 and 1999 and March
31, 2000, zero and 3,299,905 shares which had been issued upon exercise of
options were subject to repurchase. At December 31, 1998 and 1999, options to
acquire 5,500, 444,899, and 159,137 shares were vested but not exercised.
Exercise prices for options outstanding as of December 31, 1999 and the
weighted-average remaining contractual life are as follows:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-------------------------------------------------
Weighted-
Average
Remaining
Exercise Number of Contractual
Price Range Shares Life
----------- --------- -----------
(In years)
<S> <C> <C>
$0.10 764,556 7.79
$0.40 2,163,689 9.54
$0.90 1,016,650 9.68
--------- ----
3,944,895 9.22
========= ====
</TABLE>
The weighted-average fair value of options granted during 1998 was $0.02
and 1999 was $0.12.
Stock Compensation
During the period from incorporation December 31, 1997 to December 31,
1998, the year ended December 31, 1999 and for the three months ended March
31, 2000, in connection with the grant of certain share options to employees,
Support.com recorded deferred stock compensation of approximately $169,000,
$17.7 million, and $5.9 million respectively, representing the difference
between the exercise price and the deemed fair value of Support.com's common
stock on the date such stock options were granted. Such amounts are included
as a reduction of stockholders' equity (deficit) and are being amortized by
charges to operations on a graded vesting method. Support.com recorded
amortization of deferred stock compensation expense of approximately $16,000
in 1998, $3.5 million in 1999 and $3.5 million for the three months ended
March 31, 2000. At March 31, 2000, Support.com had a total of approximately
$16.6 million remaining to be amortized over the corresponding vesting period
of each respective option, generally four years. The amortization expense
relates to options awarded to employees in all operating expense categories.
This amount has not been separately allocated to these categories.
Initial Public Offering
In February 2000, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed initial public
offering ("IPO"). If the offering is consummated under the terms presently
anticipated, all of the currently outstanding convertible preferred stock will
convert to shares of common stock upon the closing of the IPO on a one-for-one
basis. The effect of this conversion has
F-22
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
been reflected as unaudited pro forma stockholders' equity in the accompanying
balance sheet at March 31, 2000.
In February 2000, the board of directors also authorized 5,000,000 shares of
undesignated preferred stock, for which the board of directors is authorized to
fix the designation, powers, preferences and rights, and an increase in the
authorized number of shares of common stock to 150,000,000 shares.
2000 Employee Stock Purchase Plan
In February 2000, the board of directors approved the adoption of
Support.com's 2000 employee stock purchase plan (the "2000 purchase plan"). A
total of 2,000,000 shares of common stock have been reserved for issuance under
the 2000 purchase plan. On January 1 of each year, the number of shares
reserved automatically increases by the lesser of 2,000,000 shares, 3% of the
outstanding shares, or an amount determined by the board of directors. The 2000
purchase plan permits eligible employees to acquire shares of Support.com's
common stock through periodic payroll deductions of up to 15% of total
compensation. No more than 1,000 shares may be purchased on any purchase date
per employee. Each offering period will have a maximum duration of 24 months,
consisting of 4 participation periods. Purchases occur on the last day of each
July and January following the end of each participation period. The price at
which the common stock may be purchased is 85% of the lesser of the fair market
value of Support.com's common stock on each employee's applicable enrollment
date or on the last day of the respective participation period. The initial
offering period commences upon the effectiveness of the initial public offering
and will end on the last business day of December 2001.
2000 Omnibus Equity Incentive Plan
In February 2000, the board of directors approved the adoption of
Support.com's 2000 omnibus equity incentive plan (the "2000 incentive plan"),
subject to stockholder approval. A total of 4,000,000 shares of common stock
have been reserved for issuance to eligible participants under the 2000
incentive plan. On January 1 of each year, the number of shares reserved
automatically increases by the lesser of 2,000,000 shares, 5% of outstanding
shares, or an amount determined by the board of directors. The types of awards
that may be made under the 2000 incentive plan include the grant of incentive
stock options, the grant of nonstatutory stock options and stock purchase
rights to employees, non-employee directors, advisors and consultants. Any
shares not yet issued under Support.com's 1998 stock option plan as of the date
of Support.com's IPO will be available for grant under the 2000 incentive plan.
The exercise price for incentive stock options may not be less than 100% of the
fair market value of Support.com's common stock on the date of grant (85% for
nonstatutory options).
Rescission Offer
Specific shares issued, and option grants made under, Support.com's 1998
stock option plan were not exempt from registration or qualification under
California state securities laws, and these
F-23
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
stock issuances and option grants violated the registration requirements of
California state securities laws because registration or qualification was not
obtained. Support.com intends to make a rescission offer of 20% of the exercise
price of the respective option to the holders of 2,932,900 shares and options
which will be held open for 30 days. If accepted, the rescission offer could
require Support.com to make payments of approximately $215,000 as consideration
for the return of any such shares issued and options granted including
statutory interest.
5. Income Taxes
No provision for income taxes has been recorded as Support.com incurred net
operating losses for the period from incorporation on December 3, 1997 to
December 31, 1998 and for the year ended December 31, 1999. The following is a
reconciliation of the statutory federal income tax rate (35%) to Support.com's
effective income tax rate (In thousands):
<TABLE>
<CAPTION>
Period from incorporation
on December 3, 1997 to Year ended
December 31, 1998 December 31, 1999
------------------------- -----------------
<S> <C> <C>
Statutory federal income tax
expense (benefit)................ $(963) $(5,003)
Loss for which no tax benefit is
currently recognizable........... 963 5,003
----- -------
$ -- $ --
===== =======
</TABLE>
Significant components of Support.com's deferred tax assets are as follows
(in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......................... $ 1,000 $ 4,100
Deferred compensation.................................... -- 1,400
Other.................................................... 100 900
------- -------
Total deferred tax assets.............................. 1,100 6,400
Valuation allowances....................................... (1,100) (6,400)
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
</TABLE>
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes," provides for the recognition of deferred tax assets if realization of
such assets is more likely than not. Based upon the weight of available
evidence, which includes Support.com's historical operating performance and the
reported cumulative net losses in all periods, Support.com has provided a full
valuation allowance against its net deferred tax assets.
The valuation allowance increased by approximately $1.1 million during the
period from incorporation on December 3, 1997 to December 31, 1998 and $5.3
million during the year ended December 31, 1999.
F-24
<PAGE>
SUPPORT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
As of December 31, 1999, Support.com had federal and state net operating
loss carryforwards each of approximately $10.1 million. The net operating loss
carryforwards will expire at various dates beginning in 2005 through 2019, if
not utilized.
Utilization of the net operating loss carryforwards may be subject to a
substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code and similar state provisions. The annual limitation
may result in the expiration of net operating loss carryforwards before
utilization.
6. Source Code License Agreement
In March 2000 the Company entered into an exclusive agreement related to
problem identification technology with another party. Pursuant to this
arrangement the Company is obligated to pay up to $750,000 during the second
quarter of 2000 for an evaluation license to the technology and training,
integration services and engineering assistance. In addition, the Company also
received a 90 day right to purchase the source code for fees of up to
$11,350,000 which would be payable over a three year period from the date of
exercise.
F-25
<PAGE>
[Company Logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
This table lists the various expenses expected to be incurred by the
Registrant with the sale and distribution of the securities being registered
hereby, other than underwriting discounts and commissions. All amounts are
estimated except the Securities and Exchange Commission registration fee and
the National Association of Securities Dealers, Inc. filing fee.
<TABLE>
<CAPTION>
Payable by
Registrant
----------
<S> <C>
SEC registration fee.............................................. $16,395
National Association of Securities Dealers, Inc. filing fee....... 6,710
Nasdaq National Market Listing Fee................................ 95,000
Accounting fees and expenses...................................... *
Legal fees and expenses........................................... *
Printing and engraving expenses................................... *
Blue Sky fees and expenses........................................ *
Registrar and Transfer Agent's fees............................... *
Miscellaneous fees and expenses................................... *
-------
Total........................................................... *
=======
</TABLE>
- --------
* To be filed by amendment.
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 these persons under specified circumstances
for liabilities (including reimbursement for expenses incurred) arising under
the Securities Act of 1933 (the "Act"). Article XI.B. of the Registrant's
Amended and Restated Certificate of Incorporation (Exhibit 3.1 hereto) and
Article XII of the Registrant's Amended and Restated Bylaws (Exhibit 3.2
hereto) provide for indemnification of the Registrant's directors, officers,
employees and other agents to the extent and under the circumstances permitted
by the Delaware General Corporation Law. The Registrant has also entered into
agreements with its directors and officers that will require the Registrant,
among other things, to indemnify them against specified 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
specified liabilities, including liabilities arising under the Act and affords
rights of contribution with respect thereto.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
ourselves, our underwriters and our directors and officers of the
underwriters, for certain liabilities, including liabilities arising under the
Act and affords certain rights of contribution with respect thereto.
Item 15. Recent Sales of Unregistered Securities
1. From December 1997 to December 31, 1999, the Registrant issued and
sold 10,874,374 shares of common stock to employees, directors and
consultants at prices ranging from $0.0001 to $0.90 per share.
2. From December 8, 1997 to March 19, 1998, the Registrant issued and
sold 3,571,600 shares of Series A preferred stock to a total of 4 investors
for an aggregate purchase price of $250,012.00.
3. On June 22, 1998, the Registrant issued and sold 7,346,108 shares of
Series B preferred stock to a total of 9 investors for an aggregate
purchase price of $5,050,228.87.
4. On June 14, 1999, the Registrant issued and sold 4,638,618 shares of
Series C preferred stock to a total of 35 investors for an aggregate
purchase price of $15,175,147.93.
II-1
<PAGE>
The sales of the above securities were considered to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701
promulgated under Section 3(b) of the Securities Act, as transactions by an
issuer not involving a public offering or transactions under compensatory
benefit plans and contracts relating to compensation as provided under Rule
701. The recipients of securities in each of these transactions represented
their intention to acquire the securities for investment only and not with a
view to or for sale with any distribution thereof, and appropriate legends
were affixed to the share certificates and instruments issued in these
transactions. All recipients had adequate access, through their relationship
with the Registrant, to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation, to be effective
upon consummation of this offering.
3.2** Amended and Restated Bylaws, to be effective upon consummation of this
offering.
3.3** Amended and Restated Certificate of Incorporation.
3.4** Certificate of Correction of the Amended and Restated Certificate of
Incorporation.
3.5** Bylaws.
4.1 Form of Common Stock Certificate.
4.2** Registration Rights Agreement, dated June 22, 1998, by and among the
registrant and the parties who are signatories thereto.
4.3** Amended and Restated Registration Rights Agreement, dated June 14,
1999, by and among the registrant and the parties who are signatories
thereto.
4.4** Warrant Agreement to Purchase Shares of Series C Convertible Preferred
Stock, dated July 12, 1999, by and between the registrant and
Comdisco, Inc.
4.5** Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.6** Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.7** Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.8** Letter Agreement, dated June 7, 1999, by and between the registrant
and Comdisco, Inc.
4.9** Warrant Agreement to Purchase Shares of Series C Preferred Stock by
and between the registrant and Excite, Inc.
4.10** Warrant Agreement to Purchase Shares of Series C Preferred Stock dated
February 17, 2000 by and between the registrant and General Electric
Company.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1** Registrant's Amended and Restated 1998 Stock Option Plan.
10.2** Registrant's 2000 Omnibus Equity Incentive Plan.
10.3** Registrant's 2000 Employee Stock Purchase Plan.
10.4** Form of Directors and Officers' Indemnification Agreement.
10.5 Employment Agreement, dated June 24, 1998, by and between the
registrant and Anthony C. Rodoni.
10.7 Employment Agreement, dated July 15, 1999, by and between the
registrant and Radha R. Basu.
10.8** Employment Agreement, dated August 16, 1999, by and between the
registrant and Scott Dale.
10.9** Employment Agreement, dated August 16, 1999, by and between the
registrant and Cadir Lee.
10.10 Employment Agreement, dated September 27, 1999, by and between the
registrant and Brian M. Beattie.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
-------- -----------------------
<C> <S>
10.11 Employment Agreement, dated December 7, 1999, by and between the
registrant and Jim Hilbert.
10.12 Employment Agreement, dated January 18, 2000, by and between the
registrant and Lucille Hoger.
10.13 Employment Agreement, dated August 1, 1999, by and between the
registrant and Mark Pincus and amendment thereto.
10.14 Sublease Agreement, dated August 6, 1999, by and between the
registrant and Excite, Inc.
10.15+** Enterprise License Agreement, dated May 27, 1999, by and between the
registrant and Bear, Stearns & Co., Inc.
10.16+** Amendment No. 1 to Enterprise License Agreement, dated October 6,
1999, by and between the registrant and Bear, Stearns & Co., Inc.
10.17+** Enterprise License Agreement dated February 17, 2000 by and between
the registrant and General Electric Company.
10.18** Form of Proprietary Information and Inventions Agreement.
10.19+** OEM Agreement, dated July 14, 1994, by and between the registrant and
Excite@Home.
10.20+** Amendment to OEM Agreement, dated March 2000, by and between the
registrant and Excite@Home.
10.21+** Reseller Agreement, dated March 2000, by and between the registrant
and Samsung SDS Co. Ltd.
10.22+** Sale and License Agreement, dated March 20, 2000.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Pillsbury Madison & Sutro LLP (contained in their opinion
filed as Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedule for Support.com, Inc.
99.2** Consent of Excite@Home.
99.3** Consent of JCPenney.
99.4** Consent of Compaq Professional Services.
99.5** Consent of everdream.
</TABLE>
- --------
* To be filed by amendment.
** Previously Filed.
+ Confidential Treatment Requested. Confidential portions of the exhibit have
been omitted and filed separately with the Commission.
(b) Financial Statement Schedules
Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, (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
II-3
<PAGE>
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, 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, 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Redwood City, State of California, on the 26th day of April, 2000.
Support.Com, Inc.
/s/ Radha Ramaswami Basu
By __________________________________
Radha Ramaswami Basu
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Radha Ramaswani Basu, Brian M. Beattie and Mark
A. Vranesh, and each of them, his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities, to
sign any and all amendments, including post-effective amendments, to this
Registration Statement, and any registration statement relating to the
offering covered by this Registration Statement and filed pursuant to Rule
462(b) under the Securities Act of 1933 and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
each of said attorneys-in-fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Radha Ramaswami Basu President, Chief Executive April 26, 2000
____________________________________ Officer and Director
Radha Ramaswami Basu (Principal Executive
Officer)
/s/ Brian M. Beattie Senior Vice President of April 26, 2000
____________________________________ Finance and Administration,
Brian M. Beattie Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
* Director April 26, 2000
____________________________________
Mark J. Pincus
* Director April 26, 2000
____________________________________
Matthew T. Cowan
/s/ Manuel F. Diaz Director April 24, 2000
____________________________________
Manuel F. Diaz
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
* Director April 26, 2000
____________________________________
William L. Dunn
* Director April 26, 2000
____________________________________
Bruce Golden
* Director April 26, 2000
____________________________________
Edward S. Russell
* Director April 26, 2000
____________________________________
Roger J. Sippl
</TABLE>
/s/ Radha Ramaswami
Basu
*By:___________________________
Radha Ramaswami Basu
(Attorney-in-Fact)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation, to be effective
upon consummation of this offering.
3.2** Amended and Restated Bylaws, to be effective upon consummation of
this offering.
3.3** Amended and Restated Certificate of Incorporation.
3.4** Certificate of Correction of the Amended and Restated Certificate of
Incorporation.
3.5** Bylaws.
4.1 Form of Common Stock Certificate.
4.2** Registration Rights Agreement, dated June 22, 1998, by and among the
registrant and the parties who are signatories thereto.
4.3** Amended and Restated Registration Rights Agreement, dated June 14,
1999, by and among the registrant and the parties who are
signatories thereto.
4.4** Warrant Agreement to Purchase Shares of Series C Convertible
Preferred Stock, dated July 12, 1999, by and between the registrant
and Comdisco, Inc.
4.5** Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.6** Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.7** Warrant Agreement to Purchase Shares of Series C Preferred Stock,
dated October 27, 1998, by and between the registrant and Comdisco,
Inc.
4.8** Letter Agreement, dated June 7, 1999, by and between the registrant
and Comdisco, Inc.
4.9** Warrant Agreement to Purchase Shares of Series C Preferred Stock by
and between the registrant and Excite, Inc.
4.10** Warrant Agreement to Purchase Shares of Series C Preferred Stock
dated February 17, 2000 by and between the registrant and General
Electric Company.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1** Registrant's Amended and Restated 1998 Stock Option Plan.
10.2** Registrant's 2000 Omnibus Equity Incentive Plan.
10.3** Registrant's 2000 Employee Stock Purchase Plan.
10.4** Form of Directors and Officers' Indemnification Agreement.
10.5 Employment Agreement, dated June 24, 1998, by and between the
registrant and Anthony C. Rodoni.
10.7 Employment Agreement, dated July 15, 1999, by and between the
registrant and Radha R. Basu.
10.8** Employment Agreement, dated August 16, 1999, by and between the
registrant and Scott Dale.
10.9** Employment Agreement, dated August 16, 1999, by and between the
registrant and Cadir Lee.
10.10 Employment Agreement, dated September 27, 1999, by and between the
registrant and Brian M. Beattie.
10.11 Employment Agreement, dated December 7, 1999, by and between the
registrant and Jim Hilbert.
10.12 Employment Agreement, dated January 18, 2000, by and between the
registrant and Lucille Hoger.
10.13 Employment Agreement, dated August 1, 1999, by and between the
registrant and Mark Pincus and amendment thereto.
10.14 Sublease Agreement, dated August 6, 1999, by and between the
registrant and Excite, Inc.
10.15+** Enterprise License Agreement, dated May 27, 1999, by and between the
registrant and Bear, Stearns & Co., Inc.
</TABLE>
<PAGE>
EXHIBIT INDEX--(Continued)
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
-------- -----------------------
<C> <S>
10.16+** Amendment No. 1 to Enterprise License Agreement, dated October 6,
1999, by and between the registrant and Bear, Stearns & Co., Inc.
10.17+** Enterprise License Agreement dated February 17, 2000 by and between
the registrant and General Electric Company.
10.18** Form of Proprietary Information and Inventions Agreement.
10.19+** OEM Agreement, dated July 14, 1994, by and between the registrant and
Excite@Home.
10.20+** Amendment to OEM Agreement, dated March 2000, by and between the
registrant and Excite@Home.
10.21+** Reseller Agreement, dated March 2000, by and between the registrant
and Samsung SDS Co. Ltd.
10.22+** Sale and License Agreement, dated March 20, 2000.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Pillsbury Madison & Sutro LLP (contained in their opinion
filed as Exhibit 5.1).
24.1** Power of Attorney.
27.1** Financial Data Schedule for Support.com, Inc.
99.2** Consent of Excite@Home.
99.3** Consent of JCPenney.
99.4** Consent of Compaq Professional Services.
99.5** Consent of everdream.
</TABLE>
- --------
* To be filed by amendment.
** Previously Filed.
+ Confidential Treatment Requested. Confidential portions of the exhibit have
been omitted and filed separately with the Commission.
<PAGE>
Exhibit 4.1
[LOGO]
NUMBER
SHARES
SC-
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 868587 10 6
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
SUPPORT.COM
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.0001 PAR VALUE OF
SUPPORT.COM, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[Brian Beattie]
CHIEF FINANCIAL OFFICER
[SEAL]
[Radha Basu]
CHIEF EXECUTIVE OFFICER AND PRESIDENT
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. BOX 1596
DENVER, CO 80201
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
SUPPORT.COM, INC.
A statement of all of 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 as established by the Certificate of Incorporation, as
amended, may be obtained by any stockholder upon request and without charge from
the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM- as tenants in common
TEN ENT- as tenants by the entireties
JT TEN- as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT- _____ Custodian _____
(Cust) (Minor)
under Uniform Gifts to Minors
Act _____
(State)
UNIF TRF MIN ACT- _____ Custodian (until age _____ )
(Cust)
_____ under Uniform Transfers
(Minor)
to Minors Act _____
(State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received _____ hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE(S)
of the Shares of capital stock represented by the within Certificate and do(es)
hereby irrevocably constitute and
appoint _____ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated
NOTE: The signature to this assignment must correspond with
the names as written upon the face of the certificate in every
particular, without alteration or enlargement or any change whatever.
Signature must be guaranteed.
Signature(s) Guaranteed:
By
THE SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-
15.
<PAGE>
EXHIBIT 10.5
1779 Woodside Road, Suite 204
Redwood City, CA 94061
Tel: 650-369-5211 Fax: 650-368-5221 [LETTERHEAD]
Dear Tony Rodoni;
I am pleased to offer you a position with Replicase, Inc., a Delaware
corporation (the "Company") as Vice President of Marketing, commencing on June
--------------------------- ----
24th, 1998. You will have an annual salary of $135,000, which will be paid
- ---------- --------
semi-monthly in accordance with the Company's normal payroll procedures. You
will also receive an annual bonus of $30,000 - with $20,000 based on the Company
achieving $5 million in 1999 revenue (subsequent years to be determined) and
$10,000 based on management based objectives which will be determined soon after
your joining the company and then reset annually. In 1998, you will receive a
bonus of $15,000 based on Replicase successfully launching five pilot accounts.
You will also receive 425,000 stock options, which will carry vesting and
-------
exercise provisions in accordance with the Company's standard policies. You
will also receive a bonus of 25,000 options based on the Company achieving $5
million in 1999 revenue. (See Employee agreement amendment A for more details)
As a Company employee, you will also be eligible to receive all employee
benefits, which will include health insurance. You should note that the Company
may modify salaries and benefits from time to time as it deems necessary. You
will also be entitled to certain bonuses based on product releases and sales,
which will be defined at a later date. (See Employee agreement amendment A for
more details)
You should be aware that your employment with the Company is for no
specified period and constitutes at will employment. As a result you are free
to resign at any time, for any reason or for no reason. Similarly, the Company
is free to conclude its employment relationship with you at any time, with or
without cause, and with or without notice.
For purposes of federal immigration law, you will be required to provide
to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
You agree that during the term of your employment with the Company, you
will not actively engage in any other employment occupation, consulting or other
business directly or indirectly related to the business in which the Company is
now involved or becomes involved during the term of your employment nor will you
engage in any other activities that conflict with your obligations to the
Company. (See Employee agreement amendment A for more details)
As a Company employee, you will be expected to abide by the Company's rules
and regulations. You will be expected to sign and comply with an Employment
Confidential Information, and Invention Assignment
<PAGE>
Agreement which requires, among other provisions, the assignment of patent
rights to any invention made during your employment at the Company and non-
disclosure of proprietary information.
In the event of any dispute or claim relating to or arising out of our
employment relationship, you and the Company agree that all such disputes shall
be fully and finally resolved by binding arbitration conducted by the American
Arbitration Association in San Mateo County, California. However, we agree that
this arbitration provision shall not apply to any disputes or claims relating to
or arising out of the misuse or misappropriation of the Company's trade secrets
or proprietary information.
To indicate your acceptance of the Company's offer, please sign and date
this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, sets forth the terms
of your employment with the Company and supersedes any prior representations or
agreements, whether written or oral. This letter may not be modified or amended
except by a written agreement, signed by an officer of the Company and you.
We look forward to working with you.
Sincerely,
REPLICASE, INC.
Mark Pincus
President and CEO
ACCEPTED AND AGREED TO this
24 day of June 1998.
/s/ Tony Rodoni
- ----------------------------
[employee name]
Enclosures: Duplicate Original Letter,
Employment Confidential Information,
Employment agreement amendment A, and
Invention Assignment Agreement (To be supplied)(1)
(1) Mr. Rodoni listed no prior inventions in his Employment Confidential
Information and Invention Assignment Agreement.
<PAGE>
Employment agreement amendment A
--------------------------------
Employee name: Tony Rodoni.
-----------
This agreement amendment provides clarifications and modifications to the
standard employee's agreement and supersedes the original subject as appears in
the employee agreement.
Employee benefit package and insurance:
- --------------------------------------
. Health Insurance (Lifeguard HMO).
. Dental insurance (Delta)
. Vision insurance
. Life and Disability insurance
. Section 125
. 401K program (no company contribution)
Stocks option
- -------------
. You will vest into 35% at the end of one year and then vest into the
remaining 65% monthly over the following 3 years.
. In case of acquisition or merger your vesting will be accelerated by 50% of
the remaining amount.
. Your stock option price will be $0.10 a share.
Revenue Definition
- ------------------
. Defined as GAAP recognizable and date certain.
. In the case of booked revenue which later turns into bad debts, those
revenues will be backed out of this agreement.
. Includes all revenue from direct enterprise sales and OEM licensing deals.
<PAGE>
EXHIBIT 10.7
[LETTERHEAD]
July 15, 1999
PERSONAL & CONFIDENTIAL
Ms. Radha R. Basu
21777 Vintage Lane
Saratoga, California 95070
Dear Radha:
On behalf of Tioga Systems, Inc. (the "Company" or "Tioga") I am pleased to
offer you the position of Chief Executive Officer and President of the Company.
The terms of your employment relationship with the company are as set forth
below and as approved by the Company's Board of Directors.
1. Position. You will become the Chief Executive Officer and President of the
Company, reporting to the Board of Directors. As such, you will have such
responsibilities commensurate with your position and such additional
responsibilities as may reasonably be determined by the Board of Directors
of the Company (the "Board"). You will also be appointed a member of the
Board at the soonest practical date following your commencement of
employment.
2. Base Salary and Performance Bonus. You will be paid a base salary of no less
than $16,667 per month. Your salary will be payable in accordance with the
Company's standard payroll policies (subject to normal required
withholding). You will receive a vacation and benefit package similar to
that provided for all other executive level employees. You will also be
eligible for an annual bonus equal to 50% of your base salary for the prior
Fiscal Year upon achieving performance criteria mutually agreed upon by you
and the Board. For the Fiscal Year ended December 31, 1999, you will be
guaranteed a bonus of 50% of your salary pro rated for the remainder of that
Fiscal Year.
3. Stock Options. Subject to the approval of the Board of Directors of the
Company, you will be granted an incentive stock option to purchase 1,680,189
shares of Common Stock of the Company at an exercise price per share of
$0.90 (which represents the fair market value of the Common Stock of the
Company at the date of the grant). Your option will be granted under the
Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each
term of the Company's standard form of option agreement. These options will
vest 25% at the end of your first year of employment and thereafter monthly
at 1/48 per month of the total option amount, so
<PAGE>
that at the end of your fourth year of employment you will be vested in 100%
of this incentive stock option grant. However, if before the end of the one
year anniversary of your employment with the Company, you should be
terminated for Cause or resign voluntarily from the Company other than for
Good Reason, there will be no vesting. "Cause" and "Good Reason" are defined
in Section 5 of this Employment Agreement.
4. At-Will Employment. You will be an employee-at-will, meaning that either you
or the Company can terminate your employment relationship at any time, for
any reason, with or without cause, and with or without notice. You agree to
devote substantially all of your business time and attention to the Company.
Nevertheless, you shall be permitted to serve as a member of the board of
directors of Seec, Inc. and of Connectinc.com, as well as such other boards
of directors of for-profit and not-for-profit organizations as the Board may
reasonably approve.
5. Termination of Employment:
(a) In the event your employment is terminated by the Company with or
without Cause, as defined herein, or you resign with or without Good Reason, as
defined herein, you will be entitled to payment of (i) accrued salary, benefits
and reimbursable expenses owing to you through the date of such termination, and
(ii) the bonus you earned for the Fiscal Year preceding the date of your
termination if it has not been paid as of the date of your termination.
(b) If your employment is terminated by the Company, for any reason other
than for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 5(a), you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as though you
were still employed by the Company for a period of 12 months in installments,
subject to appropriate deductions, (ii) continued participation in all benefit
plans as an employee for a period of 12 months, (iii) vesting of all stock
options granted to you that would have vested by the end of the month of your
termination if your employment had not been terminated, and (iv) bonus for the
Fiscal Year in which your employment is terminated, pro rated on a monthly basis
based on your termination date, if you have achieved the performance criteria
mutually agreed upon by you and the Board for that Fiscal Year. The Company
shall have the obligation to make the payments and provide the benefits provided
for in this section regardless of your income or efforts to mitigate, if any,
however it shall have the right to stop the payments and benefits in Section
5(b)(i) and (ii) if at any time prior to the expiration of twelve months after
termination, you become otherwise employed in another full time salaried
position with benefits. In order to receive this severance package, you will be
required to sign a release in a form acceptable to you and the Company, of any
and all claims that you may have against the Company.
(c) "Cause" means a determination in the reasonable good faith of a
majority of the Board that you have (i) engaged in materials act in violation of
the law, except that with regard to that act, you are not subsequently convicted
of a felony or do not enter a plea of guilty or nolo contendre to a felony
(except for ordinary traffic violations); you will be entitled to receive the
severance package provided for in Section 5(b)(i through
<PAGE>
iv), (ii) materially breached your fiduciary duty to the Company; (iii)
unreasonably refused to perform the good faith, lawful policies or instructions
of the Board; or (iv) failed to fully and faithfully perform your material
obligations under this Employment Agreement after having been given thirty days
written notice of any such failure and an opportunity to cure. "Good Reason"
means (i) you are assigned significant duties inconsistent with your position in
the Company or your employment terms and responsibilities are materially
diminished by the Company, (ii) you are required to relocate to a regular work
location that is more than 50 miles from the Company's offices where you
regularly work, without your approval or (iii) a material breach by the Company
of its obligations under this Employment Agreement. If you wish to resign your
employment for Good Reason, you will be required to give the Company 30 days
written notice of resignation. The Company will have 30 days to cure the
reason(s) for your resignation. If the reason(s) for your resignation is not
cured within 30 days, the period of time you have to exercise your stock options
shall begin to run following the expiration of the cure period.
6. Change in Ownership Event. For a period of twelve months following a "Change
In Ownership Event" ("Change In Ownership Event" being defined as any sale
of all or substantially all of the Company's assets or any merger,
consolidation or stock sales which results in the holders of the Company's
capital stock immediately prior to such transaction owning less than 50% of
the voting power of the Company's capital stock immediately after such
transaction), if (a) your employment is terminated by the Company or its
successor for any reason other than for Cause (as defined in Section 5 of
this Employment Agreement); or (b) you resign for Good Cause, you will be
entitled to receive a severance package consisting of (i) vesting of any
unvested stock options that were issued to you by the Company, (ii) 12
months of your base salary at that time, payable in a lump sum, subject to
normal required withholding, (iii) continued participation in all benefit
plans as an employee for a period of 12 months, and (iv) bonus for the
Fiscal Year in which your employment is terminated, pro rated on a monthly
basis based on your termination date, if you have achieved the performance
criteria mutually agreed upon by you and the Board for that Fiscal Year. You
shall have a period of 90 days following termination of your employment
pursuant to Section 6(a) to exercise such options. If you wish to resign
your employment pursuant to Section 6(b), you will be required to give the
Company 30 days written notice of resignation. The Company will have 30 days
to cure the reason(s) for your resignation. If the reason(s) for your
resignation is not cured within 30 days, you shall have a period of 90 days
following the cure period to exercise such options. In order to receive this
severance package, you will be required to sign a release in a form
acceptable to you and the Company, of any and all claims that you may have
against the Company.
7. Representation and Warranty. You represent and warrant to the Company that
the performance of your duties will not violate any agreements or trade
secrets of any other person or entity.
8. Standard Employee Agreements. You will be expected to sign and comply with
the Company's standard Employment, Confidential Information and Invention
<PAGE>
Assignment Agreement (the "Employee NDA") which requires, among other
provisions, the assignment of patent rights to any invention made during
your employment at the Company and non-disclosure of proprietary
information. Your employment will be contingent upon and not be deemed
effective until you have executed and returned the Employee NDA to the
Company. As provided in the Employee NDA, in the event of any dispute or
claim relating to or arising out of our employment relationship, you and the
Company agree that all such disputes shall be fully and finally resolved by
binding arbitration. In addition, you will abide by the Company's strict
policy that prohibits any employee from using or bringing with him or her
from any previous employer any confidential information, trade secrets, or
proprietary materials or processes of such former employer. You also agree
that, during the term of your employment with the Company, you will not
actively engage in any other employment, occupation, consulting or other
business directly or indirectly related to the business in which the Company
is now involved or becomes involved during the term of your employment, nor
will you engage in any other activities that conflict with your obligations
to the Company.
9. Start Date. Your employment with the Company will commence on Thursday, July
15,1999.
10. Federal Immigration Law. For purpose of federal immigration law, you will be
required to provide the Company documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided to us within three (3) business days of your commencement date, or
our employment relationship you may be terminated.
11. Entire Agreement. This Employment Agreement, together with your Stock Option
Agreement, and your Confidentiality and Assignment of Inventions Agreement,
which are incorporated by reference, constitutes the entire agreement
between the parties and supersedes all other agreements or understandings.
This Employment Agreement can only be changed in writing, signed by you and
the Chairman of the Board of the Company.
Radha, on behalf of the Board, let me indicate how pleased I am to extend this
offer, and how much I look forward to working with you. Please indicate your
acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
TIOGA SYSTEMS, INC.
By: /s/ Mark Pincus
-----------------------
Title: Chairman & CEO
--------------------
Mark Pincus
<PAGE>
The forgoing terms and conditions are hereby accepted:
Signed: /s/ Radha R. Basu
--------------------------
Print Name: RADHA R. BASU
----------------------
Date: July 15, 1999
----------------------------
(Please note: Ms. Basu listed no prior inventions in her Employment
Confidential Information and Invention Assignment Agreement.)
<PAGE>
EXHIBIT 10.10
[LETTERHEAD]
Tioga Systems, Inc.
575 Broadway
Redwood City, CA 94063
Phone 650.556-9440
Fax 650.556-1195
Web www.tioga.com
September 27, 1999
PERSONAL & CONFIDENTIAL
Brian M. Beattie
63 Almendral Avenue
Atherton, CA 94027
(650) 299-9944
Dear Brian:
On behalf of Tioga Systems, Inc. (the "Company" or "Tioga") I am pleased to
offer you the position of Chief Financial Officer of the Company. The terms of
your employment relationship with the company are as set forth below and as
approved by the Company's Board of Directors.
1. Position: You will be the Chief Financial Officer of the Company, reporting
to the President and Chief Executive Officer. As such, you will have such
responsibilities as determined by the President and Chief Executive Officer.
2. Base Salary and Performance Bonus: You will be paid a base salary of $15,000
per month Your salary will be payable in accordance with the Company's
standard payroll policies (subject to normal required withholding). You will
receive a vacation and benefit package similar to that provided for all other
executive level employees. You will also be eligible to earn an annual bonus
of up to 40% of your base salary if you achieve performance criteria mutually
agreed upon by you and the President and Chief Executive Officer. For the
Fiscal Year ended December 31, 1999, you will be guaranteed a bonus of 40% of
your salary pro-rated for The remainder of that Fiscal year.
3. Stock Options: Subject to the approval of the Board of Directors of the
Company, you will be granted an option to purchase 560,000 shares of Common
Stock of the Company at an exercise price per share of $0.90. Your option
will be granted under the Tioga Systems, Inc. 1998 Option Plan, in accordance
with and subject to each term of the Company's standard form of option
agreement. These options will vest 25% at the end of your first year of
employment and thereafter monthly at 1/48 per month of the total option
amount so that at the end of your fourth year of employment you will be 100%
vested in this incentive stock option grant.
4. At-Will Employment: You will be an employee-at-will, meaning that either you
or the Company can terminate your employment relationship at any time, for
any reason, with or without Cause, and with or without notice. You agree to
devote substantially
2a) You will be entitled to a signing bonus of $15,000.
<PAGE>
all of your business time and attention to the Company. Nevertheless, you
shall be permitted to serve as a member of the board of directors of other
boards of directors of for-profit and not-for-profit organizations as the
Board may reasonable approve.***
5. Termination of Employment:
5.1 In the event your employment is terminated by the Company with or without
Cause, as defined herein, or you resign with or without Good Reason as
defined herein, you will be entitled to payment of (i) accrued salary,
benefits and reimbursable expenses owing to you through the date of such
termination, and (ii) the bonus you earned for the Fiscal Year preceding
the date of your termination if it has not been paid as of the date of your
termination.
5.2 If your employment is terminated by the Company, for any reason other than
for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 5.1, you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as
though you were still employed by the Company for a period of 6 months in
installments, subject to appropriate deductions, (ii) continued
participation in all benefit plans as an employee for a period of 6 months,
(iii) vesting of all stock options granted to you that would have vested by
the end of the month of your termination if your employment had not been
terminated, and (iv) bonus for the Fiscal year in which your employment is
terminated, pro rated on a monthly basis based upon your termination date,
if you achieved the performance criteria mutually agreed upon by you and
the Board for the Fiscal Year. The Company shall have the obligation to
make the payments and provide the benefits provided for in this section
regardless of your income or effects to mitigate, if any, however it shall
have the right to stop the payments and benefits in Section 5.2(i) and (ii)
if at any time prior to the expiration of six months after termination, you
become otherwise employed in another full time salaried position with
benefits. In order to receive this severance package, you will be required
to sign a release in a form acceptable to the Company, of any and all
claims that you may have against the Company.
5.3 "Cause" means a determination in the reasonable good faith of the Board
that you have: (a) engaged in a material act in violation of the law,
except that if with regard to the act, you are not subsequently convicted
of a felony or do not enter a plea of guilty or nolo contendre to a felony
(except for ordinary traffic violations); you will be entitled to receive
the severance package provided for in Section 5.2 (i through iv), (b)
materially breached your fiduciary duty to the Company, (c) unreasonably
refused to perform the good faith, lawful policies or instructions of the
Chief Executive Officer, or (d) failed to fully and faithfully perform your
materially obligations under this Employment Agreement after having been
given thirty days written notice of any such failure and an opportunity to
cure. "Good Reason" means (i) you are assigned significant duties
inconsistent with your position in the Company or your employment terms and
responsibilities are materially diminished by the Company, (ii) you are
required to relocate to a regular work location that is more than 50 miles
from the Company's offices where you regularly work, without your
<PAGE>
approval or (iii) a material breach by the Company of its obligations under
the Employment Agreement. If you wish to resign your employment for Good
Reason, you will be, required to give the Company 30 days written notice of
resignation. The Company will have 30 days to clue the reason(s) for you,
resignation. If the reason(s) for your resignation is/are not cured within
30 clays, the period of time you have to exercise your stock options shall
begin to run following the expiration of the cure period.
6. Change of Ownership Event. For a period of twelve months following a
"Change In Ownership Event" ("Change In Ownership Event" being defined as
any sale of all or substantially all of the Company's assets or any merger,
consolidation or stock sales which results in the holders of the Company's
capital stock immediately prior to such transaction owning less than 50% of
the voting power of the Company's capital stock immediately after such
transaction), if (a) your employment is terminated by the Company or its
successor for any reason other than for Cause (as defined in Section 5 of
this Employment Agreement); or (b) you resign for Good Cause, you will be
entitled to receive a severance package consisting of (i) vesting of 50% of
any unvested stock options the were issued to you by the Company, (ii) 6
months of your base salary at that time, payable in a lump sum, subject to
normal withholding requirements, (iii) continued participation in all
benefit plans as an employee for a period of 6 months, and (iv) bonus for
the fiscal year in which your employment is terminated, pro rated on a
monthly basis based upon your termination date, if you achieved the
performance criteria mutually agreed upon by you and the Board for that
Fiscal Year. You shall have a period of 90 days following termination of
your employment pursuant to Section 6(a) to exercise such options. If you
wish to resign your employment pursuant to Section 6(b), you will be
required to give the Company 30 days written notice of resignation. The
Company will have 30 days to cure the reason(s) for your resignation. If
the reason(s) for your resignation is not cured within 30 days, you shall
have a period of 90 days following the cure period to exercise such
options. In order to receive this severance package, you will be required
to sign a release in a form acceptable to you and the Company, of any and
all claims that you may have against the Company.
7. Representation and Warranty. You represent and warrant to the Company that
the performance of your duties will not violate any agreements or trade
secrets of any other person or entity.
8. Standard Employee Agreements. You will be expected to sign and comply with
the Company's standard Employment, Confidential Information and Invention
Assignment Agreement (the "Employee NDA") which requires, among other
provisions, the assignment of patent rights to any invention made during
your employment at the Company and non-disclosure of proprietary
information. Your employment will be contingent upon and not be deemed
effective until you have executed and returned the Employee NDA to the
Company. As provided in the Employee NDA, in the event of any dispute or
claim relating to or arising out of our employment relationship, you and
the Company agree that all such disputes shall be fully and finally
resolved by binding arbitration. In addition, you will
<PAGE>
abide by the Company's strict policy that prohibits any employee from using
or bringing with him or her from any pervious employer any confidential
information, trade secrets, or proprietary materials or processes of such
former employer. You also agree that, during the term of your employment
with the Company, you will not actively engage in any other employment,
occupation, consulting or other business directly or indirectly related to
the business in which the Company is now involved or becomes involved
during the term of your employment, nor will you engage in any other
activities that conflict with your obligations to the Company.
9. Start Date. This agreement is effective as of October 1, 1999.
10. Federal Immigration Law. For purpose of federal immigration law, you will
be required to provide the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation
must be provided to us within three (3) business days of your commencement
date, or our employment relationship you may be terminated.
11. Entire Agreement. This Employment Agreement, together with your Stock
Option Agreement, and your Confidentiality and Assignment of Inventions
Agreement, which are incorporated by reference, constitutes the entire
agreement between the parties and supersedes all other agreements or
understandings. This Employment Agreement can only be changed in writing,
signed by you and the Chairman of the Board of the Company.
<PAGE>
Brian, on behalf of the Board, let me express how pleased I am to extend this
offer, and how much I look forward to working with you. Please indicate your
acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
TIOGA SYSTEMS, INC.
/s/ R. R. Basu
By:----------------------------------------------
President & CEO
Title:-------------------------------------------
The forgoing terms and conditions arc hereby accepted:
/s/ Brian Beattie
Signed:------------------------------------------
Brian Beattie
Print Name:--------------------------------------
Oct 1, 1999
Date:--------------------------------------------
(Please note: Mr. Beattie listed no prior inventions in his
Employment Confidential Information and
Invention Assignment Agreement.)
<PAGE>
EXHIBIT 10.11
December 7, 1999
PERSONAL & CONFIDENTIAL
Jim Hilbert
Dear Jim:
On behalf of Support.com, Inc. (the "Company" or "Support.com") I am pleased to
offer you the position of Senior Vice President Sales and Business Development
of the Company. The terms of your employment relationship with the company are
as set forth below and as approved by the Company's Board of Directors.
1. Position. You will be the Senior Vice President of Sales and Business
Development of the Company, reporting to the President and Chief Executive
Officer. As such, you will have such responsibilities as determined by the
President and Chief Executive Officer.
2. Base Salary and Performance Bonus. You will be paid a base salary of $12,500
per month. Your salary will be payable in accordance with the Company's
standard payroll policies (subject to normal required withholding). You will
receive a vacation and benefit package similar to that provided for all
other executive level employees. You will also be eligible to cam incentive
based compensation amounts based performance criteria mutually agreed upon
by you and the President and Chief Executive Officer.
3. Stock Options. Subject to the approval of the Board of Directors of the
Company, you will be granted an option to purchase 500,000 shares of Common
Stock (TBD on base options and performance based options) of the Company at
an exercise price per share of to be determined at the next board meeting.
Your option will be granted under the Support.com, Inc. 1998 Option Plan, in
accordance with and subject to each term of the Company's standard form of
option agreement. These options will vest 25% at the end of your first year
of employment and thereafter monthly at 1/48 per month of the total option
amount so that at the end of your fourth year of employment you will be 100%
vested in this incentive stock option grant.
4. At-Will Employment. You will be an employee-at-will, meaning that either you
or the Company can terminate your employment relationship at any time, for
any reason, with or without Cause, and with or without notice. You agree to
devote substantially all of your business time and attention to the Company.
Nevertheless, you shall be permitted to serve as a member of the board of
directors of other boards of directors of for-profit and not-for-profit
organizations as the Board may reasonable approve.
<PAGE>
5. Termination of Employment:
5.1 In the event your employment is terminated by the Company with or without
Cause, as defined herein, or you resign with or without Good Reason, as
defined herein, you will be entitled to payment of (i) accrued salary,
benefits and reimbursable expenses owing to you through the date of such
termination, and (ii) the incentive based compensation earned for the Fiscal
Year preceding the date of your termination if it has not been paid as of
the date of your termination.
5.2 If your employment is terminated by the Company, for any reason other than
for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 5.1, you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as though
you were still employed by the Company for a period of 6 months in
installments, subject to appropriate deductions, (ii) continued
participation in all benefit plans as an employee for a period of 6 months,
and (iii) vesting of all stock options granted to you that would have vested
by the end of the month of your termination if your employment had not been
terminated. The Company shall have the obligation to make the payments and
provide the benefits provided for in this section regardless of your income
or effects to mitigate, if any, however it shall have the right to stop the
payments and benefits in Section 5.2(i) and (ii) if at any time prior to the
expiration of six months after termination, you become otherwise employed in
another full time salaried position with benefits. In order to receive this
severance package, you will be required to sign a release in a form
acceptable to the Company, of any and all claims that you may have against
the Company.
5.3 "Cause" means a determination in the reasonable good faith of the Board that
you have: (a) engaged in a material act in violation of the law, except that
if with regard to the act, you are not subsequently convicted of a felony or
do not enter a plea of guilty or nolo contendre to a felony (except for
ordinary traffic violations); you will be entitled to receive the severance
package provided for in Section 5.2 (i through iv), (b) materially breached
your fiduciary duty to the Company; (c) unreasonable refused to perform the
good faith, lawful policies or instructions of the Chief Executive Officer;
or (d) failed to fully and faithfully perform your materially obligations
under this Employment Agreement after having been given thirty days written
notice of any such failure and an opportunity to cure. "Good Reason" means
(i) you are assigned significant duties inconsistent with your position in
the Company or your employment terms and responsibilities are materially
diminished by the Company, (ii) you are required to relocate to a regular
work location that is more than 50 miles from the Company's offices where
you regularly work, without your approval or (iii) a material breach by the
Company of its obligations under the Employment Agreement. If you wish to
resign your employment for Good Reason, you will be required to give the
Company 30 days written notice of resignation. The Company will have 30 days
to cure the reason(s) for your resignation. If the reason(s) for your
resignation is/are not cured within 30 days, the period of time you have to
exercise your stock options shall begin to run following the expiration of
the cure period.
<PAGE>
6. Change in Ownership Event. For a period of six months following a "Change In
Ownership Event" ("Change In Ownership Event" being defined as any sale of
all or substantially all of the Company's assets or any merger,
consolidation or stock sales which results in the holders of the Company's
capital stock immediately prior to such transaction owning less than 50% of
the voting power of the Company's capital stock immediately after such
transaction), if (a) your employment is terminated by the Company or its
successor for any reason other than for Cause (as defined in Section 5 of
this Employment Agreement); or (b) you resign for Good Cause, you will be
entitled to receive a severance package consisting of (i) vesting of 50% of
any unvested stock options that were issued to you by the Company, (ii) 6
months of your base salary at that time, payable in a lump sum, subject to
normal withholding requirements, (iii) continued participation in all
benefit plans as an employee for a period of 6 months, and (iv) bonus for
the fiscal year in which your employment is terminated, pro rated on a
monthly basis based upon your termination date, if you achieved the
performance criteria mutually agreed upon by you and the Board for that
Fiscal Year. You shall have a period of 90 days following termination of
your employment pursuant to Section 6(a) to exercise such options. If you
wish to resign your employment pursuant to Section 6(b), you will be
required to give the Company 30 days written notice of resignation. The
Company will have 30 days to cure the reason(s) for your resignation. If the
reason(s) for your resignation is not cured within 30 days, you shall have a
period of 90 days following the cure period to exercise such options. In
order to receive this severance package, you will be required to sign a
release in a form acceptable to you and the Company, of any and all claims
that you may have against the Company.
7. Representation and Warranty. You represent and warrant to the Company that
the performance of your duties will not violate any agreements or trade
secrets of any other person or entity.
8. Standard Employee Agreements. You will be expected to sign and comply with
the Company's standard Employment, Confidential Information and Invention
Assignment Agreement (the "Employee NDA") which requires, among other
provisions, the assignment of patent rights to any invention made during
your employment at the Company and non-disclosure of proprietary
information. Your employment will be contingent upon and not be deemed
effective until you have executed and returned the Employee NDA to the
Company. As provided in the Employee NDA, in the event of any dispute or
claim relating to or arising out of our employment relationship, you and the
Company agree that all such disputes shall be fully and finally resolved by
binding arbitration. In addition, you will abide by the Company's strict
policy that prohibits any employee from using or bringing with him or her
from any pervious employer any confidential information, trade secrets, or
proprietary materials or processes of such former employer. You also agree
that, during the term of your employment with the Company, you will not
actively engage in any other employment, occupation, consulting or other
business directly or indirectly related to the business in which the Company
is now involved or becomes involved during the term of your employment, nor
will you engage in any other activities that conflict with your obligations
to the Company.
<PAGE>
9. Start Date. This agreement is effective as of December __, 1999.
10. Federal Immigration Law. For purpose of federal immigration law, you will be
required to provide the Company documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided to us within three (3) business days of your commencement date, or
our employment relationship you may be terminated.
11. Entire Agreement. This Employment Agreement, together with your Stock
Option Agreement, and your Confidentiality and Assignment of Inventions
Agreement, which are incorporated by reference, constitutes the entire
agreement between the parties and supersedes all other agreements or
understandings. This Employment Agreement can only be changed in writing,
signed by you and the Chairman of the Board of the Company.
<PAGE>
Jim, on behalf of the Board, let me express how pleased I am to extend this
offer, and how much I look forward to working with you. Please indicate your
acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
SUPPORT.COM, INC.
By:___________________________________
Title:________________________________
The forgoing terms and conditions are hereby accepted:
Signed: /s/ Jim R. Hilbert
-------------------------------
Print Name: Jim R. Hilbert
---------------------------
Date: 12/7/99
---------------------------------
(Please note: Mr. Hilbert listed no prior inventions in
his Employment Confidential Information
and Invention Assignment Agreement.)
<PAGE>
Exhibit 10.12
January 18, 2000
PERSONAL & CONFIDENTIAL
Dear Lucy:
On behalf of Support.com, Inc. (the "Company" or "Support.com") I am pleased to
offer you the position of Vice President of Operations of the Company. The
terms of your employment relationship with the company are as set forth below
and as approved by the Company's Board of Directors.
1. Position: You will be the Vice President of Operations of the Company,
reporting to the President and Chief Executive Officer. As such, you will
have such responsibilities as determined by the President and Chief
Executive Officer.
2. Base Salary and Performance Bonus: You will be paid a base salary of
$13,333.33 per month. Your salary will be payable in accordance with the
Company's standard payroll policies (subject to normal required
withholding). You will receive a vacation and benefit package similar to
that provided for all other executive level employees. You will also be
eligible to earn an annual bonus in your first year of up to $20,000 if
you achieve performance criteria mutually agreed upon by you and the
President and Chief Executive Officer.
3. Stock Options: Subject to the approval of the Board of Directors of the
Company, you will be granted an option to purchase 300,000 shares of
Common Stock of the Company at an exercise price per share to be
determined at the next board meeting. Your option will be granted under
the Support.com, Inc. 1998 Option Plan, in accordance with and subject to
each term of the Company's standard form of option agreement. These
options will vest 25% at the end of your first year of employment and
thereafter monthly at 1/48 per month of the total option amount so that at
the end of your fourth year of employment you will be 100% vested in this
incentive stock option grant. You will also be eligible to receive an
option grant of 50,000 shares at your one year anniversary date.
3. At -Will Employment: You will be an employee-at-will, meaning that either
you or the Company can terminate your employment relationship at any time,
for any reason, with or without Cause, and with or without notice. You
agree to devote substantially all of your business time and attention to
the Company. Nevertheless, you shall be permitted to serve as a member of
the board of directors of other boards of directors of for-profit and not-
for-profit organizations as the Board may reasonable approve.
<PAGE>
4. Termination of Employment:
4.1 In the event your employment is terminated by the Company with or without
Cause, as defined herein, or you resign with or without Good Reason, as
defined herein, you will be entitled to payment of (i) accrued salary,
benefits and reimbursable expenses owing to you through the date of such
termination, and (ii) the bonus you earned for the Fiscal Year preceding
the date of your termination if it has not been paid as of the date of
your termination.
4.2 If your employment is terminated by the Company, for any reason other than
for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 4.1, you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as
though you were still employed by the Company for a period of 6 months in
installments, subject to appropriate deductions, (ii) continued
participation in all benefit plans as an employee for a period of 6
months, and (iii) vesting of all stock options granted to you that would
have vested by the end of the month of your termination if your employment
had not been terminated. The Company shall have the obligation to make the
payments and provide the benefits provided for in this section regardless
of your income or effects to mitigate, if any, however it shall have the
right to stop the payments and benefits in Section 4.2(i) and (ii) if at
any time prior to the expiration of six months after termination, you
become otherwise employed in another full time salaried position with
benefits. In order to receive this severance package, you will be required
to sign a release in a form acceptable to the Company, of any and all
claims that you may have against the Company.
4.3 "Cause" means a determination in the reasonable good faith of the Board
that you have: (a) engaged in a material act in violation of the law,
except that if with regard to the act, you are not subsequently convicted
of a felony or do not enter a plea of guilty or no lo contendre to a
felony (except for ordinary traffic violations); you will be entitled to
receive the severance package provided for in Section 4.2 (i through iii),
(b) materially breached your fiduciary duty to the Company; (c)
unreasonable refused to perform the good faith, lawful policies or
instructions of the Chief Executive Officer; or (d) failed to fully and
faithfully perform your material obligations under this Employment
Agreement after having been given thirty days written notice of any such
failure and an opportunity to cure. "Good Reason" means (i) you are
assigned significant duties inconsistent with your position in the Company
or your employment terms and responsibilities are materially diminished by
the Company, (ii) you are required to relocate to a regular work location
that is more than 50 miles from the Company's offices where you regularly
work, without your approval or (iii) a material breach by the Company of
its obligations under the Employment Agreement. If you wish to resign your
employment for Good Reason, you will be required to give the Company 30
days written notice of resignation. The Company will have 30 days to cure
the reason(s) for your resignation. If the reason(s) for your resignation
is/are not cured within 30 days, the period of time you have to exercise
your stock options shall begin to run following the expiration of the cure
period.
<PAGE>
5. Change in Ownership Event: For a period of six months following a "Change
In Ownership Event" ("Change In Ownership Event" being defined as any sale
of all or substantially all of the Company's assets or any merger,
consolidation or stock sales which results in the holders of the Company's
capital stock immediately prior to such transaction owning less than 50%
of the voting power of the Company's capital stock immediately after such
transaction), if (a) your employment is terminated by the Company or its
successor for any reason other than for Cause (as defined in Section 4 of
this Employment Agreement); or (b) you resign for Good Cause, you will be
entitled to receive a severance package consisting of (i) vesting of 50%
of any unvested stock options that were issued to you by the Company, (ii)
6 months of your base salary at that time, payable in a lump sum, subject
to normal withholding requirements, (iii) continued participation in all
benefit plans as an employee for a period of 6 months, and (iv) bonus for
the fiscal year in which your employment is terminated, pro rated on a
monthly basis based upon your termination date, if you achieved the
performance criteria mutually agreed upon by you and the Board for that
Fiscal Year. You shall have a period of 90 days following termination of
your employment pursuant to Section 5(a) to exercise such options. If you
wish to resign your employment pursuant to Section 5(b), you will be
required to give the Company 30 days written notice of resignation. The
Company will have 30 days to cure the reason(s) for your resignation. If
the reason(s) for your resignation is not cured within 30 days, you shall
have a period of 90 days following the cure period to exercise such
options. In order to receive this severance package, you will be required
to sign a release in a form acceptable to you and the Company, of any and
all claims that you may have against the Company.
6. Representation and Warranty: You represent and warrant to the Company that
the performance of your duties will not violate any agreements or trade
secrets of any other person or entity.
7. Standard Employee Agreements: You will be expected to sign and comply with
the Company's standard Employment, Confidential Information and Invention
Assignment Agreement (the "Employee NDA") which requires, among other
provisions, the assignment of patent rights to any invention made during
your employment at the Company and non-disclosure of proprietary
information. Your employment will be contingent upon and not be deemed
effective until you have executed and returned the Employee NDA to the
Company. As provided in the Employee NDA, in the event of any dispute or
claim relating to or arising out of our employment relationship, you and
the Company agree that all such disputes shall be fully and finally
resolved by binding arbitration. In addition, you will abide by the
Company's strict policy that prohibits any employee from using or bringing
with him or her from any pervious employer any confidential information,
trade secrets, or proprietary materials or processes of such former
employer. You also agree that, during the term of your employment with the
Company, you will not actively engage in any other employment, occupation,
consulting or other business directly or indirectly related to the
business in which the Company is now involved or becomes involved during
the term of your employment, nor will you engage in any other activities
that conflict with your obligations to the Company.
<PAGE>
8. Start Date: This agreement is effective as of February 1, 2000.
9. Federal Immigration Law: For purpose of federal immigration law, you will
be required to provide the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation
must be provided to us within three (3) business days of your commencement
date, or our employment relationship you may be terminated.
10. Entire Agreement: This Employment Agreement, together with your Stock
Option Agreement, and your Confidentiality and Assignment of Inventions
Agreement, which are incorporated by reference, constitutes the entire
agreement between the parties and supersedes all other agreements or
understandings. This Employment Agreement can only be changed in writing,
signed by you and the President and CEO of the Company.
<PAGE>
Lucy, on behalf of the Board, let me express how pleased I am to extend this
offer, and how much I look forward to working with you. Please indicate your
acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
SUPPORT.COM, INC.
By: /s/ Radha R. Basu
---------------------------------
Radha R. Basu
Title:
------------------------------
President and CEO
The forgoing terms and conditions are hereby accepted:
Signed: /s/ Lucille K. Hoger
--------------------------------
Print Name: Lucille K. Hoger
-----------------------------
Date: January 20, 2000
-----------------------------------
(Please note: Ms. Hoger listed no prior inventions in
her Employment Confidential Information
and Invention Assignment Agreement.)
<PAGE>
Exhibit 10.13
August 1, 1999
PERSONAL & CONFIDENTIAL
Mark Pincus
1572 Shrader Street
San Francisco, CA 94117
Dear Mark:
On behalf of Tioga Systems, Inc. (the "Company" or "Tioga") I am pleased to
offer you the position of Chairman and Founder of the Company. The terms of
your employment relationship with the company are as set forth below and as
approved by the Company's Board of Directors.
1. Position: You will be the Chairman and Founder of the Company, reporting to
the Board of Directors. As such, you will have such responsibilities as
determined by the Board of Directors.
2. Base Salary and Performance Bonus: You will be paid a base salary of $15,000
per month. Your salary will be payable in accordance with the Company's
standard payroll policies (subject to normal required withholding). You will
receive a vacation and benefit package similar to that provided for all other
executive level employees.
3. Stock Options: Subject to the approval of the Board of Directors of the
Company, you will be granted (i) an option to purchase 250,000 shares of
Common Stock of the Company at an exercise price per share equivalent to the
fair market value as determined by the Board of Directors at the July 21,
1999 Board meeting and which will vest monthly at the rate of 1/12 per month
and, (ii) an option to purchase 250,000 shares of Common Stock of the Company
at an exercise price per share equivalent to the fair market value as
determined by the Board of Directors at the July 21, 1999 Board meeting and
which will vest monthly at 1/48 per month. Your options will be granted under
the Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to
each term of the Company's standard form of option agreement.
4. At-Will Employment: You will be an employee-at-will, meaning that either you
or the Company can terminate your employment relationship at any time, for
any reason, with or without Cause, and with or without notice. You agree to
devote substantially all of your business time and attention to the Company.
Nevertheless, you shall be permitted to serve as a member of the board of
directors of Brightlight as well as such other boards of directors of for-
profit and not-for-profit organizations as the Board may reasonable approve.
<PAGE>
5. Termination of Employment:
5.1 In the event your employment is terminated by the Company with or without
Cause, as defined herein, or you resign with or without Good Reason, as
defined herein, you will be entitled to payment of (i) accrued salary,
benefits and reimbursable expenses owing to you through the date of such
termination, and (ii) the bonus you earned for the Fiscal Year preceding
the date of your termination if it has not been paid as of the date of your
termination.
5.2 If your employment is terminated by the Company, for any reason other than
for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 5.1, you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as
though you were still employed by the Company for a period of 12 months in
installments, subject to appropriate deductions, (ii) continued
participation in all benefit plans as an employee for a period of 12
months, (iii) vesting of all stock options granted to you that would have
vested by the end of the month of your termination if your employment had
not been terminated , and (iv) bonus for the Fiscal year in which your
employment is terminated, pro rated on a monthly basis based upon your
termination date, if you achieved the performance criteria mutually agreed
upon by you and the Board for the Fiscal Year. The Company shall have the
obligation to make the payments and provide the benefits provided for in
this section regardless of your income or effects to mitigate, if any,
however it shall have the right to stop the payments and benefits in
Section 5.2(i) and (ii) if at any time prior to the expiration of twelve
months after termination, you become otherwise employed in another full
time salaried position with benefits. In order to receive this severance
package, you will be required to sign a release in a form acceptable to the
Company, of any and all claims that you may have against the Company.
5.3 "Cause" means a determination in the reasonable good faith of the Board
that you have: (a) engaged in a material act in violation of the law,
except that if with regard to the act, you are not subsequently convicted
of a felony or do not enter a plea of guilty or no lo contendre to a felony
(except for ordinary traffic violations); you will be entitled to receive
the severance package provided for in Section 5.2 (i through iv), (b)
materially breached your fiduciary duty to the Company; (c) unreasonable
refused to perform the good faith, lawful policies or instructions of the
Board; or (d) failed to fully and faithfully perform your materially
obligations under this Employment Agreement after having been given thirty
days written notice of any such failure and an opportunity to cure. "Good
Reason" means (i) you are assigned significant duties inconsistent with
your position in the Company or your employment terms and responsibilities
are materially diminished by the Company, (ii) you are required to relocate
to a regular work location that is more than 50 miles from the Company's
offices where you regularly work, without your approval or (iii) a material
breach by the Company of its obligations under the Employment Agreement. If
you wish to resign your employment for Good Reason, you will be required to
give the Company 30 days written notice of resignation. The Company will
have 30 days to cure the reason(s) for your resignation. If the reason(s)
for your
<PAGE>
resignation is/are not cured within 30 days, the period of time you have to
exercise your stock options shall begin to run following the expiration of
the cure period.
6. Change in Ownership Event: For a period of twelve months following a
"Change In Ownership Event" ("Change In Ownership Event" being defined as
any sale of all or substantially all of the Company's assets or any merger,
consolidation or stock sales which results in the holders of the Company's
capital stock immediately prior to such transaction owning less than 50% of
the voting power of the Company's capital stock immediately after such
transaction), if (a) your employment is terminated by the Company or its
successor for any reason other than for Cause (as defined in Section 5 of
this Employment Agreement); or (b) you resign for Good Cause, you will be
entitled to receive a severance package consisting of (i) vesting of any
unvested stock options that were issued to you by the Company, (ii) 12
months of your base salary at that time, payable in a lump sum, subject to
normal withholding requirements, (iii) continued participation in all
benefit plans as an employee for a period of 12 months, and (iv) bonus for
the fiscal year in which your employment is terminated, pro rated on a
monthly basis based upon your termination date, if you achieved the
performance criteria mutually agreed upon by you and the Board for that
Fiscal Year. You shall have a period of 90 days following termination of
your employment pursuant to Section 6(a) to exercise such options. If you
wish to resign your employment pursuant to Section 6(b), you will be
required to give the Company 30 days written notice of resignation. The
Company will have 30 days to cure the reason(s) for your resignation. If
the reason(s) for your resignation is not cured within 30 days, you shall
have a period of 90 days following the cure period to exercise such
options. In order to receive this severance package, you will be required
to sign a release in a form acceptable to you and the Company, of any and
all claims that you may have against the Company.
7. Representation and Warranty: You represent and warrant to the Company that
the performance of your duties will not violate any agreements or trade
secrets of any other person or entity.
8. Standard Employee Agreements: You will be expected to sign and comply with
the Company's standard Employment, Confidential Information and Invention
Assignment Agreement (the "Employee NDA") which requires, among other
provisions, the assignment of patent rights to any invention made during
your employment at the Company and non-disclosure of proprietary
information. Your employment will be contingent upon and not be deemed
effective until you have executed and returned the Employee NDA to the
Company. As provided in the Employee NDA, in the event of any dispute or
claim relating to or arising out of our employment relationship, you and
the Company agree that all such disputes shall be fully and finally
resolved by binding arbitration. In addition, you will abide by the
Company's strict policy that prohibits any employee from using or bringing
with him or her from any pervious employer any confidential information,
trade secrets, or proprietary materials or processes of such former
employer. You also agree that, during the term of your employment with the
Company, you will not actively engage in any other employment, occupation,
consulting or other business
<PAGE>
directly or indirectly related to the business in which the Company is now
involved or becomes involved during the term of your employment, nor will
you engage in any other activities that conflict with your obligations to
the Company.
9. Start Date: This agreement is effective as of July 21, 1999.
10. Federal Immigration Law: For purpose of federal immigration law, you will
be required to provide the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation
must be provided to us within three (3) business days of your commencement
date, or our employment relationship you may be terminated.
11. Entire Agreement: This Employment Agreement, together with your Stock
Option Agreement, and your Confidentiality and Assignment of Inventions
Agreement, which are incorporated by reference, constitutes the entire
agreement between the parties and supersedes all other agreements or
understandings. This Employment Agreement can only be changed in writing,
signed by you and the Chairman of the Board of the Company.
<PAGE>
On behalf of the Board, let me indicate how pleased I am to extend this offer,
and how much I look forward to working with you. Please indicate your
acceptance by signing and returning the enclosed copy of this letter.
Sincerely,
TIOGA SYSTEMS, INC.
By: /s/ Radha R. Basu
---------------------------------
Title: CEO & President
------------------------------
The forgoing terms and conditions are hereby accepted:
Signed: /s/ Mark Pincus
------------------------------
Print Name: Mark Pincus
--------------------------
Date: 8/1/99
--------------------------------
(Please note: Mr. Pincus listed no prior inventions in
his Employment Confidential Information
and Invention Assignment Agreement.)
<PAGE>
April 13, 2000
PERSONAL & CONFIDENTIAL
Mark Pincus
1572 Shrader Street
San Francisco, CA 94117
Dear Mark:
This letter is to confirm the agreement between you and Support.com, Inc. (the
"Company") regarding the mutually agreed upon decision to amend your employment
agreement with Support.com dated August 1, 1999 ("Employment Agreement"). The
amended terms of your employment relationship with the company are as set forth
below. Except as expressly stated herein, the terms of this amendment supersede
and replace the terms of your Employment Agreement.
1. Position: You will be the Chairman and Founder of the Company, reporting to
the Board of Directors. As such, you will have such responsibilities as
determined by the Board of Directors.
2. Base Salary: You will be paid a base salary of $15,000 per month. Your
salary will be payable in accordance with the Company's standard payroll
policies (subject to normal required withholding). You will receive a
vacation and benefit package similar to that provided for all other executive
level employees.
3. Part-Time At-Will Employment: You will be an employee-at-will, meaning that
either you or the Company can terminate your employment relationship at any
time, for any reason, with or without Cause, and with or without notice. You
agree to devote more than 50% of your business time and attention to the
Company.
4. Time and Attention Less Than 50%: At anytime during the term of your
employment, you may give written notice to the Company stating that you
intend to devote less than 50% of your time and attention to the Company. At
such time you will no longer be entitled to any base salary pursuant to
Section 2 above.
5. Stock: You will be entitled to vest according to the vesting schedules of
your outstanding option awards (as set forth in the Employment Agreement),
but in consideration for the reduction in your time and attention to the
Company, such vesting shall continue only through December 31, 2000. Such
vesting to occur regardless of employment status with the Company. Any
remaining option shares that would have vested after December 31, 2000 will
be considered cancelled by this
<PAGE>
amendment to the Employment Agreement and you agree to execute any
amendments to the applicable Option Agreements, accordingly. With respect
to any shares of the Company in which you have an interest, you agree to
comply with all Federal and state securities laws related to reporting and
other compliance requirements, including Sections 13 and 16 of the
Securities Exchange Act of 1934.
6. Termination of Employment:
6.1 In the event your employment is terminated by the Company with or without
Cause, as defined herein, or you resign with or without Good Reason, as
defined herein, you will be entitled to payment of (i) accrued salary,
benefits and reimbursable expenses owing to you through the date of such
termination, and (ii) if applicable, any bonus you earned for the Fiscal
Year preceding the date of your termination if it has not been paid as of
the date of your termination.
6.2 If your employment is terminated by the Company, for any reason other than
for Cause, or is terminated by you for Good Reason, in addition to the
payments provided for in Section 6.1, you will be entitled to receive a
severance package consisting of (i) your base monthly salary, paid as
though you were still employed by the Company for a period of 12 months in
installments, subject to appropriate deductions, (ii) continued
participation in all benefit plans as an employee for a period of 12
months, subject to Section 5 above, (iii) if applicable, any bonus for the
Fiscal year in which your employment is terminated, pro rated on a monthly
basis based upon your termination date, if you achieved performance
criteria mutually agreed upon by you and the Board for the Fiscal Year. The
Company shall have the obligation to make the payments and provide the
benefits provided for in this section regardless of your income or effects
to mitigate, if any, however it shall have the right to stop the payments
and benefits in Section 6.2(i) and (ii) if at any time prior to the
expiration of twelve (12) months after termination, you become otherwise
employed in another position in which you are dedicating more than fifty
percent (50%) of your business time and attention. In order to receive this
severance package, you will be required to sign a release in a form
acceptable to the Company, of any and all claims that you may have against
the Company.
6.3 "Cause" and "Good Reason" shall have the meaning set forth in your
Employment Agreement. If you wish to resign your employment for Good
Reason, you will be required to give the Company thirty (30) days written
notice of resignation. The Company will have thirty (30) days to cure the
reason(s) for your resignation. If the reason(s) for your resignation
is/are not cured within thirty (30) days, the period of time you have to
exercise your stock options shall begin to run following the expiration of
the cure period.
7. Change in Ownership Event: For a period of twelve (12) months following a
"Change In Ownership Event" ("Change In Ownership Event" being defined as
any sale of all or substantially all of the Company's assets or any merger,
consolidation or stock sales which results in the holders of the Company's
capital stock immediately prior to such transaction owning less than fifty
percent (50%) of the voting power of
<PAGE>
the Company's capital stock immediately after such transaction), if (a)
your employment is terminated by the Company or its successor for any
reason other than for Cause (as defined in Section 5 of your Employment
Agreement); or (b) you resign for Good Cause (as defined in Section 5 of
your Employment Agreement), you will be entitled to receive a severance
package consisting of (i) vesting of any unvested stock options that were
issued to you by the Company, subject to Section 5 above, (ii) twelve (12)
months of your base salary at that time, payable in a lump sum, subject to
normal withholding requirements, (iii) continued participation in all
benefit plans as an employee for a period of twelve (12) months, subject to
Section 5 above, and (iv) if applicable, any bonus for the Fiscal Year in
which your employment is terminated, pro rated on a monthly basis based
upon your termination date, if you achieved performance criteria mutually
agreed upon by you and the Board for that Fiscal Year. You shall have a
period of ninety (90) days following termination of your employment
pursuant to Section 7(a) to exercise such options. If you wish to resign
your employment pursuant to Section 7(b), you will be required to give the
Company thirty (30) days written notice of resignation. The Company will
have thirty (30) days to cure the reason(s) for your resignation. If the
reason(s) for your resignation is not cured within thirty (30) days, you
shall have a period of ninety (90) days following the cure period to
exercise such options. In order to receive this severance package, you will
be required to sign a release in a form acceptable to you and the Company,
of any and all claims that you may have against the Company.
8. Representation and Warranty: You represent and warrant to the Company that
the performance of your duties will not violate any agreements or trade
secrets of any other person or entity.
9. Standard Employee Agreements: You will be expected to continue to comply
with the Company's standard Employment, Confidential Information and
Invention Assignment Agreement you signed on __________ (the "Employee
NDA") which requires, among other provisions, the assignment of patent
rights to any invention made during your employment at the Company and non-
disclosure of proprietary information. Your employment will be contingent
upon your compliance with the Employee NDA. As provided in the Employee
NDA, in the event of any dispute or claim relating to or arising out of our
employment relationship, you and the Company agree that all such disputes
shall be fully and finally resolved by binding arbitration. In addition,
you will abide by the Company's strict policy that prohibits any employee
from using or bringing with him or her from any pervious employer any
confidential information, trade secrets, or proprietary materials or
processes of such former employer. You also agree that, during the term of
your employment with the Company, you will not actively engage in any other
employment, occupation, consulting or other business directly or indirectly
related to the business in which the Company is now involved or becomes
involved during the term of your employment, nor will you engage in any
other activities that conflict with your obligations to the Company.
10. Start Date: This amendment to your Employment Agreement is effective as of
April __, 2000.
<PAGE>
11. Entire Agreement: This amendment, your Employment Agreement, and your
Confidentiality and Assignment of Inventions Agreement, which are
incorporated by reference, constitute the entire agreement between the
parties and supersedes all other agreements or understandings. This
Employment Agreement can only be changed in writing, signed by you and the
CEO of the Company.
On behalf of the Board, let me indicate how pleased I am to extend this offer,
and how much I look forward to continue working with you. Please indicate your
acceptance to the terms of the amendment to your Employment Agreement by signing
and returning the enclosed copy of this letter.
Sincerely,
SUPPORT.COM, INC.
By: /s/ Radha R. Basu
---------------------------------
Title: President & CEO
------------------------------
The forgoing terms and conditions are hereby accepted:
Signed: /s/ Mark Pincus
------------------------------
Print Name: Mark Pincus
--------------------------
Date: 4/21/00
--------------------------------
<PAGE>
EXHIBIT 10.14
SUBLEASE
1. Parties:
This Sublease is made and entered into as of August 6,1999 by and between
Excite, Inc. ("Sublandlord") and Tioga Systems, Inc., a Delaware Corporation,
("Subtenant") under the Master Lease dated March 14, 1997 as amended by the
First Amendment To Lease dated October 1, 1997 (as amended, the "Master Lease")
between Martin/Campus Associates, L.P., as "Lessor" and Sublandlord under this
Sublease as "Lessee". A copy of the Master Lease is attached hereto as
Attachment I and incorporated herein by this reference.
2. Provisions Constituting Sublease:
2.1 This Sublease is subject and subordinate to all of the terms and
conditions of the Master Lease. Subtenant hereby assumes and agrees to perform
all of the obligations of "Lessee" under the Master Lease to the extent said
obligations apply to the Subleased Premises and Subtenant's use of the Common
Areas, except as specifically set forth herein. Sublandlord hereby agrees to
use commercially reasonable efforts to cause Lessor to perform all of the
obligations of Lessor under the Master Lease to the extent said obligations
apply to the Subleased Premises and Subtenant's use of the Common Areas.
Subtenant shall not commit or permit to be committed on the Subleased Premises
or on any other portion of the Project any act or omission which violates any
term or condition of the Master Lease. Except to the extent waived or consented
to in writing by the other party or parties hereto who are affected thereby,
neither of the parties hereto will, by renegotiation of the Master Lease,
assignment, subletting, default or any other voluntary action, avoid or seek to
avoid the observance or performance of the terms to be observed or performed
hereunder by such party, but will at all times in good faith assist in carrying
out all the terms of this Sublease and in taking all such action as may be
necessary or appropriate to protect the rights of the other party or parties
hereto who are affected thereby against impairment. Nothing contained in this
Section 2.1 or elsewhere in this Sublease: (i) shall obligate Sublandlord to
exercise its option to extend the Term of the Master Lease; or (ii) shall
prevent or prohibit Sublandlord (a) from exercising its right to terminate the
Master Lease pursuant to paragraph 23 thereof or (b) from assigning its interest
in this Sublease or subletting the Premises to any other third party.
2.2 All of the terms and conditions contained in the Master Lease are
incorporated herein, except as specifically provided below, and such terms and
conditions, together with the terms and conditions specifically set forth in
this Sublease, shall constitute the complete terms and conditions of this
Sublease, except the following paragraphs of the Master Lease which shall remain
solely the rights and obligations of Sublandlord: 1, 4, 5, 7, 9, 15, 16, 17, 35,
Work Letter C, Exhibit D and E.
3. Subleased Premises and Rent:
3.1 Subleased Premises: Sublandlord leases to Subtenant and
------------------
Subtenant leases from Sublandlord the Subleased Premises upon all of the terms,
covenants and conditions contained in this Sublease. The Subleased Premises
consist of those portions of the premises located at 575 Broadway, Redwood City,
CA, as displayed in the floor plan attached hereto as Exhibit A, of
---------
approximately 23,216=/- square feet.
<PAGE>
3.2 Rent: Subtenant shall pay to Sublandlord as Full Service Rent
----
for the Subleased Premises the sum of Eighty-One Thousand Two Hundred Fifty-Six
Dollars ($81,256.00) per month, without deductions, prior notice or demand. Rent
shall be payable by Subtenant to Sublandlord in consecutive monthly installments
on or before the first (1st) day of each calendar month from September 1, 1999
through August 14, 2000. Effective September 1, 2000 through August 14, 2001,
the monthly Full Service Rent shall be increased to Eighty-Three Thousand Five
Hundred Seventy-Eight Dollars ($83,578.00). If the Sublease Commencement Date or
the Termination Date of the Sublease occurs on a date other than the first (1st)
day of a calendar month, then the Rent for such partial month shall be prorated
and the prorated Rent shall be payable on the Sublease Commencement Date or on
the first (1st) day of the calendar month in which the Sublease Termination Date
occurs, respectively.
3.3 Security Deposit: In addition to the Rent specified above,
----------------
Subtenant shall pay to Sublandlord, upon execution of this Sublease, an
equivalent of one month's Rent, the sum of Eighty-One Thousand Two Hundred
Fifty-Six Dollars ($81,256.00), as a non-interest bearing Security Deposit.
Sublandlord may commingle the Security Deposit with its other funds and is not a
trustee of the Security Deposit. Subtenant is not entitled to interest on the
Security Deposit. Sublandlord may use the Security Deposit to cure Subtenant's
defaults and to compensate Sublandlord for damages suffered by reason of
Subtenant's defaults. If Sublandlord so uses a portion of the Security Deposit,
Subtenant must replenish the Security Deposit to its full amount within five (5)
days after written demand. The Security Deposit shall not be applied by
Subtenant against the last month's Rent. In the event Subtenant has performed
all of the terms and conditions of this Sublease during the term hereof,
Sublandlord shall return to Subtenant, within ten (10) days after Subtenant has
vacated the Subleased Premises, the Security Deposit less any sums due and owing
to Sublandlord.
4. Use:
Subtenant shall use the Subleased Premises only for those purposes
permitted in the Master Lease, unless Sublandlord and Lessor consent in writing
to other uses prior to the commencement thereof.
5. Sublease Term:
5.1 Sublease Term: The Sublease Term shall be for the period
-------------
commencing September 1, 1999 ("Commencement Date") and continuing through August
14 31, 2001, or such earlier date as the Master Lease or this Sublease may be
terminated in accordance with its terms ("Sublease Termination Date"). In no
event shall the Sublease Term extend beyond the Term of the Master Lease.
5.2 Inability to Deliver Possession: Subtenant shall be entitled to
-------------------------------
early occupancy of the Subleased Premises as of August 20, 1999 ("Early
Occupation Date"). Subtenant shall not be obligated to pay Rent for early
occupancy, but otherwise the early occupancy shall be on the terms
2
<PAGE>
and conditions of this Sublease and Subtenant's obligation to pay Rent shall
commence on the Commencement Date. In the event Sublandlord is unable to
deliver possession of the Subleased Premises at the Early Occupation Date,
Sublandlord shall not be liable for any damage caused thereby, nor shall this
Sublease be void or voidable but Subtenant shall not be liable for Rent on or
after the Commencement Date until such time as Sublandlord offers to deliver
possession of the Subleased Premises to Subtenant. The Sublease Term shall not
be extended by such delay. If Subtenant, with Sublandlord's consent, takes
possession prior to commencement of the Sublease Term, Subtenant shall do so
subject to all the covenants and conditions hereof and shall pay Rent for the
period ending with the commencement of the Sublease Term at the same rental as
that prescribed for the first month of the Sublease Term prorated at the rate of
1/30/th/ thereof per day. In the event Sublandlord has been unable to deliver
possession of the Subleased Premises within thirty (30) days from the
Commencement Date, Subtenant, at Subtenant's option, may terminate this Sublease
by written notice to Sublandlord prior to delivery of the Subleased Premises.
5.3 Right of First Offer: Subtenant shall have no right to remian in
--------------------
the Subleased Premises at any time after the Sublease Termination Date. In the
event that prior to the Sublease Termination Date Sublandlord elects in its sole
discretion to sublease the Subleased Premises for any period that commences on
or after the day following the Sublease Termination Date, Sublandlord shall so
notify Subtenant in writing and shall offer to continue to sublease the
Subleased Premises to Subtenant for a fair market rental determined by
Sublandlord in its sole discretion exercised in good faith for such period as
Sublandlord may elect in its sole discretion and otherwise on terms
substantially the same as those contained in this Sublease. Subtenant shall have
fifteen (15) days in which to accept Sublandlord's offer and enter into a new
sublease agreement or extension of this Sublease. If Subtenant fails to do so,
this right of first offer shall be of no further force or effect, Subtenant
shall have no further rights hereunder, and Sublandlord shall have the right to
sublease the Subleased Premises to such persons and on such terms (subject to
the Master Lease) as Sublandlord may elect in its sole discretion.
6. Operating Expenses:
This is a Full Service Sublease and Sublandlord shall pay all direct
operating expenses of the Subleased Premises and expense pass throughs for the
property as may be provided for in the Master Lease. Except as expressly
provided herein, Sublandlord shall provide all standard utility services (except
telephone usage), all of the telephone and data communication equipment listed
in the Inventory of Communications Equipment (attached hereto as Exhibit B) and
---------
janitorial services (as described in the attached Exhibit D) to the Subleased
---------
Premises. Subtenant acknowledges that the Building provides HVAC from 6:00 a.m.
to 10:00 p.m., Monday through Friday, and 6:00 a.m. to 5:00 p.m. on Saturdays
and Sundays. If Subtenant desires after-hours HVAC service, Sublandlord and
Subtenant shall make an arrangement so that Subtenant may procure such after-
hours HVAC directly from the Lessor, all at Subtenant's sole cost and expense.
If the Lessor invoices Sublandlord for Subtenant's after-hours HVAC usage,
Subtenant shall pay such amount directly to Sublandlord within ten (10) days
after receipt of invoice so that Sublandlord may timely pay Lessor without
advancing funds on Subtenant's behalf.
7. Personal Property:
3
<PAGE>
The furniture and fixtures provided by Sublandlord for Subtenant's use
during the term of this Sublease are listed on Exhibit C attached hereto and
---------
are collectively referred to as the "Personal Property". Sublandlord shall
deliver such Personal Property to Subtenant in good condition and repair. By
taking possession of the Subleased Premises, Subtenant shall be deemed to have
acknowledged and agreed that all Personal Property is present at the Subleased
Premises and is in good condition and repair. On the Termination Date,
Subtenant shall return all of the Personal Property to Sublandlord in good
condition and repair, reasonable wear and tear and damage by fire, earthquake or
other casualty excepted. Subtenant shall not modify or remove any of the
workstations or other Personal Property without Sublandlord's consent.
8. Security and Telephones:
Sublandlord shall have absolutely no responsibility or liability with
respect to the security of the Subleased Premises. Without limiting the
generality of the foregoing: (a) with respect to the card-key system,
Sublandlord shall leave the existing card-key system in place, and upon
Subtenant's request, Sublandlord shall provide card-keys to Subtenant and shall
program the card-key system to limit access to the Subleased Premises to
Subtenant's employees; (b) Subtenant may perform whatever rekeying it may elect,
all at its sole risk and cost, and Subtenant shall ensure that Sublandlord has
operative keys to all areas of the Subleased Premises at all times; and (c) the
fire alarm and burglar alarm systems shall be left in place for Subtenant's use
if Subtenant so elects, but without any Sublandlord representation, warranty or
other duty to Subtenant with respect thereto. Sublandlord shall provide
reasonable access to Sublandlord's existing telephone and voice mail systems (as
described in Exhibit B) for the use of Subtenant and Subtenant's employees in
the conduct of their business, but all telephone service shall be the sole
responsibility of Subtenant.
9. Sublandlord's Right to Enter Upon the Subleased Premises:
In accordance with paragraph 19 of the Master Lease, Subtenant shall permit
Sublandlord and Sublandlord's Agents to enter the Subleased Premises at all
reasonable times with reasonable notice except for emergencies in which case no
notice shall be required.
10. Indemnity:
Except for claims arising from the gross negligence or willful misconduct
of Sublandlord (against which Sublandlord shall indemnify and hold Subtenant
harmless), Subtenant shall indemnify, defend and hold Sublandlord harmless from
and against any and all claims, damages, losses, liabilities and costs
(including without limitation reasonable attorneys' fees, costs and
disbursements) relating in any manner, directly or indirectly, in whole or in
part, to: (a) any failure by Subtenant to timely and properly perform each of
its obligations under this Sublease; (b) any accident occurring or other
circumstance existing on or about the Subleased Premises at any time during the
period between the Early Occupation Date or Sublease Commencement Date,
whichever is earlier, and the Termination Date (and any holdover period) due to
any cause whatsoever; and (c) any negligence or willful misconduct on the part
of Subtenant or any of its officers, directors, employees, guests, invitees,
agents or contractors. Subtenant shall promptly assume its defense and
indemnification obligations upon written notice from Sublandlord. Subtenant
shall not settle any
4
<PAGE>
claim without the consent of Sublandlord if Sublandlord would incur any
liability for such claim under or following such a settlement, which consent
shall not be unreasonably withheld.
11. Condition of the Subleased Premises:
The Subleased Premises shall be delivered in their "AS IS" condition.
Sublandlord shall have no obligation to make any capital improvements, repairs
or alterations to the Subleased Premises. By taking possession of the Subleased
Premises, Subtenant shall be deemed to have accepted the Subleased Premises in
its condition on the date of delivery of possession. Subtenant acknowledges
that neither Sublandlord nor any agent of Sublandlord has made any
representation or warranty with respect to the condition of the Subleased
Premises, the parking and common areas surrounding the Subleased Premises, or
with respect to the suitability of same for the conduct of Subtenant's business.
Subtenant further acknowledges that Sublandlord shall have no obligation to
construct or complete any additional alterations or improvements within or about
the Subleased Premises. Subtenant shall not alter or improve the Subleased
Premises without the consent of Sublandlord and Lessor, to the extent required
under the Master Lease. Notwithstanding the foregoing, to Sublandlord's actual
knowledge, the existing electrical and data communications equipment and
associated wiring in the Subleased Premises is in good working condition and
repair.
12. Sublandlord's Representations and Warranties:
Sublandlord represents and warrants to Subtenant that: (a) there are no
amendments to the Master Lease other than the First Amendment To Lease dated
October 1, 1997; (b) to Sublandlord's actual knowledge, neither Sublandlord nor
Lessor is in default under the Master Lease; and (c) to Sublandlord's actual
knowledge, there is no claim or threatened claim by Lessor that Sublandlord is
in default under the Master Lease.
13. Notices:
All notices, demands, consents and approvals which may or are required to
be given by either party to the other hereunder shall be given in the manner
provided in the Master Lease, at the addresses shown on the signature page
hereof. Sublandlord shall notify Subtenant of any default under the Master
Lease, or of any other event of which Sublandlord has actual knowledge which
will impair Subtenant's ability to conduct its normal business at the Subleased
Premises, as soon as reasonably practicable following Sublandlord's receipt of
notice from the Landlord of a default or actual knowledge of such impairment. If
Sublandlord elects to terminate the Master Lease, Sublandlord shall so notify
Subtenant by giving at least thirty (30) days notice prior to the effective date
of such termination pursuant to paragraph 23 thereof.
14. Broker Fee:
Each party represents and warrants to the other that it has not had any
contract or dealings regarding the Property, or any communication in connection
with the subject matter of this transaction, through any licensed real estate
broker or other person who can claim a commission or finder's fee. In the event
that any broker or finder asserts a claim for a commission or finder's fee based
upon any contract, dealing or communications with either party, such party shall
indemnify, defend and hold the other party harmless from all costs and expenses
(including without limitation reasonable attorneys' fees and costs of defense at
the trial and appellate levels) incurred in
5
<PAGE>
connection with such claim. The provisions of this section shall survive any
termination of this Sublease.
15. Subtenant Improvements/Compliance With Americans With
Disabilities Act:
Subtenant shall be responsible for the installation and cost of any and all
improvements, alterations or other work required on or to the Subleased Premises
or to any other portion of the property and/or building of which the Subleased
Premises are a part, required or reasonably necessary because of: (1)
Subtenant's use of the Subleased Premises or any portion thereof; or (2) the use
by a subtenant by reason of assignment or sublease. Compliance with the
provisions of this Section 13 shall be a condition of Sublandlord granting its
consent to any assignment or sublease of all or a portion of this Sublease and
the Subleased Premises described in this Sublease. Sublandlord shall be
responsible for the installation and cost of any and all improvements,
alterations or other work required on or to the Subleased Premises or to any
other portion of the property and/or building of which the Subleased Premises
are a part, required or reasonably necessary under the Americans With
Disabilities Act of 1990.
16. Toxic Contamination Disclosure:
Sublandlord and Subtenant each acknowledge that they have been advised that
numerous federal, state, and/or local laws, ordinances and regulations ("Laws")
affect the existence and removal, storage, disposal, leakage of and
contamination by materials designated as hazardous or toxic ("Toxics"). Many
materials, some utilized in everyday business activities and property
maintenance, are designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by
landowners, future landowners or former landowners without regard to whether the
party required to pay for "clean up" caused the contamination, owned the
property at the time the contamination occurred or even knew about the
contamination. Some items, such as asbestos or PCBs, which were legal when
installed, now are classified as Toxics, and are subject to removal
requirements. Civil lawsuits for damages resulting from Toxics may be filed by
third parties in certain circumstances.
Sublandlord and Subtenant each acknowledge that Sublandlord has made no
representations or warranties with respect to environmental assessment or
physical condition of the Subleased Premises, including, but not limited to,
matters relating to: (i) problems which may be posed by the presence or disposal
of hazardous or toxic substances on or from the Subleased Premises, (ii)
problems which may be posed by the Subleased Premises being within the Special
Studies Zone as designated under the Alquist-Priolo Special Studies Zone Act
(Earthquake Zones), Section 2621-2630, inclusive of the California Public
Resources Code, and (iii) problems which may be posed by the Subleased Premises
being within a HUD Flood Zone as set forth in the U.S. Department of Housing and
Urban Development "Special Flood Zone Area Maps," as applicable.
independent investigation or determination of the physical or environmental
condition of the Subleased Premises, including, but not limited to, the
existence or nonexistence of any underground tanks, sumps, piping, toxic or
hazardous substances on the Subleased Premises. Subtenant agrees that it will
rely solely upon its own investigation and/or the investigation of professionals
retained by it.
6
<PAGE>
17. Rent Abatement and Damages to Personal Property:
In the event Sublandlord, pursuant to the terms of the Master Lease, is
entitled to and receives rent abatement, then to the extent such rent abatement
affects the Subleased Premises, Subtenant shall be entitled to a corresponding
rent abatement in an amount that the net rentable area of the Subleased Premises
bears to the total net rentable area of the Master Lease, and only to the extent
any such abatement applies to the Sublease Term. In addition, any amounts paid
or credited to Sublandlord under the terms of the Master Lease for damage to
Subtenant's personal property shall be credited to Subtenant, subject to the
same limitations set forth above.
18. Sign Rights:
Subtenant shall be permitted to place its sign on the exterior of the
Subleased Premises in accordance with paragraph 20 of the Master Lease.
Sublandlord shall remove its signage within fifteen (15) days after the Sublease
Commencement Date.
19. Entire Agreement:
This Sublease and the Exhibits attached hereto set forth the entire
agreement between the parties with respect to the Sublease of the Subleased
Premises. Except as specifically set forth herein, there are no agreements,
representations, or warranties whatsoever between the parties as to any matter.
Any prior agreements, conversations, or writings, are merged herein, superseded
hereby and extinguished.
Exhibits to be attached include:
Exhibit A - Floor plan showing the improvements to the Premises
---------
Exhibit B - Inventory of Communications Equipment supplied by Sublandlord
---------
Exhibit C - Inventory list of all furniture, fixtures and other
---------
equipment supplied by Sublandlord
Exhibit D - Janitorial services specification or copy of Sublandlord's
---------
current janitorial services agreement
Sublandlord: EXCITE, INC. Address: 555 Broadway
Redwood City, CA 94063
By /s/ Elizabeth M. Berez Date: 8/6/99
------------------------------------ -----------------------------
Subtenant: TIOGA SYSTEMS, INC., a Address: 1816 Embarcadero Road
Delaware corporation Palo Alto, CA 94303
By /s/ Mark Vranesh Date: 8/6/99
------------------------------------ -----------------------------
7
<PAGE>
CONSENT TO SUBLEASE
-------------------
DATE: ___________________ 1999
RE: BUILDING: MidPoint Technology Park, 575 Broadway, Redwood City, CA
SUBLET PREMISES: Approximately 23,216 rentable square feet
DATE OF MASTER LEASE: Lease dated March 14, 1997, ("Master Lease")
MASTER LESSOR: Martin/Campus Associates, L.P., a Delaware limited
partnership
MASTER TENANT: Excite, Inc., a Delaware corporation
SUBTENANT: Tioga Systems, Inc., a Delaware corporation
TERM OF SUBLETTING: August 15, 1999 through August 14, 2001
Mr. Robert Hood
Excite, Inc.
Dear Mr. Hood:
Pursuant to the terms of the Master Lease covering the above-captioned
premises ("Sublet Premises"), Excite has requested Landlord's consent to your
subletting the Sublet Premises to the above-referenced Subtenant, hereinafter
referred to as the "Sublease."
Landlord hereby grants consent to such Subletting upon the following
express terms and conditions:
Such subletting is subject and subordinate to the Master Lease and to all
of its terms, covenants, conditions, provisions and agreements.
1. The Subtenant shall perform faithfully and be bound by all of the
applicable terms, covenants, conditions, provisions and agreements of the Master
Lease, for the period of such subletting and to the extent of the Sublet
Premises.
2. Neither such subletting nor this consent thereto shall:
(a) release or discharge you from any liability, whether past,
present or future, under the Master Lease;
(b) operate as a consent or approval by us to or of any of the terms,
covenants, conditions, provisions or agreements of the Sublease and we shall not
be bound thereby;
<PAGE>
(c) be construed to modify, waive or affect any of the terms,
covenants, conditions provisions or agreements of the Master Lease, or to waive
any breach thereof, or any of our rights as Landlord thereunder; or to enlarge
or increase our obligations as Landlord thereunder, or
(d) be construed as a consent by us to any further subletting either
by you or by the Subtenant or to any assignment by you of the Master Lease or
assignment by the Subtenant of the Sublease, whether or not the Sublease
purports to permit the same and, without limiting the generality of the
foregoing, both you and the Subtenant agree that the Subtenant has no right
whatsoever to assign, mortgage or encumber the Sublease nor to sublet any
portion of the Sublet Premises or permit any portion of the Sublet Premises to
be used or occupied by any other party; in connection herewith, both you and the
Subtenant agree that an assignment by operation of law or a transfer of control
of Subtenant (including but not limited to transfer of the controlling interest
of the stock of Subtenant, if Subtenant is a corporation) shall be deemed to be
a prohibited assignment hereunder, subject to our consent.
4. You shall not be released from any liability under the Master Lease
because of our failure to give notice of default under or in respect of any of
the terms, covenants, conditions, provisions or agreements of the Master Lease.
5. In the event of your default under the provisions of the Master Lease,
the rent due from the Subtenant under the Sublease shall be deemed assigned to
us and we shall have the right, under such default, at any time at our option,
to give notice of such assignment to the Subtenant and to demand that Subtenant
pay the rent and any other charges due under the Sublease directly to us. We
shall credit you with any rent received by us under such assignment but the
acceptance of any payment on account of rent from the Subtenant as the result of
any such default shall in no manner whatsoever be deemed an attornment by the
Subtenant to us, or serve to release you from liability under the terms,
covenants, conditions and provisions of agreements under the Master Lease.
Notwithstanding the foregoing, any other payment of rent from the Subtenant
directly to us, regardless of the circumstances or reasons therefor, shall in no
manner whatsoever be deemed an attornment by the Subtenant to us in the absence
of a specific written agreement signed by us to such an effect.
6. Both you and the Subtenant shall be and continue to be liable for the
payment of all bills rendered by us for charges incurred by the Subtenant for
services and materials supplied to the Sublet Premises.
7. The term of the Sublease shall expire and come to an end on its
natural expiration date or any premature termination date thereof or
concurrently with any premature termination or expiration of the Master Lease
(whether by consent or other right, now or hereafter agreed to by Landlord or
Tenant under the Master Lease, or by operation of law or at Landlord's option in
the event of default by tenant under the Master Lease).
8. This consent is not assignable, nor shall this consent be deemed a
consent to any amendment, modification, extension or renewal of the Sublease,
without our prior written consent.
<PAGE>
9. You and the Subtenant covenant and agree that under no circumstances
shall we be liable for any brokerage commission or other charge or expense in
connection with the Sublease and you both agree to indemnify us against same and
against any cost or expense (including but not limited to counsel fees) incurred
by us in resisting any claim for any such brokerage commission.
10. Notwithstanding any provision of the Sublease or this Consent to the
contrary, the Subtenant agrees that Master Landlord shall not be: (i) liable for
any act or omission of the Master Tenant as Sublessor under the Sublease; (ii)
subject to any offsets or defenses which the Subtenant may have against the
Master Tenant as Sublessor; (iii) bound by any payment of rent or other sums
made by the Subtenant for any advance period under the Sublease; (iv) bound by
any security deposits which the Subtenant might have paid to the Master Tenant
as Sublessor or any other party, or (v) bound by any amendment or modification
of the Sublease made without Master Landlord's prior written consent, which may
be withheld in the sole and absolute discretion of Master Landlord.
11. This Consent shall not be effective until executed by all the parties
hereto.
12. Concurrent with the execution of this Consent, Master Tenant shall pay
to Master Landlord an amount equal to $300.00, representing Master Landlord's
attorney fees and costs incurred in connection with the review of the Sublease
and the preparation of this Consent.
13. Master Landlord shall be named as an additional insured under all
liability insurance required to be carried by the Subtenant pursuant to the
Sublease, and Master Tenant shall furnish Master Landlord with a certificate of
insurance before the commencement of the term of the Sublease.
14. Master Landlord hereby waives all rights under paragraph 15.D of the
Lease during the term of the Sublease, including the ability to collect fifty
percent (50%) of any excess of the Subrent over the Rent payable pursuant to the
Lease and caused by this Consent to Sublease.
[SIGNATURES FOLLOW THIS PAGE]
<PAGE>
The execution of a copy of this Consent by you (as Master Tenant) and by
the Subtenant shall indicate your joint and several confirmation of the
foregoing conditions and of your agreement to be bound thereby and shall
constitute Subtenant's acknowledgment that it has received a copy of the Master
Lease from you.
MASTER LESSOR:
Martin/Campus Associates., a Delaware limited partnership
By: Martin/Redwood Associates, L.P., a California limited partnership
Its: General Partner
By: The Martin Group of Companies, Inc., a California corporation
Its: General Partner
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
Date: ___________________________________________
MASTER TENANT:
Excite, Inc., a Delaware corporation
By: /s/ Elizabeth M. Berez
------------------------------------------
Name: Elizabeth M. Berez
------------------------------------------
Title: VP, Finance
------------------------------------------
Date: August 6, 1999
------------------------------------------
SUBTENANT:
Tioga Systems, Inc., a Delaware corporation
By: /s/ Mark Vranesh
------------------------------------------
Name: Mark Vranesh
------------------------------------------
Title: Dir Fin/Corp. Sec
------------------------------------------
Date: 8/6/99
------------------------------------------
<PAGE>
EXHIBIT A
---------
graphic indicating offices around the inside perimeter of the office building,
cubicles throughout the interior of the office building and a common use area
in the middle of the office building.
Excite@Home
575 Broadway
Revised: 8/16/99
R. Spieler
<PAGE>
EXHIBIT B
---------
Inventory of Communications Equipment
<TABLE>
<CAPTION>
Quantity Part # Description
Meridian 1 Opt 11C
<S> <C> <C>
1 NTSF1001 OPTION 11C SNGL CABNT HW PKG (AC)
1 NTSF2001 OPTION 11C 30FT EXPANSION CABINET
1 NTDK22AA 30 FT FIBER DAUTERBOARD
1 NT6R78AB OPT 11C R23 ENG DOCUMEN PKG COIL
1 NTSF8021 OPT 11 C ENTERPRISE BUS SW PKG
1 NTSF8103 OPT 11 C 100 ADD TNS ENTERPRISE
1 NT8D09AL ANALOG MESSAGE WAITING LINE CARD
4 NT8D14BB UNIVERSAL TRUNK CARD
10 NT8D02GA DIGITAL LINE CARD (DLC)
1 AMP1102 CREDIT: System AMP
Meridian Mail 12Port/24 Hour
1 NTZC49AA ENH MM CARD OPT 4-12 PS, 5/10/24/54HRS
1 SW7100H MMAIL CARD OPTION R12 BASE SW
2 NTZC51AA ENH MM OP FS PORTS - 5&6 OR 9&10
2 NTZC51BA ENH MM OP FS PORTS - 7&8 OR 11&12
10 NT1F94AA MMAIL 12 VOICE MESSAGING PKG
1 NTAK30DB EXTERNAL TAPE DRIVE, TANDBERG
1 A0630697 MAGNUS 2.5B DATA CARTRIDGE
1 SW7102 MM CARD OPT EXP STRG SW LEVEL 1
1 SW7103 MM CRD OPT EXP STRG SW LEVEL 2
1 SW7140 MM CRD OPT EXP STRG SW LEVEL 3-4
Peripheral Equipment
1 017-102-XX CFR1500 1500 VA/1005W ON-LINE UPS
1 032-047-21 EBP48E EXTERNAL BATTERY PACK
1 LX300 EPSON LX-300 9-PIN DOT MTX PRINTER-SE
1 70364 M/F 10' RS232 SERIAL CABLE
1 000839-0 US ROBOTICS 28.8 KBPS MODEM
1 HQ-P1331A MICO-MINI PRINTER BUFFER, 64K, SER/SE
1 SEBII SITE EVENT BUFFER - 2 PORT/128K
30 ----------------------- MERIDIAN 266 DISPLAY PHONES
60 ----------------------- MERIDIAN 2008 PHONES
1 ----------------------- RECEPTIONIST CONSOLE
</TABLE>
EXHIBIT B
Page 1 of 1
<PAGE>
EXHIBIT C
575 Broadway Inventory
<TABLE>
<CAPTION>
Hardwall Offices
<S> <C>
Rosemount Workstations 12
Task Chairs 12
Guest Chairs 24
Ped (BBF) 12
Ped (FF) 12
Cubicles 103
Herman Miller Ethospace
Task Chairs 103
White Boards 102
Ped (BBF) 103
Ped (FF) 103
Overhead Bin 103
Overhead Shelf 103
Break/Common Areas
8' Racetrack Table 2
Credenza 2
Red Conference Room Chairs 14
Blue Conference Room Chairs 10
Green Conference Room Chairs 10
Black Soft Seating 20
Coffee Tables 4
Lowenstein High Seating Red 6
Lowenstein High Seating Black 6
Lowenstein Low Seating Red 4
Lowenstein Low Seating Black 4
48" square table 2
</TABLE>
<PAGE>
EXHIBIT D
PENINSULA JANITORIAL SERVICE CO.
================================================================================
<PAGE>
<TABLE>
<CAPTION>
Monthly Service Plan: Monthly
- --------------------- -------
<S> <C>
Routine 5 x weekly service (Sunday - Thursday)........... $3,675.00
Day porter service 5 x weekly (Monday - Thursday 10:00
to 6:00, and Friday 1:00 to 7:00)........................ $1,980.00
Optional:
- ---------
Second floor area 5 x weekly service..................... $1,840.00
Floor Care Program:
- -------------------
Window wash 2 x yearly inside/outside.................... $ 80.00
Clean carpets quarterly.................................. $ 740.00
Shampoo all wall to wall 1 x yearly...................... $ 440.00
Scrub & wax all floors 1 x yearly & buff monthly......... $ 320.00
4 x yearly dust all high areas........................... $ 210.00
Total Monthly Professional Fee........................... $7,445.00
</TABLE>
<TABLE>
<CAPTION>
PERIODIC SERVICES (priced separately) Per Service Per Sq. Ft. $ Minimum
---------------- --------------- ----------------
<S> <C> <C> <C>
Carpeting:
- ----------
Truck-mounted steam extraction...................... .06 $45.00
Tile: Vinyl
- -------------
Spray & buff tile................................... "
Machine scrub & recoat.............................. .10 "
Strip & wax tile.................................... .15 "
Tile: Ceramic
- ---------------
Machine scrub & reseal.............................. .10 "
Strip, restore grout & reseal....................... .15 "
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENTRANCES / OUTSIDE Weekly Monthly Verify
<S> <C> <C> <C>
Remove trash including all small pieces of debris......... 5
Remove cobwebs at entrances (as needed)................... 5
Clean ash urns............................................ 5
Clean entrance glass & door frames........................ 5
Empty trash receptacles................................... 5
Clean trash receptacles (as needed)....................... 1
Spot clean lobby windows, especially lower areas.......... 5
LOBBY AND RECEPTION AREA Weekly Monthly Verify
All routine services apply, including:
- --------------------------------------
Entrance doors: Clean inside and out..................... 5
Detail clean & dust all furniture & furnishings........... 5
Polish bright metal....................................... 5
Detail clean reception desk............................... 5
Remove cobwebs (high, low, corners)....................... 5
Spot clean upholstered furniture (as needed).............. 5
Vacuum upholstered furniture (as needed).................. 5
Vacuum carpeting.......................................... 5
Dry mop and damp mop wooden grain vinyl................... 5
Detail clean floor edges & corners........................ 1
Dust ceiling lights (as needed) & high ceiling............ 1
Scrub entry thresholds.................................... 1
Clean carpeting........................................... 1
Fully clean lobby glass (inside & outside)................ 1
GENERAL OFFICE AREAS & CONFERENCE ROOMS Weekly Monthly Verify
Vacuum carpet (moving light furniture).................... 5
Spot clean carpets........................................ 5
Dust desks, work surfaces, filing cabinets and furniture.. 5
Clean all table tops...................................... 5
Damp wipe surfaces to remove stains (as needed)........... 5
Empty trash & replace liners as needed.................... 5
Sweep & damp mop tile floors.............................. 5
Remove scuff marks from tile.............................. 5
Clean and polish bright metal as needed................... 5
Clean & polish drinking fountains......................... 5
Empty water cooler tray scrub / disinfect as needed....... 5
Spot clean interior partition glass....................... 5
Remove cobwebs / high, low, corners....................... 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL OFFICE AREAS (continued) Weekly Monthly Verify
<S> <C> <C> <C>
Dust white board trays.................................... 5
Properly arrange all furniture............................ 5
Turn off all designated lights when finished.............. 5
Remove smudges from doors & frames........................ 5
Dust partition tops....................................... 3
Wipe clean copiers, printers, & fax machines.............. 1
Clean & disinfect telephones.............................. 1
Detail dust and wipe: e.g. chair legs, picture frames..... 1
Detail clean desks & work surfaces........................ 1
Wipe clean monitor & computer casings..................... 1
Feather dust computer keyboards & screens................. 1
Dust silk plants.......................................... 1
Dust window sills......................................... 1
Wipe clean light switches................................. 1
Detail clean counters, bookcases, shelves, file cabinets.. 1
Dust skylights for cobwebs................................ 1
Detail vacuum carpet edges, around & behind furniture..... 1
Vacuum & spot clean upholstered chairs: offices........... 1
Dust high surfaces including door frames.................. 1
Dust all window blinds.................................... 1
Vacuum under photo copy machines.......................... 1
Brush vacuum ceiling air vents............................ 1
Dust & high areas for cobwebs............................. 1
Polish conference room & executive furniture.............. Per specs
Clip off any loose carpet loops (safety hazard)........... As needed
Vacuum fabric partition walls............................. 4
Total clean interior partition glass...................... 4
EXECUTIVE SERVICE Weekly Monthly Verify
Areas include lobby, conference / demo rooms,
- -----------------------------------------------
executive offices
- -------------------
All routine services apply, including:
- ----------------------------------------
Detail clean furniture & furnishings...................... 5
Detail clean floors....................................... 1
Polish conference room & executive furniture.............. Per specs
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COFFEE AREAS Weekly Monthly Verify
<S> <C> <C> <C>
Empty trash & replace liners.............................. 5
Clean coffee machines / remove old grounds................ 5
Scrub clean coffee pots / clean cups as needed............ 5
Wipe clean entire counter top & cabinet fronts............ 5
Wipe clean inside cabinet doors & trash container......... 5
Detail clean entire coffee areas walls & floor............ 1
LUNCHROOMS Weekly Monthly Verify
Empty trash / replace liners.............................. 5
Clean trash receptacles................................... 5
Clean walls near trash receptacles........................ 5
Scrub clean coffee pots................................... 5
Turn off & clean coffee makers & appliances............... 5
Clean microwaves, refrigerator & vending machines......... 5
Wipe clean tables, chairs & bases (detail edges).......... 5
Clean inside microwaves................................... 5
Spot clean all walls...................................... 5
Remove scuff marks from tile floor........................ 5
Clean & polish water cooler............................... 5
Clean entry doors......................................... 5
Vacuum carpets & remove spots............................. 5
Sweep & damp mop tile floor with mild degreaser........... 5
Properly arrange furniture................................ 5
Detail clean entire lunchroom............................. 1
Detail clean tables and chairs............................ 1
Detail clean all surfaces, entire facility................ 1
Clean tops of cabinets.................................... 1
Detail clean & scrub baseboards & edges................... 1
Clean inside cabinets especially doors.................... 1
Clean inside refrigerators/clean up any spills............ 1
Discard spoiled food from refrigerators................... 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESTROOM MAINTENANCE Weekly Monthly Verify
<S> <C> <C> <C>
Clean and sanitize sinks & counter tops................... 5
Clean and disinfect all toilets & urinals................. 5
Clean & disinfect handles................................. 5
Clean partitions & walls by urinals....................... 5
Wet mop tile floor using a germicidal cleaner............. 5
Dispose of waste and clean waste receptacles.............. 5
Check for paper products and refill as needed............. 5
Check for soap products and refill as needed.............. 5
Clean and shine all chrome fixtures and mirrors........... 5
Wipe clean light switches................................. 5
Clean doors & push-plates................................. 5
Check all dispensers for proper operation................. 5
Report any items needing repair or maintenance............ 5
Check feminine hygiene product dispensers for product..... 5
Disinfect floor drains / Keep traps filled................ 5
Detail clean & disinfect entire restroom.................. 1
Totally clean partitions & walls.......................... 1
Wipe clean baseboards..................................... 1
Brush vacuum ceiling air vents............................ 1
Replace or replenish deodorizers (as needed).............. 1
SHOWERS Weekly Monthly Verify
Wash walls w/ non-scratch disinfectant cleaners........... 5
Wash & polish all faucets and shower heads................ 5
Wet mop floor w/ disinfectant germicidal cleaner.......... 5
Report any items needing repair........................... 5
Detail clean & disinfect entire shower area............... 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DAY PORTER Weekly Monthly Verify
<S> <C> <C> <C>
LOBBY:
Spot clean entry doors.................................... 5
Sweep any debris (at entrance)............................ 5
Scrub clean metal entry thresholds........................ 1
LUNCHROOMS:
Duties, performed after lunch:
------------------------------
Clean all table tops and chairs with a moistened cloth
including all edges & bases............................... 5
Empty trash & replace liners.............................. 5
Clean trash receptacles................................... 5
Sweep/damp mop the floor.................................. 5
Vacuum carpeting, moving tables & chairs to reach all
food & debris............................................. 5
Clean coffee area including sink, water dispenser,
coffee machine and counter................................ 5
Check all walls and clean as required..................... 5
Check all microwaves, inside and out...................... 5
Perform additional duties as needed....................... 5
RESTROOMS:
Check for paper products and refill as needed............. 5
Check for soap products and refill as needed.............. 5
Wipe down counter tops / pick up trash.................... 5
Check trash receptacles and empty as needed............... 5
OFFICE AREAS:
Duties performed "as required" daily, weekly, monthly
-----------------------------------------------------
OUTSIDE ENTRANCES & GROUNDS:
Duties to be determined & performed as needed
---------------------------------------------
DUMPSTER AREA:
Dispose of loose trash around bins........................ 5
Detail sweep around bins (or often as needed)............. 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPUTER ROOM Weekly Monthly Verify
<S> <C> <C> <C>
Wipe clean tables, chairs, & stools....................... 5
Wipe clean other specified surfaces....................... 5
Dry mop floor............................................. 5
Damp mop floor (as needed)................................ 5
Empty trash & replace liners.............................. 5
Detail clean all surfaces................................. 1
Vacuum floor edges & corners.............................. 1
WINDOW & PARTITION GLASS: Routine Cleaning) Weekly Monthly Verify
Entrance glass: Clean entry doors & glass................. 5
Spot clean lobby glass.................................... 5
Clean all lobby glass..................................... 1
Interior partition glass: Spot clean...................... 5
Interior partition glass: Clean total surface............. 4
TILE FLOOR & CARPET CARE (routine maintenance) Weekly Monthly Verify
Carpeting:
Vacuum floors thoroughly.................................. 5
Spot clean................................................ 5
Detail vac (edges, corners, behind furniture)............. 1
Vinyl Tile:
Dust mop w/ treated mop................................... 5
Damp mop.................................................. 5
Remove scuff marks........................................ 5
Detail clean edges and corners............................ 1
Ceramic Tile:
Sweep & damp mop.......................................... 5
Detail clean edges & corners.............................. 1
Other:
Wipe clean baseboards..................................... 1
Scrub metal entry threshold (main entrance)............... 1
RECYCLING Weekly Monthly Verify
Process recycling appropriately: aluminum, glass,
paper, cardboard. (Non-recyclables put into compactor)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JANITORIAL CLOSET Weekly Monthly Verify
<S> <C> <C> <C>
Organize janitorial closet (all items shelved if poss.)... 5
Clean, sanitize mop heads & hang up....................... 5
Empty & clean mop bucket.................................. 5
Inventory supplies........................................ 1
Sweep and mop floor....................................... 1
Replace mop heads with new ones........................... 1
Remove trash and excess cleaning agents................... as needed
Deodorize................................................. as needed
COMPACTOR AREA Weekly Monthly Verify
Insure trash goes into compactor.......................... 5
Report problems with overflow or mixing recycling......... 5
Sweep area under & around compactor....................... 1
HEALTH & SAFETY
Maintain MSDS sheets in Janitor's closet always
Report safety hazards immediately, repair if possible as needed
SECURITY
No persons admitted into building by servicers
No employee substitutions will be made without auth.
Make sure all doors are locked during & following work
Keep building secured when dumping trash in back.
QUALITY ASSURANCE
1. Servicers use checklists
2. Supervisor inspects work & documentation per
schedule nightly.
3. Quality Assurance Inspector will arrange routine
inspection w/client once each week.
INITIAL SERVICES (No charge)
1. Detail clean entire facility.
2. Service includes all services routinely performed
daily, weekly & monthly.
</TABLE>
<PAGE>
MAINTENANCE: Routine or Emergency
1. Maintenance is available. As needed
2. Duties will vary according to the need.
NOTES
1. Team leader working nights will speak English.
2. Day Porter / Utility person during the day will speak
English & will be very good-natured, helpful, &
proactive.
3. Computer Room: When floor is being cleaned,
dedicated mop bucket will be kept outside the
computer room.
CHEMICALS AND PAPER PRODUCTS
1. Peninsula provides cleaning agents and equipment.
2. Paper goods, trash can liners, hand soaps &
deodorants are either provided by client or billed
separately through Peninsula Janitorial Service.
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SQUARE FOOTAGE / FLOOR COVERINGS Square Ft.
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Vinyl tile........................................... 2,000
Wood grain tile...................................... 500
Ceramic tile......................................... 2,200
Raised floor......................................... 5,000
Carpeting............................................ 78,521
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Total Square Footage................................. 88,221
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CLEANING DAYS
5 x Weekly S M T W T F S
Days Specified: Times Specified:
Time Specified:
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PERIODIC SERVICES (continued) Per Service Per Sq. Ft. $ Minimum
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Window Cleaning:
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Clean windows outside................................ $ 240 "
Clean windows inside................................. $ 240 "
Interior Partition Glass............................. $ 280 "
Cubicle Panels:
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Steam/dry clean fabric panels........................ $2/side/panel
Skylights:
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Clean interior....................................... $ 200 "
Clean exterior....................................... $ 100 "
Construction clean inside & outside.................. $ 600 "
High Areas: (pipers, air ducts, fluorescent lights)
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Brush vacuum (recommended 2 x yrly).................. $ 400 "
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STAFFING
Nights: 3 cleaners
1 supervisor
Days: 1 day porter
Inspector: 1 x weekly Q.A. Inspection
Floors: Separate 2 man crew conducting periodic
floor care
FORM OF OWNERSHIP
1. Corporation
2. All cleaners & supervisors are employees on payroll
TERM OF PROPOSAL
1. Peninsula guarantees pricing 1 year
2. Client month-to-month
EQUIPMENT LIST
1. Bucket w/ wringers
2. Mops (heads replaced monthly)
3. Treated dust mops
4. Upright vacuums
5. Back pack vacuum w/pole extension
6. Buffer-scrubbing
7. Buffer-high speed buffing
8 Steam extractor portable
9. Steam extractor-truck mount
10. Dry chemical carpet cleaning available
11. Chem 5 cleaning solution system
12. Tall ladder for high cleaning
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Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 15, 2000, in Amendment No. 3 to the
Registration Statement (Form S-1 No. 333-30674) and related Prospectus of
Support.com, Inc. for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
April 24, 2000
