<PAGE>
As filed with the Securities and Exchange Commission on February 18, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
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 (Primary Standard Industrial (I.R.S. Employer
jurisdiction
of incorporation or Classification Code Number) Identification No.)
organization)
</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:
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<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. [_]
----------------
CALCULATION OF FILING FEE
<TABLE>
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- -------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Class of Securities Aggregate Offering Amount of
To Be Registered Price(1) Registration Fee
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<S> <C> <C>
Common Stock, $.001 par value....... $62,100,000 $16,395
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes up to shares that may be sold to cover over-allotments,
if any.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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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 we are not soliciting offers to buy these securities in any +
+state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 2000
Shares
(logo)
Common Stock
-----------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on The
Nasdaq Stock Market's National Market under the symbol "SPRT."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
<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>
GATEFOLD
Graphic depicting Support.com's business:
the new infrastructure of support
Support.com Logo
<TABLE>
<S> <C> <C> <C> <C>
Representative Corporate IT Internet Customers
Support.com provides web-enabled
list of automated, personalized support
Support outsourcers software for eBusiness and
corporate IT, e-Commerce companies that seek to
differentiate themselves through
support outsourcer, enhanced customer service.
Internet service Internet service Extranet Partners Business can lower costs, increase
provider Clients customer satisfaction and increase
provider and Suppliers revenue by using support.com's
Internet support infrastructure
application service Application service Intranet Employees to support customers, partners,
provider suppliers and employees over
provider customers. intranets and extranets and the
Internet.
</TABLE>
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................. 3
Risk Factors........................ 6
Special Note Regarding Forward-
Looking Statements................. 19
Use of Proceeds..................... 20
Dividend policy..................... 20
Capitalization...................... 21
Dilution............................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 24
Business............................ 30
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management....................... 47
Certain Transactions............. 57
Principal Stockholders........... 59
Description of Capital Stock..... 61
Shares Eligible for Future Sale.. 66
Underwriting..................... 68
Notice to Canadian Residents..... 71
Legal Matters.................... 72
Experts.......................... 72
Where You Can Find More
Information..................... 72
Index To Financial Statements.... F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is
legal to sell these securities. The information in this document may only be
accurate on the date of this document.
------------
Dealer Prospectus Delivery Obligation
Until (25 days after the commencement of this offering), all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealer's obligation to deliver a prospectus when acting as an underwriter and
with respect to unsold allotments or subscriptions.
------------
<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 are a leading provider of eBusiness infrastructure software that
optimizes, automates and personalizes user support over the Internet. Our
comprehensive suite of eSupport software products and services is designed to
accelerate eBusiness growth by increasing the strategic value of support
organizations and reducing support inefficiencies that would otherwise
constrain expanding Internet initiatives. We offer customers the ability to
automate problem avoidance through self-healing, promote call avoidance through
user self-service and improve problem resolution through optimized assisted
support. We sell our products and services to corporate information technology
departments, Internet service providers, application service providers and
support outsourcers. Our customers include Bear Stearns, Compaq Professional
Services, Computer Sciences Corp., everdream, Excite@Home, Globo Cabo, JCPenney
and micronpc.com.
Businesses are seeking to deploy Internet, intranet and extranet technology
solutions that automate and optimize interactions between a business, its
employees, its customers, and members of its network of suppliers, distributors
and business partners. According to the Gartner Group, the volume of
nonfinancial goods and services sold through business-to-business e-commerce is
expected to reach over $7 trillion worldwide in 2004. As organizations leverage
the Internet to conduct business in this automated environment, high-quality
user support becomes a competitive asset that enables them to differentiate
their products and services and improve the efficiency of their operations.
We believe technical support is the most critical form of user support as
businesses and users increasingly rely on information technology infrastructure
and the Internet to conduct commerce. The growing complexity of information
systems, the proliferation of electronic devices, and the escalation in the
number of users has made technical support increasingly difficult to deliver.
In addition, many organizations lack an adequate support infrastructure to meet
the demands imposed by the increasing volume of Internet commerce transactions.
The growing complexity of support requires a highly personalized, automated
and Web-based approach to intelligently identify and resolve user problems.
Organizations need to transform eBusiness support operations from inefficient
cost centers to highly productive and scalable competitive assets that increase
customer loyalty, improve operational efficiencies and generate incremental
revenue. We believe this can only be accomplished by adopting comprehensive
eSupport solutions that deliver automated user support over the Internet. IDC
estimates that the market for these eSupport solutions will grow from $3
billion in 1999 to over $14 billion in 2003.
We offer a comprehensive suite of eSupport software products. Our product
suite consists of:
<TABLE>
<C> <S>
. Healing Agent -- User-based support agent that promotes personalized
self-service and makes software self-healing by
proactively identifying and repairing problems.
. Support Center -- Centralized support infrastructure that optimizes remote
assisted service and enables enterprise-wide problem
resolution.
. Support Portal -- Web platform that enables interactive full service and
personalized online support.
. Foundry -- Web support content authoring environment for automating
support actions and managing support content.
</TABLE>
3
<PAGE>
Our eSupport solution delivers the following benefits:
. Reduced costs through the automation and optimization of the support
process.
. Increased customer satisfaction through rapid problem resolution.
. Accelerated eBusiness growth by converting the traditional call center
into a revenue-generating business services desk.
We believe that our leadership in providing eSupport infrastructure software
gives us a competitive advantage as we develop solutions to address broader
customer support opportunities.
We were incorporated in Delaware in December 1997 under the name Replicase,
Inc. We changed our name to Tioga Systems, Inc. in October 1998 and to
Support.com in December 1999. Our principal executive offices are located at
575 Broadway, Redwood City, California 94063, and our telephone number at that
address is (650) 556-9440. Our Web site is located at www.support.com. The
information on our Web site is not part of this prospectus.
Unless otherwise indicated, the number of shares of our common stock to be
outstanding after this offering is based on the number of shares outstanding on
December 31, 1999 and assumes: (1) no exercise of the underwriters' over-
allotment option, (2) the exercise of warrants to purchase 136,972 shares of
our common stock that will expire if not exercised prior to completion of this
offering and (3) conversion of all outstanding shares of preferred stock into
common stock, and excludes: (1) 3,944,895 shares issuable upon exercise of
options outstanding at a weighted average exercise price of $0.47 per share,
(2) 146,678 shares issuable upon exercise of warrants outstanding and
(3) 7,307,545 additional shares available for future issuance under our stock
plans.
Our trademarks include Support.com, the Support.com logo, ContextResponse
Technology, Self-Healing, SupportAction and TierZero. This prospectus also
includes trade names, trademarks and service marks of other companies and
organizations.
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. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol............. SPRT
</TABLE>
----------------
Summary Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period from
inception
(December 3, 1997) Year Ended
to December 31, December 31,
1998 1999
------------------ ------------
<S> <C> <C>
Statement of Operations Data:
Total revenue................................. $ 18 $ 3,315
Loss from operations.......................... (2,804) (14,464)
Net loss...................................... (2,750) (14,294)
Accretion on redeemable convertible preferred
stock........................................ (214) (1,072)
Net loss attributable to common stockholders.. (2,964) (15,366)
Net loss per share:
Basic and diluted........................... (0.57) (2.31)
Weighted average shares--basic and diluted.. 5,227 6,643
Pro forma net loss per share:
Basic and diluted........................... (0.71)
Weighted average shares--basic and diluted.. 20,137
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
---------------------
Pro Forma
Actual as Adjusted
-------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments......... $ 12,489 $
Working capital........................................... 9,338
Total assets.............................................. 17,525
Long-term obligations, net of current portion............. 2,277
Redeemable convertible preferred stock.................... 21,449
Stockholders' equity (deficit)............................ (13,253)
</TABLE>
----------------
The statement of operations for the year ended December 31, 1998 is
presented for the period from inception (December 3, 1997). Operating expenses
totaled approximately $9,000 for the period from inception (December 3, 1997)
to December 31, 1997.
Please see note 1 of the notes to the financial statements for an
explanation of the determination of the number of shares used in computing per
share data.
The pro forma as adjusted balance sheet data gives effect to the sale of the
shares of common stock that we are offering under this prospectus at an
assumed initial public offering price of $ per share and after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us. See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
Any investment in our shares of common stock involves a high degree of risk.
You should carefully consider the risks described below and the other
information in this prospectus before deciding to invest in shares of our
common stock. If any of the following risks actually occur, our business,
results of operations and financial condition would likely suffer. In these
circumstances, the market price of our common stock could decline, and you may
lose all or part of your investment.
Risks Related to Support.com
We expect continuing losses and may never achieve profitability, which may harm
our future operating performance and may cause the market price of our stock to
decline.
We incurred net losses of approximately $17.0 million for the period from
December 3, 1997 (inception) through December 31, 1999. We expect to continue
to incur substantial net losses for the foreseeable future. If we continue to
incur net losses, we may not be able to increase our number of employees or our
investment in capital equipment, sales, marketing and research and development
programs in accordance with our present plans. We do not know when or if we
will become profitable. If we do not become profitable within the timeframe
expected by securities analysts or investors, the market price of our stock
will likely decline. If we do achieve profitability, we may not sustain or
increase profitability in the future and may not be able to continue to
operate.
If we do not meet quarterly financial expectations, our stock price could
decline.
We were incorporated in December 1997. Because of our limited operating
history and other factors, our quarterly revenue and operating results are
difficult to predict. In addition, due to the emerging nature of the eSupport
market and other factors, our quarterly revenue and operating results may
fluctuate from quarter to quarter. It is possible that our operating results in
some quarters may fall below the expectations of securities analysts or
investors. In this event, the market price of our common stock will likely
decline.
A number of factors are likely to cause fluctuations in our operating
results, including, but not limited to, the following:
. the growth rate of the eSupport market generally;
. demand for our eSupport infrastructure software;
. the price and mix of products and services we offer;
. our ability to attract and retain customers and maintain customer
satisfaction;
. the amount and timing of operating costs and capital expenditures
relating to expansion of our business and infrastructure;
. technical difficulties or system outages; and
. the announcement, introduction, pricing and market acceptance of new or
enhanced products and services by us or our competitors.
Our quarterly results depend on the size of a small number of orders, so the
delay or loss of any single large order during a quarterly period, and
especially an order for a perpetual license rather than a subscription license,
could harm that quarter's results and cause our stock price to decline.
Each quarter, we derive a significant portion of our license revenue from a
small number of relatively large orders for the licensing of our eSupport
infrastructure software. We also license our eSupport infrastructure software
under perpetual and subscription licenses. Perpetual licenses typically result
in our
6
<PAGE>
recognition of a larger amount of revenue in the quarter in which the license
is granted as compared with subscription licenses. Revenue from a perpetual
license is generally recognized upon delivery of a product. Revenue from a
subscription license is recognized on a monthly basis over the term of the
subscription, which is typically three years. In 1999, though 18% of our
licenses were perpetual, these licenses accounted for 67% of our revenue. As a
result, our operating results could suffer if any large orders, and especially
orders for perpetual licenses, are delayed or cancelled in any future period.
We expect that we will continue to depend upon a small number of large orders
for a significant portion of our license revenue.
Because a small number of customers has accounted for and may continue to
account for substantial portions of our revenue, our revenue could decline due
to the delay of customer orders or the failure of existing customers to renew
licenses.
In 1999, Bear Stearns accounted for 53% of our total revenue. No other
single customer accounted for 10% or more of our total revenue in 1999,
although our top four customers together accounted for approximately 81% of our
total revenue in 1999. Because we have a small number of customers and a few
customers are likely to continue to account for a significant portion of our
revenue, our revenue could decline due to the loss or delay of a single
customer order or the failure of an existing customer to renew its subscription
license. We may not obtain additional customers. The failure to obtain
additional customers, the loss or delay of customer orders and the failure of
existing customers to renew licenses will harm our business and operating
results.
Our business will suffer if our gross margin fluctuates.
Our competitors may offer eSupport infrastructure software that meets or
exceeds the performance and capabilities of our products. If competitive price
pressures cause prices to fall faster than we expect or if we must reduce our
prices for any reason, we may experience pressure on our gross margin. In
addition, our gross margin will depend in part on the following:
. our ability to introduce new products and services to the market;
. our competitors' prices, products and services and market share;
. our costs related to third-party technologies in our product offerings;
. increased services-related costs associated with increased services
orders;
. increased licenses and sales through indirect channels which typically
carry lower gross margins; and
. general economic conditions.
In addition, we expect to continue to spend substantial financial and other
resources on developing and introducing new products and services, and
expanding our sales and marketing organization and operating infrastructure. We
expect that our operating expenses will continue to increase in absolute
dollars and may increase as a percentage of revenue. If our revenue does not
correspondingly increase, our business and operating results could suffer. We
base our expense levels in part on our expectations regarding future revenue
levels. If our revenue for a particular quarter is lower than we expect, we may
be unable to proportionately reduce our operating expenses for that quarter.
Our future success depends on the broad adoption and acceptance of our products
and services.
We must successfully offer our customers a comprehensive, integrated support
solution to enable us to expand market acceptance of our eSupport solution.
Specifically, we must encourage our customers to transition from using
traditional support methods. To accomplish this, we must:
. continually improve the performance, features and reliability of our
products and services;
7
<PAGE>
. develop new products, services, functionality, compatibility and
technologies that address changing industry standards and customer needs;
and
. develop integration with other support-related technologies.
We may not be successful in achieving any of these objectives. If our
efforts to achieve broad market acceptance and adoption of our products and
services fail, our business and operating results will suffer. Factors that
might influence market acceptance of our solution include the following, over
which we have little or no control:
. willingness of enterprises to transition to automated support and
eSupport;
. the growth of the Internet and commercial online services;
. the willingness of businesses to manage high volumes of customer
communications over the Internet;
. acceptance of competitors' automated support or eSupport solutions; and
. changes in security and reliability of online transactions and
communications.
We must attract and retain qualified personnel, which is particularly difficult
for us because we are headquartered in the San Francisco Bay Area, where
competition for personnel is extremely intense.
Our future success will also depend on our ability to attract, train, retain
and motivate other highly skilled engineering, technical, managerial, sales and
marketing and customer support personnel. We currently plan to substantially
increase the number of personnel over the next 12 months. Competition for these
personnel is intense, especially in the San Francisco Bay Area and after a
company has completed an initial public offering. We have had difficulty hiring
qualified personnel as quickly as we have desired. In particular, we may be
unable to hire a sufficient number of qualified support, training and
engineering professionals. Our inability to hire, integrate and retain
qualified personnel in sufficient numbers could reduce the quality of our
products and services. If we fail to retain and recruit the necessary
personnel, our ability to develop new products and services and to provide
acceptable levels of customer service could suffer. In addition, if we hire
employees from our competitors, these competitors may claim that we have
engaged in unfair hiring practices. We could incur substantial costs in
defending ourselves against any of these claims, regardless of the merits of
such claims.
If we fail to expand our sales and marketing activities, we may be unable to
expand our brand recognition and increase our revenue, which would harm our
business.
If we do not successfully expand our sales and marketing activities, we
cannot expand our business and our stock price could decline. We believe that
continued expansion of our brand recognition will be critical to achieve
widespread acceptance of our eSupport infrastructure software. Favorable public
perception of our brand will depend largely on our ability to continue
providing our customers with effective eSupport infrastructure software and the
success of our marketing efforts. Our brand promotion activities may not yield
increased revenue and, even if they do, any increased revenue may not offset
the expenses we incur in building our brand.
Failure to successfully develop and introduce new versions and releases of
eSupport infrastructure software that meet changing customer demands or
technological standards would harm our business.
Our industry is characterized by rapid technological change, frequent new
product introductions and enhancements, changes in customer demands and
evolving industry standards. Our existing products will be rendered obsolete if
we fail to introduce new products or product enhancements that meet new
customer
8
<PAGE>
demands, support new standards or integrate with new or upgraded versions of
packaged applications. In addition, the life cycle of our products is difficult
to estimate.
If we fail to develop, in a timely manner, new or enhanced versions of our
eSupport infrastructure software or to provide new products and services that
achieve rapid and broad market acceptance, our business will suffer. We may
fail to identify new product and service opportunities successfully or develop
and timely bring new products and services to market. In addition, we may incur
substantial expense in developing new or enhanced versions of our products and
services. If we experience delays in completing development of, enhancements
to, new or localized versions of, or cross platform capabilities for, our
products, our operating results would suffer. We also may need to develop and
acquire new software products or support services to broaden our product and
service offerings. We may be unable to develop or acquire marketable products
or services on a timely basis, if at all. In addition, product innovations may
not achieve the market penetration or price stability necessary for
profitability.
Our sales are currently concentrated in the corporate information technology,
support outsourcer and Internet service provider markets, and if our customers
in these markets decrease their spending on eSupport solutions, or we fail to
penetrate other industries, our revenue will likely decline.
Sales to customers in the corporate information technology, support
outsourcer and Internet service provider markets accounted for the majority of
our total revenue in 1998 and 1999. We expect to continue to direct our sales
and marketing efforts toward these markets. Given our market position, the high
degree of competition and the rapidly changing environment in these industries,
we may be unable to make sales to these types of businesses. In addition,
customers in these markets are likely to have different requirements and may
require us to change our product design or features, sales methods, support
capabilities or pricing policies. If our customers in these markets decrease
their spending on eSupport solutions, or we fail to penetrate other industries,
our revenue will likely decline.
If our product does not operate with the many hardware and software platforms
used by our customers, our business may fail.
We currently serve a customer base with a wide variety of constantly
changing hardware, packaged software applications and networking platforms.
With the exception of our Support Portal, our eSupport infrastructure software
is currently available only on Microsoft Windows operating systems. If there is
widespread adoption of other operating system environments, or if we fail to
release versions of our eSupport infrastructure software that are compatible
with these other operating systems, our business and operating results will
suffer. Our future success also depends on several factors, including:
. our ability to integrate our product with multiple platforms and
existing, or legacy, systems and to modify our product as new versions of
packaged applications are introduced;
. the portability of our product, particularly the number of operating
systems and databases that our product can source or target;
. our ability to anticipate and support new standards, especially Internet
standards;
. the integration of additional software modules under development with our
existing product; and
. our management of software being developed by third parties for our
customers or for use with our product.
9
<PAGE>
Our business may not sustain revenue growth or be profitable and we may change
our business model in an effort to become profitable.
Our business depends on our ability to generate revenue streams from
multiple sources, including direct and indirect sales of software products and
sales of our services. The demand for our product and service offerings is
largely undetermined at this time. We do not know if our business model will
succeed or be sustainable as our business grows. Furthermore, we may revise our
business model as consumer preferences change and new competitors emerge. As e-
commerce and the demand for eSupport continue to evolve, we may need to develop
complementary products and services as additional sources of revenue.
Accordingly, we may change our business model to attempt to take advantage of
new business opportunities, including business areas in which we do not have
extensive experience. If we make these changes to our business model and are
not successful, it will harm our business and reputation.
Our products and services rely on third-party programming tools and
applications, and if we lose access to these tools and applications or are
unable to modify our product in response to changes in these tools and
applications, our revenue could decline.
Our programs utilize third-party programming tools and applications. We also
depend upon access to the application program interfaces, known as APIs, used
for integration of external software products and our software. Our access to
APIs of third-party applications is controlled by the providers of these
applications. If the application provider denies or delays our access to APIs,
our business may be harmed. Some application providers may become competitors
or establish alliances with our competitors, increasing the likelihood that we
would not be granted access to their APIs. Loss of the ability to use these
technologies, delays in upgrades or failure of these third parties to support
these technologies could cause our revenue to decline.
Our failure to integrate third-party technologies could harm our business.
We intend to continue to license technologies from third parties including
applications used in our research and development activities and technologies,
which are integrated into our products and services. These technologies may not
continue to be available to us on commercially reasonable terms or at all. In
addition, we may fail to successfully integrate any licensed technology into
our products or services. Third-party licenses expose us to increased risks,
including, but not limited to, risks with the integration of new technology,
the diversion of resources from the development of our own proprietary
technology, our inability to generate revenue from new technology sufficient to
offset associated acquisition and maintenance costs. Our inability to obtain
any of these licenses could delay product and service development until
equivalent technology can be identified, licensed and integrated. This in turn
would harm our business and operating results.
We may engage in future acquisitions or investments that could dilute our
existing stockholders, cause us to incur significant expenses or harm our
business.
We may use a portion of the net proceeds of this offering to acquire or
invest in complementary businesses, technologies or products, although we
currently have no specific agreements or commitments and are not currently
engaged in any negotiations with respect to these transactions. Integrating any
newly acquired businesses, technologies or products may be expensive and time-
consuming. To finance any acquisitions, it may be necessary for us to raise
additional funds through public or private financings. Additional funds may not
be available on terms that are favorable to us and, in the case of equity
financings, may result in dilution to our stockholders. We may be unable to
complete any acquisitions or investments on commercially reasonable terms, if
at all. Even if completed, we may be unable to operate any acquired businesses
profitably or otherwise implement our growth strategy successfully. If we are
unable to integrate any newly acquired entities or technologies effectively,
our operating results could suffer. Future acquisitions by us could also result
in large and immediate write-offs, incurrence of debt and contingent
liabilities or amortization of expenses related to goodwill and other
intangibles, any of which could harm our operating results.
10
<PAGE>
Our recent growth has placed a strain on our management systems and resources
and if we fail to integrate new employees or manage our future growth, our
business could suffer.
We are currently experiencing a period of rapid expansion in our personnel,
facilities, systems and infrastructure. For example, substantially all of our
employees were hired in 1999, and we expect that our hiring rate will continue
at a rapid pace. We expect further significant expansion, including expansion
outside the San Francisco Bay Area, will be required to address any future
growth in our consumer base, the breadth of our product and service offerings
and other opportunities. For example, we will need to obtain additional office
space prior to the end of 2000, and if we fail to obtain sufficient space, our
business could suffer. Our expansion has placed, and we expect that it will
continue to place, a significant strain on our management controls and
operational and financial resources and may negatively impact our ability to
provide adequate levels of service to our customer. Our failure to expand,
train and motivate our workforce and to manage growth could disrupt our
operations, delay execution of our business plan and consequently harm our
business.
The integration of new senior management personnel into our management team may
interfere with our operations.
Over the last 12 months, we have hired a number of new officers, including
our Chief Executive Officer, Radha R. Basu, our Chief Financial Officer, Brian
M. Beattie, and our Senior Vice President of Sales and Business Development,
Jim R. Hilbert. To integrate into our company, these individuals must spend a
significant amount of time learning our business model and management system,
in addition to performing their regular duties. Accordingly, the integration of
new personnel could result in some disruption to our ongoing operations. In
addition, if our senior management are unable to work effectively as a team,
our business operations could be harmed.
If we lose the services of any of our senior management or other key personnel,
our business may be harmed.
Our success will depend on the skills, experience and performance of our
senior management, engineering, sales, marketing and other key personnel, many
of whom have worked together for only a short period of time. We do not have
long-term employment agreements with many of our key employees. The loss of the
services of any of our senior management or other key personnel, including our
Chief Executive Officer, Radha R. Basu, our Chief Financial Officer, Brian
Beattie, our Chief Technology Officer, Scott W. Dale, and our Chief Software
Officer, Cadir B. Lee, could harm our business.
Our failure to expand our strategic alliances would impede our revenue growth.
We must successfully establish relationships that can enable us to expand
market acceptance of our eSupport infrastructure software. Specifically, we
must establish and extend existing distribution alliances with specialized
technology and services firms such as support outsourcers. These relationships
are intended to provide us access to the marketing and lead generation
capabilities of these firms, which have already established relationships with
small- to medium-sized businesses, Internet service providers and large
corporate customers. We must also establish and extend existing solutions
alliances with leading providers of complementary support technologies such as
call center/help desk management companies, knowledge management companies and
systems management firms. Without adequate strategic alliances, we may have to
devote substantially more resources than we would otherwise to the sales,
marketing and implementation of our products and the development of
complementary products in order to deliver comprehensive support solutions, and
our efforts may not be as effective as those who have such alliances. In many
cases, the firms with which we wish to ally have extensive relationships with
our existing and potential customers and influence the decisions of these
customers by recommending products. If we fail to maintain, establish or
successfully implement these alliances, our ability to achieve market
acceptance of our eSupport infrastructure software will suffer and our business
and operating results will be harmed.
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Failure to expand and upgrade our infrastructure to meet customer requirements
would harm our business.
As the volume and complexity of customers' needs increase, we will need to
expand our systems and network infrastructure. In addition, in the event we
transition to new delivery models for our support products, we may need to
expand our systems and network infrastructure. The expansion and adaptation of
our network infrastructure for any reason will require substantial financial,
operational and management resources as well as uncertain equipment
incompatibility and capacity issues. We may not be able to expand or adapt our
network infrastructure to meet additional demand or our customers' changing
requirements in a timely manner or at all.
Our business could suffer if our products fail to perform properly due to
undetected errors or similar problems.
Our eSupport infrastructure software depend on complex software, both
internally developed and licensed from third parties. Complex software often
contains undetected errors or "bugs." Although we conduct testing during
product development, we may be forced to delay commercial release of software
until problems are corrected and, in some cases, may need to provide
enhancements to correct errors in released software. If we do detect any errors
before we ship a product, we might have to limit product shipment for an
extended period of time while we address the problem. We may not discover
software errors that affect our new or current products or enhancements until
after they are deployed. Therefore, it is possible that, despite testing by us,
errors may occur in our software. These errors could result in:
. damage to our reputation;
. lost sales;
. delays in commercial release;
. product liability claims;
. delays in or loss of market acceptance of our products;
. product returns; and
. unexpected expenses and diversion of resources to remedy errors.
If our system security is breached, our business and reputation could suffer.
A fundamental requirement for online communications, transactions and
support is the secure transmission of confidential information. Third parties
may attempt to breach our security or that of our customers. We may be liable
to our customers for any breach in such security and any breach could harm our
customers, our business and our reputation. In addition, our software contains
features which may allow us or our customers to control, monitor or collect
data from computers running the software without notice to the computing users.
Therefore we may be subject to claims associated with invasion of privacy or
inappropriate disclosure, use or loss of this information. Any imposition of
liability, particularly liability that is not covered by insurance or is in
excess of insurance coverage, could harm our reputation and our business and
operating results. Also, computers are vulnerable to computer viruses, physical
or electronic break-ins and similar disruptions, which could lead to
interruptions, delays or loss of data. We may be required to expend significant
capital and other resources to further protect against security breaches or to
rectify problems caused by any breach.
Due to the lengthy sales cycles of some of our products, the timing of our
sales is difficult to predict and may cause us to miss our revenue
expectations.
Our sales cycle for our eSupport infrastructure software can be as long as
nine months or more and may vary substantially from customer to customer. While
our customers are evaluating our products and services,
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we may incur substantial sales and marketing expenses and spend significant
management effort. Consequently, if revenue forecasted from a specific customer
for a particular quarter is not realized in that quarter, we may incur
significant expenses that are not offset by corresponding sales. This makes it
more difficult to predict quarterly financial performance, or to achieve it,
and any delay in completing sales in a particular quarter could harm our
business and cause our operating results to vary significantly.
If we do not successfully address the risks inherent in the expansion of our
international operations, our business could suffer.
We intend to expand further into international markets. If our revenue from
international operations does not exceed the expense associated with
establishing and maintaining our international operations, our business could
suffer. We have limited experience in international operations and may not be
able to compete effectively in international markets. Some risks we face in
conducting business internationally include:
. difficulties and costs of staffing and managing international operations;
. differing technology standards;
. difficulties in collecting accounts receivable and longer collection
periods;
. political and economic instability;
. fluctuations in currency exchange rates;
. imposition of currency exchange controls;
. potentially adverse tax consequences;
. reduced protection for intellectual property rights in foreign countries;
. dependence on local vendors;
. compliance with multiple conflicting and changing governmental laws and
regulations;
. longer sales cycles; and
. import and export restrictions and tariffs.
Technical problems with either our internal or our outsourced computer and
communications systems could reduce our ability to provide eSupport services
and could harm our business and our reputation.
The success of our eSupport infrastructure software depends on the efficient
and uninterrupted operation of our own and outsourced computer and
communications hardware and software systems. These systems and operations are
vulnerable to damage or interruption from human error, natural disasters,
telecommunications failures, break-ins, sabotage, computer viruses, intentional
acts of vandalism and similar events. Since all of our internal computer and
communications hardware and networks systems are located in the San Francisco
Bay Area, an earthquake or other natural disaster could affect all of our
facilities and our systems located there simultaneously. We have no formal
disaster recovery plan in the event of damage to or interruption of our
internal or outsourced systems, and business interruption insurance may not
adequately compensate us for losses that may occur. Any system failure that
causes an interruption in our customers' ability to use our eSupport products
or services or a decrease in their performance could harm our relationships
with our customers and result in reduced revenue.
Problems arising from use of our products with other vendors' products could
cause us to incur significant costs, divert attention from our product
development efforts and cause customer relations problems.
Our customers may use our eSupport products together with products from
other companies. As a result, when problems occur, it may be difficult to
identify the source of the problem. Even when these problems are
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not caused by our products, they may cause us to incur significant warranty
costs, divert the attention of our engineering personnel from our product
development efforts and cause significant customer relations problems.
Our pending patents may never be issued and, even if issued, may provide us
with little protection.
Our success and ability to compete depend to a significant degree upon the
protection of our software and other proprietary technology rights. We regard
the protection of patentable inventions as important to our future
opportunities. It is possible that:
. our pending patent applications may not result in the issuance of
patents;
. any patents issued to us may not be broad enough to protect our
proprietary rights;
. any issued patent could be successfully challenged by one or more third
parties, which could result in our loss of the right to prevent others
from exploiting the inventions claimed in those patents;
. current and future competitors may independently develop similar
technologies, duplicate our products or design around any of our patents;
and
. effective patent protection may not be available in every country in
which we do business.
We rely upon trademarks, copyrights and trade secrets to protect our
proprietary rights, which may not be sufficient to protect our intellectual
property.
We also rely on a combination of laws, such as copyright, trademark and
trade secret laws, and contractual restrictions, such as confidentiality
agreements and licenses, to establish and protect our proprietary rights.
However, despite any precautions that we have taken,
. laws and contractual restrictions may not be sufficient to prevent
misappropriation of our technologies or deter others from developing
similar technologies;
. current federal laws that prohibit software copying provide only limited
protection from software "pirates," and effective trademark, copyright
and trade secret protection may be unavailable or limited in foreign
countries;
. other companies may claim common law trademark rights based upon state or
foreign laws that precede the federal registration of our marks; and
. policing unauthorized use of our products and trademarks is difficult,
expensive and time-consuming, and we may be unable to determine the
extent of this unauthorized use.
Also, the laws of other countries in which we market our products may offer
little or no effective protection of our proprietary technologies. Reverse
engineering, unauthorized copying or other misappropriation of our proprietary
technologies could enable third parties to benefit from our technologies
without paying us for it, which would significantly harm our business.
We may face intellectual property infringement claims that could be costly to
defend and result in our loss of significant rights.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties may assert infringement
claims against us. Although we have not received notice of any alleged
infringement, our products may infringe issued patents that may relate to our
products. In addition, because the contents of patent applications in the
United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to our software products. We and
our customers may be
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subject to legal proceedings and claims from time to time, including claims of
alleged infringement of the trademarks and other intellectual property rights
of third parties. Intellectual property litigation is expensive and time-
consuming and could divert management's attention away from running our
business. This litigation could also require us to develop non-infringing
technology or enter into royalty or license agreements. These royalty or
license agreements, if required, may not be available on acceptable terms, if
at all, in the event of a successful claim of infringement. Our failure or
inability to develop non-infringing technologies or license the proprietary
rights on a timely basis would harm our business.
We might have liability for Internet content and we may not have adequate
liability insurance.
As a provider of eSupport services to Internet-related businesses, we face
potential liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
transmitted via the Internet. Furthermore, some foreign governments, such as
Germany, have enforced laws and regulations related to content distributed over
the Internet that are more strict than those currently in place in the United
States.
Although we carry general liability and umbrella liability insurance, our
insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. There is a risk that a
single claim or multiple claims, if successfully asserted against us, could
exceed the total of our coverage limits. There is also a risk that single claim
or multiple claims asserted against us may not qualify for coverage under our
insurance policies as a result of coverage exclusions that are contained within
these policies. Should either of these risks occur, capital contributed by our
shareholders may need to be used in order to settle claims. Any imposition of
liability, particularly liability that is not covered by insurance or is in
excess of insurance coverage, could have a material adverse effect on our
reputation and our business and operating results, or could result in the
imposition of criminal penalties.
Industry Risks
We must compete successfully in the eSupport market or our business will fail.
We may encounter competition from companies such as customer communications
software companies, question/answer companies, customer relationship management
solution providers, consolidated service desk solution vendors, Internet
infrastructure companies and operating systems providers. The market for our
products is intensely competitive, subject to rapid change and significantly
affected by new product introductions and other market activities of industry
participants. Although we do not currently compete against any one entity with
respect to all aspects of our eSupport solution, our integrated software
solution does compete against various vendors' software products designed to
accomplish specific elements of a complete eSupport solution. For example, we
currently compete with companies that provide automated development of support
solutions such as Serena Software, Inc., as well as with companies that provide
automated delivery of support solutions such as Motive Communications, Inc.
Our potential competitors may have longer operating histories, significantly
greater financial, technical, and other resources or greater name recognition
than we do. Our competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements. Competitive
pressures could reduce our market share or require us to reduce the price of
products and services, any of which could harm our business and operating
results.
Our success depends on the continued growth and levels of performance of
Internet usage.
Because a majority of our products are designed to support businesses
operating over the Internet, our revenue growth depends on the continued
development and maintenance of the Internet infrastructure. This continued
development of the Internet would include maintenance of a reliable network
with the necessary speed, data capacity and security, as well as timely
development of complementary products, including high
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speed modems, for providing reliable Internet access and services. Because
global commerce on the Internet and the online exchange of information is new
and evolving, we cannot predict whether the Internet will prove to be a viable
commercial marketplace in the long term. The success of our business will rely
on the continued improvement of the Internet as a convenient means of consumer
interaction and commerce, as well as an efficient medium for the delivery and
distribution of information by enterprises to their employees.
Governmental regulation and legal uncertainties could impair the growth of the
Internet and decrease demand for our products or increase our cost of doing
business.
The laws and regulations that govern our business change rapidly. Although
our operations are currently based in California, the United States government
and the governments of other states and foreign countries have attempted to
regulate activities on the Internet and the manufacture of computer software
and distribution. Although there are currently few laws and regulations
directly applicable to the Internet and the use of the Internet as a commercial
medium, a number of laws have been proposed involving the Internet. These
proposed laws include laws addressing user privacy, pricing, content,
copyrights, distribution, antitrust and characteristics and quality of products
and services. Moreover, the applicability to the Internet of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Evolving areas of law that are relevant to our business include
privacy law, proposed encryption laws, content regulation and sales and use tax
laws and regulations. Because of this rapidly evolving and uncertain regulatory
environment, we cannot predict how these laws and regulations might affect our
business. Any new laws and regulations could harm us by subjecting us to
liability or forcing us to change how we do business. For example, in 1998,
Congress passed the Internet Freedom Act, which imposes a three-year moratorium
on state and local taxes on Internet-based transactions. We cannot assure you
that this moratorium will be extended. Failure to renew this moratorium would
allow various states to impose taxes on e-commerce, which might harm our
business directly and indirectly by harming the businesses of our customers,
potential customers and business alliances.
Our business could be disrupted if any of the computer systems or software we
rely on experience Year 2000 problems.
We have executed a plan designed to make our computer systems, applications,
computer and manufacturing equipment and facilities Year 2000 ready. To date,
none of our systems, applications, equipment or facilities have experienced
material difficulties from the transition to Year 2000. Although we have not
experienced any Year 2000 problems, it is possible that we could still face
problems or disruptions. For instance, we may face problems with systems that
have not been utilized since 1999 or in connection with the leap year. While we
believe that all of our systems are Year 2000 compliant, we cannot assure you
that we will not discover a problem during 2000 that needs to be upgraded,
modified or replaced. In addition, we depend on a number of third-party vendors
to provide both information and non-information technology systems and
services. While we believe that our material third-party systems and services
are Year 2000 compliant, we cannot be sure that we will not experience any
problems with these systems and services during 2000. We also cannot provide
any assurance that governmental agencies, utility companies, Internet access
companies and others outside of our control will not experience any future Year
2000 problems.
Offering Risks
Our stock price may be volatile, and you may not be able to sell your shares at
or above the offering price.
Prior to this offering, our common stock has not been publicly traded, and
an active trading market may not develop or be sustained after this offering.
You may not be able to sell your shares at or above the offering price. The
price at which our common stock will trade after this offering is likely to be
highly volatile and may fluctuate substantially due to factors such as the
following:
. actual or anticipated fluctuations in our operating results;
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. changes in or our failure to meet securities analysts' expectations;
. announcements of technological innovations;
. introduction of new competitors;
. introduction of new products and services by us or our competitors;
. developments with respect to intellectual property rights;
. additions or departures of key personnel;
. conditions and trends in the Internet and other technology industries;
. fluctuations in stock market price and volume, which are particularly
common among securities of software and internet-oriented companies; and
. general market conditions.
Purchasers of our common stock will suffer immediate and substantial dilution.
Purchasers of our common stock in this offering will experience immediate
dilution of $ in the pro forma net tangible book value per share of common
stock, based on an assumed initial public offering price of $ per share.
Purchasers will also experience additional dilution upon the exercise of
outstanding stock options and warrants. The initial public offering price is
expected to be substantially higher than the book value per share of our common
stock. Some elements of our market value do not originate from measurable
transactions. Therefore, there is not a corresponding rise in "book," or
historical accounting, value for our rise in market value, if any. Examples of
these elements include the perceived value associated with our strategic
relationships, perceived growth prospects of our market and our perceived
competitive position within that market.
After this offering, our directors, executive officers and principal
stockholders will continue to have substantial control over matters requiring
stockholder approval and may not vote in the same manner as our other
stockholders.
After this offering, our directors, executive officers and stockholders who
currently own over 5% of our common stock will collectively beneficially own,
in the aggregate, approximately % of our outstanding common stock. These
stockholders, if they vote together, will be able to significantly influence
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. This concentration of
ownership may also delay or prevent a change in control of Support.com.
Future sales of our common stock may depress our stock price.
Sales of a substantial number of shares of common stock, including shares
issued upon the exercise of outstanding options and warrants, in the public
market after this offering or after the expiration of lockup and holding
periods could cause the market price of our common stock to decline. After this
offering, we will have approximately shares of common stock
outstanding. All the shares sold in this offering will be freely tradable. The
remaining shares of common stock outstanding after this offering are
subject to lock-up agreements that prohibit the sale of the shares for 180 days
after the date of this prospectus. Any or all of these shares may be released
prior to expiration of the 180-day lockup period at the discretion of Credit
Suisse First Boston Corporation. Immediately after the 180-day lockup period,
of these shares of outstanding options and warrants will become
available for sale. The remaining shares of our common stock will become
available at various times thereafter upon the expiration of one-year holding
periods.
Due to our expected stock price volatility, we may become involved in
securities class action litigation, which could divert management's attention
and harm our business.
The stock market has from time to time experienced significant price and
volume fluctuations that have affected the market prices for the common stocks
of technology companies, particularly Internet companies.
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These broad market fluctuations may cause the market price of our common stock
to decline. In the past, following periods of volatility in the market price of
a particular company's securities, securities class action litigation has often
been brought against that company. We may become involved in this type of
litigation in the future. Litigation is often expensive and diverts
management's attention and resources, which could harm our business and
operating results.
We may need additional capital, and raising additional capital may dilute
existing stockholders.
We believe that our existing capital resources, including the anticipated
proceeds of this offering, will enable us to maintain our current and planned
operations for at least the next 12 months. However, we may choose to, or be
required to, raise additional funds due to unforeseen circumstances. If our
capital requirements vary materially from those currently planned, we may
require additional financing sooner than anticipated. This financing may not be
available in sufficient amounts or on terms acceptable to us and may be
dilutive to existing stockholders. If adequate funds are not available or are
not available on acceptable terms, our ability to hire, train or retain
employees, to fund our expansion, take advantage of unanticipated
opportunities, develop or enhance services or products, or otherwise respond to
competitive pressures would be significantly limited.
Our certificate of incorporation, bylaws and Delaware corporate law contain
provisions which could delay or prevent a change in control even if the change
in control would be beneficial to our stockholders.
Delaware law as well as our certificate of incorporation and bylaws contain
provisions that could delay or prevent a change in control of Support.com, even
if it were beneficial to the stockholders to do so. These provisions could
limit the price that investors might be willing to pay in the future for shares
of our common stock. These provisions:
. authorize the issuance of preferred stock that can be created and issued
by the board of directors without prior stockholder approval to increase
the number of outstanding shares and deter or prevent a takeover attempt;
. prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders;
. prohibit cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
. limit the ability of stockholders to call special meetings of
stockholders; and
. establish advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted upon by
stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of Support.com.
If we do not use the proceeds in a manner that increases our operating results
or market value, our business could suffer.
Our management will have significant flexibility in applying the net
proceeds of this offering. The net proceeds could be applied in ways that do
not increase our operating results or market share. We intend generally to use
the net proceeds from this offering to repay $2.4 million in principal under
secured and subordinated debt facilities and for general corporate purposes,
including working capital. We have not yet determined the actual expected
expenditures and thus cannot estimate the amounts to be used for each specified
purpose. The actual amounts and timing of these expenditures will vary
significantly depending on a number of factors, including, but not limited to,
the amount of cash used in or generated by our operations and the market
response to the introduction of any new product and service offerings.
Depending on future developments and
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circumstances, we may use some of the proceeds for purposes other than those
described above. You will not have the opportunity, as part of your investment
decision, to assess whether proceeds are being used appropriately.
Shares issued, and option grants made, under our 1998 Stock Option Plan
violated the registration requirements of state securities laws.
Shares issued and options granted under our 1998 Stock Option Plan violated
state securities laws because these stock issuances and option grants were not
exempt from registration or qualification under state securities laws and
registration or qualification was not obtained. If the rescission offer that we
intend to make to the holders of these shares and options beginning
approximately 30 days after the effective date of this offering is accepted, we
could be required to make aggregate payments to the holders of these shares and
options of up to $ plus statutory interest. If any or all of the offerees
reject the rescission offer, we may continue to be liable under state
securities laws for up to an aggregate amount of approximately $ plus
statutory interest. See "Rescission Offer."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to our, and in some cases our customers' and/or alliance partners', future
plans, objectives, expectations, intentions and financial performance, and the
assumptions that underlie these statements. In some cases, you can identify
forward-looking statements because they use terms such as "anticipates,"
"believes," "continue," "could," "estimates," "expects," "intends," "may,"
"plans," "potential," "predicts," "should" or "will" or the negative of those
terms or other comparable words. These statements involve known and unknown
risks, uncertainties and other factors that may cause industry trends or our
actual results, level of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. These factors include
those listed under "Risk Factors," "Business," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this prospectus.
Although we believe that expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results or changes in our expectations. You should not place undue
reliance on these forward-looking statements, which apply only as of the date
of this prospectus.
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USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $
million from the sale of shares of our common stock, and $
million if the underwriters' over-allotment option is exercised in full at the
initial public offering price of $ per share, after deducting the
estimated underwriting discounts and commissions and the estimated offering
expenses payable by us.
We intend to use the net proceeds of this offering to repay $2.4 million in
principal under secured and subordinated debt facilities and for general
corporate purposes, including working capital. We do not have more specific
plans for the net proceeds from this offering. The amounts and timing of these
expenditures will vary depending on a number of factors, including the amount
of cash generated by our operations, competitive and technological developments
and the rate of growth, if any, of our business. We may also use a portion of
the net proceeds to acquire additional businesses, products and technologies,
to lease additional facilities, or to establish joint ventures that we believe
will complement our current or future business. However, we have no specific
plans, agreements or commitments to do so and are not currently engaged in any
negotiations for any acquisition or joint venture. As a result, we will retain
broad discretion in the allocation of the net proceeds of this offering.
Pending the uses described above, we will invest the net proceeds of this
offering in short term interest bearing, investment-grade securities. We cannot
predict whether the proceeds will be invested to yield a favorable return. We
believe that our available cash, together with the net proceeds of this
offering, will be sufficient to meet our capital requirements for at least the
next 12 months.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock and do not
anticipate paying any dividends in the foreseeable future. We currently expect
to retain our earnings, if any, for the development of our business. Our bank
line of credit currently prohibits the payment of dividends.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to:
. the assumed exercise of outstanding warrants to purchase an aggregate
of 136,972 shares of common stock that expire upon completion of this
offering; and
. the conversion of all outstanding shares of preferred stock into common
stock and changes to our authorized capital stock upon completion of
this offering;
. on the same pro forma basis as adjusted to give effect to the sale of
shares of common stock by us at an assumed initial public
offering price of $ per share and after deducting the
underwriting discounts and commissions and estimated offering expenses
payable by us.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
(in thousands except share
data)
<S> <C> <C> <C>
Long-term obligations, excluding current
portion....................................... $ 2,277 $ 2,277 $
-------- -------- ----
Redeemable convertible preferred stock:
12,156,108 shares authorized:
Series B--7,346,108 shares designated,
7,346,108 issued and outstanding actual,
none authorized, issued and outstanding pro
forma and pro forma as adjusted............. 5,641 -- --
Series C--4,810,000 shares authorized,
4,638,618 issued and outstanding actual,
none authorized, issued and outstanding pro
forma and pro forma as adjusted............. 15,808 -- --
Stockholders' equity (net capital deficiency):
Series A preferred stock, 3,571,600 shares
authorized, 3,571,600 shares issued and
outstanding actual, none authorized, issued
and outstanding pro forma and pro forma as
adjusted.................................... 1 -- --
Common Stock, 31,060,000 shares authorized,
10,874,374 shares issued and outstanding
actual; 150,000,000 shares authorized,
26,567,672 shares issued and outstanding pro
forma; shares issued and
outstanding pro forma as adjusted........... 1 3
Additional paid-in capital................... 19,491 41,384
Receivable from stockholders................. (1,450) (1,450)
Deferred compensation........................ (14,252) (14,252)
Accumulated deficit.......................... (17,044) (17,044)
-------- -------- ----
Total stockholders' equity (deficit)....... (13,253) (8,641)
-------- -------- ----
Total capitalization....................... $ 10,473 $ 10,918
======== ======== ====
</TABLE>
This table excludes the following shares:
. 146,678 shares of common stock issuable upon exercise of warrants that
will be outstanding after this offering;
. 3,944,895 shares of common stock subject to options outstanding under our
1998 Stock Option Plan as of December 31, 1999; and
. 7,307,545 shares of common stock reserved for issuance under our 1998
Stock Option Plan, 2000 Omnibus Equity Incentive Plan and our 2000
Employee Stock Purchase Plan.
21
<PAGE>
DILUTION
The pro forma net tangible book value of our common stock, on December 31,
1999, assuming the issuance of 136,972 shares of common stock upon the exercise
of warrants that will expire upon completion of the offering, and after giving
effect to the conversion of all outstanding shares of preferred stock upon
completion of the offering, was approximately $8.6 million, or approximately
$0.33 per share. Pro forma net tangible book value per share represents the
amount of our total tangible assets less total liabilities divided by the
number of shares of common stock outstanding. Dilution in net tangible book
value per share represents the difference between the amount per share paid by
purchasers of our common stock in this offering and the net tangible book value
per share of our common stock immediately afterwards. Assuming our sale of
shares of common stock offered by this prospectus at an assumed
initial public offering price of $ per share, and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses, our pro forma net tangible book value at December 31, 1999 would have
been approximately $ million or $ per share. This represents an
immediate increase in net tangible book value of $ per share to the
existing stockholders and an immediate dilution of $ per share to new
investors purchasing common stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $
Pro forma net tangible book value per share at December 31, 1999... $0.33
Increase per share attributable to new investors...................
-----
Pro forma net tangible book value per share after this offering.....
----
Pro forma dilution per share to new investors....................... $
====
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering. We used the assumed initial public offering price of $ per
share, and we have not deducted estimated underwriting discounts and
commissions and estimated offering expenses in our calculations.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 26,567,672 % $22,772,000 % $0.86
New investors.................. $ $
---------- ------ ----------- ------
Total........................ 100.00% $ 100.00%
========== ====== =========== ======
</TABLE>
The foregoing discussion and table assume no exercise of any outstanding
stock options. The exercise of options outstanding under our stock option plans
having an exercise price less than the offering price would increase the
dilutive effect to new investors.
If the underwriters exercise the over-allotment in full, the following will
occur:
. the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our
outstanding common stock; and
. the number of shares held by new investors will increase to ,
or approximately % of the total number of shares of our common stock
outstanding after completion of this offering.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the period from
inception (December 3, 1997) through December 31, 1998 and the year ended
December 31, 1999 and the selected balance sheet data as of December 31, 1998
and 1999 are derived from our audited financial statements included elsewhere
in this prospectus. Our historical results are not necessarily indicative of
results to be expected for any future period. The data have been derived from
financial statements that have been prepared in accordance with generally
accepted accounting principles and should be read together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes included elsewhere in this
prospectus. See note 1 of the notes to our financial statements for an
explanation of the determination of the number of shares used in computing
basic and diluted net loss per share.
<TABLE>
<CAPTION>
Period from
inception
(December 3, 1997) Year ended
to December 31, December 31,
1998 1999
------------------ ------------
(in thousands
except per share data)
<S> <C> <C>
Statement of Operations Data:
Revenue:
License fees................................ $ 18 $ 2,746
Services.................................... -- 569
------- --------
Total revenue............................. 18 3,315
Costs and expenses:
Cost of license fees........................ -- 4
Cost of services............................ -- 965
Research and development.................... 1,132 2,401
Sales and marketing......................... 1,197 8,974
General and administrative.................. 477 1,881
Amortization of deferred compensation....... 16 3,554
------- --------
Total costs and expenses.................. 2,822 17,779
------- --------
Loss from operations.......................... (2,804) (14,464)
Interest and other income (expense), net...... 54 170
------- --------
Net loss...................................... (2,750) (14,294)
Accretion on redeemable convertible preferred
stock........................................ (214) (1,072)
------- --------
Net loss attributable to common stockholders.. $(2,964) $(15,366)
======= ========
Basic and diluted net loss per share.......... $ (0.57) $ (2.31)
======= ========
Shares used in computing basic and diluted net
loss per share............................... 5,227 6,643
======= ========
Unaudited pro forma basic and diluted net loss
per share.................................... $ (0.71)
========
Shares used in computing unaudited pro forma
basic and diluted net loss per share......... 20,137
========
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
------- --------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments............ $ 2,807 $ 12,489
Working capital (deficit).................................... 2,979 9,338
Total assets................................................. 3,672 17,525
Long-term obligations, net of current portion................ 449 2,277
Redeemable convertible preferred stock....................... 5,237 21,449
Total stockholders' equity (deficit)......................... (2,423) (13,253)
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with the financial
statements and the related notes included elsewhere in this prospectus. The
following discussion contains forward-looking statements. Our actual results
may differ significantly from those projected in the forward-looking
statements. Factors that might cause future results to differ materially from
those projected in the forward-looking statements include, but are not limited
to, those discussed below and elsewhere in this prospectus, particularly in
"Risk Factors."
Overview
We are a leading provider of eSupport infrastructure software that automates
and personalizes the delivery of support to users over the Internet. We were
incorporated in December 1997. From our founding through the end of 1998, we
primarily engaged in research activities and developing and marketing our
products. We first began generating revenue from software license fees from the
initial version of our products in December 1998. During 1999, we continued to
enhance the core functionality of our products, and build our management team
and operational infrastructure. In June 1999, we began shipping the second
version of our products and in January 2000, we began shipping the third
version of our products. As our revenue increased sequentially from quarter to
quarter during 1999, we also incurred significant operating expenses as we
expanded our research and development organization, our direct sales force and
professional services department. At December 31, 1999, we had an accumulated
deficit of $17.0 million.
Our revenue is principally generated from software licenses and related
professional services. We market our products through a combination of direct
sales, resellers, support outsourcers and distributors. Through 1999,
substantially all of our revenue was derived from direct sales. We focused on
building our indirect sales channel in the fourth quarter of 1999. Although we
expect direct sales to continue to account for a majority of revenue in the
future, we anticipate a more significant portion of sales to be generated
through our indirect channel. In 1998, no revenue was attributable to licenses
to customers outside of North America and, in 1999, 2% of our revenue was
attributable to these customers. We plan to expand our international operations
significantly, particularly in Europe and Asia.
We license our software under subscription and perpetual licenses. Revenue
under subscription licenses is recognized ratably over the term of the
subscription period beginning upon delivery of the product. Subscription
licenses typically have a term of three years. Payments under a subscription
agreement are typically made at the beginning of each annual period. We began
licensing software under a subscription model in June 1999. Due to the fact
that revenue under perpetual license agreements is recognized more rapidly than
subscription-based revenue, a majority of the revenue recognized to date has
been derived from perpetual licenses. However, to date, a majority of the
licenses executed were subscription-based. We recognize revenue from perpetual
licenses when persuasive evidence of an agreement exists, product has been
delivered, no obligations remain, the fee is fixed and determinable and
collectibility is probable. When services are an essential element of an
arrangement, we recognize revenue under the arrangement as the services are
delivered. We do not recognize revenue from sales to resellers and other
distributors until our product is delivered to the end user.
Services revenue consist primarily of fees from professional services, such
as consulting services, maintenance and support. Services revenue from
professional services is recognized as the services are delivered. Our
maintenance arrangements provide technical support and include the right to
unspecified upgrades. Maintenance revenue is typically based on a percentage of
the license fee and is recognized over the life of the related agreement.
Customer advances and billed amounts due from customers in excess of revenue
recognized under subscription and maintenance agreements are recorded as
deferred revenue.
24
<PAGE>
We intend to continue to invest in product development and technologies to
enhance our current products and services, develop new products and services
and further advance our solution offerings. In addition, an important part of
our strategy is to expand our operations and employee base and build our sales,
marketing, customer support, technical and operational resources. As a result,
we expect to continue to incur substantial operating losses for the foreseeable
future, and our expected increase in operating expenses will require
significant increases in revenue before we become profitable.
For purposes of this discussion, references to 1998 include the period from
our inception on December 3, 1997 to December 31, 1998.
Results of Operations
Revenue
Total revenue increased from $18,000 in 1998 to $3.3 million in 1999. Bear
Stearns, which licensed our software under a perpetual licensing arrangement,
accounted for 53% of our total revenue in 1999. No other single customer
accounted for more than 10% of our total revenue.
License revenue
License revenue increased from approximately $18,000 in 1998 to $2.7 million
in 1999. This increase was primarily due to the fact that we did not ship our
first product until December 1998.
Services revenue
Services revenue increased from $0 in 1998 to $569,000 in 1999. This
increase was primarily due to maintenance on new licenses and increased
implementation and consulting services performed in connection with increased
license sales.
Cost of revenue
Total cost of revenue increased from $0 in 1998 to approximately $969,000 in
1999.
Cost of license revenue
Cost of license revenue in 1999 consists primarily of expenses incurred to
manufacture, package and distribute software products and related documentation
and license fees paid to third parties under technology license arrangements
which have not been significant to date. Cost of license revenue increased from
$0 in 1998 to approximately $4,000 in 1999. We expect cost of license revenue
to continue to remain a relatively small percentage of total revenue and to
grow in absolute dollars as we license third party technologies.
Cost of services revenue
Cost of services revenue includes salaries and other expenses related to our
customer support organization and related overhead expenses, and payments made
to third parties for consulting services provided to our customers. Cost of
services revenue increased from $0 in 1998 to approximately $965,000 in 1999.
This increase was primarily due to an increase in the number of employees in
our customer support and professional services organizations from no employees
at December 31, 1998 to 13 at December 31, 1999. Cost of services revenue
exceeds services revenue during 1999 due to the increase in the number of
personnel in our services and organization and our investment in experienced
management in anticipation of future growth. We expect to continue to invest
heavily in customer support, professional services, consulting and training and
expect cost of services revenue to increase accordingly.
25
<PAGE>
Operating Expense
Research and development. Research and development expense consists
primarily of payroll expenses and related costs for research and development
personnel. Research and development expense is expensed as incurred. Research
and development expenses increased from approximately $1.1 million in 1998 to
approximately $2.4 million in 1999. This increase was primarily due to the
increase in the number of engineering personnel from 10 at December 31, 1998 to
30 at December 31, 1999. We expect research and development expense to increase
in absolute dollars in 2000 as we continue to hire additional research and
development personnel and spend additional amounts on third party development
efforts.
Sales and marketing. Sales and marketing expense consists primarily of
payroll expense, including salaries and commissions and related costs for sales
and marketing personnel, promotional expenditures, including public relations,
advertising and trade shows. Sales and marketing expense increased from
approximately $1.2 million in 1998 to approximately $9.0 million in 1999. This
increase was primarily due to an increase in the number of direct sales, pre-
sales support and marketing employees from 10 employees at December 31, 1998 to
43 employees at December 31, 1999. We also increased the number of regional and
international sales offices from two at December 31, 1998 to 11 at December 31,
1999. In addition, we expense sales commissions in the period in which a sale
occurs. As a result, we expect that sales and marketing expense will continue
to be a significant component of operating expense. We expect sales and
marketing expense will increase in absolute dollars as we increase our sales
force, establish sales offices in additional domestic and international
locations and increase advertising and marketing programs and other promotional
activities.
General and administrative. General and administrative expense consists
primarily of payroll expense and related costs of administrative personnel and
professional fees for legal, accounting and other professional services.
General and administrative expense increased from approximately $477,000 in
1998 to approximately $1.9 million in 1999. The increase was primarily due to
increased numbers of administrative personnel from five at December 31, 1998 to
15 at December 31, 1999. We expect general and administrative expense to
increase as we hire additional administrative personnel to support the
anticipated growth of our business and our operations as a public company.
Deferred stock-based compensation. In connection with the grant of stock
options to employees and consultants, we have recorded deferred stock-based
compensation related to stock options through December 31, 1999 of
approximately $17.8 million. This amount represents the difference between the
exercise price of these stock option grants and the deemed fair value of the
common stock at the time of grant. Of this amount, we amortized approximately
$3.5 million through December 31, 1999. The remaining $14.3 million and the
additional amount of stock-based compensation from recent grants will be
amortized using the graded vesting method over the remaining vesting period of
the options. Based on option grants through December 31, 1999, we expect to
amortize approximately $2.7 million in the first quarter of 2000, $2.7 million
in the second quarter of 2000, $2.1 million in the third quarter of 2000 and
$1.8 million in the fourth quarter of 2000 and lower amortization amounts in
subsequent quarters.
Interest and other income (expense), net. Interest income, net consists
primarily of interest earned on our cash, cash equivalents and short term
investments offset by interest expenses associated with our capital leases and
equipment advances. Interest and other income, net was approximately $54,000 in
1998 and approximately $170,000 in 1999. The increase in interest income and
other income, net relates primarily to increased average cash balances
resulting from our equity financing in June 1999.
Provision for income taxes. From inception through December 31, 1999, we
incurred net losses for federal and state tax purposes and have not recognized
any tax provision or benefit. As of December 31, 1999, we had $10.1 million of
federal and state net operating loss carryforwards to offset future taxable
income. The net operating loss carryforwards begin to expire on varying dates
beginning in 2005 through 2019. Given our limited operating history, our losses
incurred to date and the difficulty in accurately forecasting our future
26
<PAGE>
results, management does not believe that the realization of the related
deferred income tax asset meets the criteria required by generally accepted
accounting principles. Therefore we have recorded a 100% valuation allowance
against the deferred income tax asset.
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly statement of
operations data for the four quarters ended December 31, 1999. This information
has been derived from our unaudited financial statements, which, in
management's opinion, have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information for
the quarters presented. This information should be read in conjunction with the
audited financial statements and related notes included elsewhere in this
prospectus. The operating results for any quarter are not necessarily
indicative of the operating results for any future period.
<TABLE>
<CAPTION>
Three months ended
----------------------------------
Mar. June Sept. Dec.
31, 30, 30, 31,
1999 1999 1999 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue
License fees............................. $ 330 $ 492 $ 624 $ 1,300
Services................................. 4 21 154 390
------- ------- ------- -------
Total revenue.......................... 334 513 778 1,690
Costs and expenses
Cost of license fees..................... 1 -- 2 1
Cost of services......................... 73 128 240 524
Research and development................. 373 370 787 871
Sales and marketing...................... 862 1,648 2,576 3,888
General and administrative............... 182 322 488 889
Amortization of deferred compensation.... 52 183 1,324 1,995
------- ------- ------- -------
Total costs and expenses............... 1,543 2,651 5,417 8,168
------- ------- ------- -------
Loss from operations....................... (1,209) (2,138) (4,639) (6,478)
Interest and other income (expense), net... 2 (22) 88 102
------- ------- ------- -------
Net loss................................... $(1,207) $(2,160) $(4,551) $(6,376)
======= ======= ======= =======
</TABLE>
Our quarterly revenue increased sequentially in 1999 due to the introduction
of and increased demand for our software products as well as the growth of our
direct sales force. Additionally, in June 1999, we began offering subscription
licenses of our software. Services revenue consisting of the maintenance
components of our license agreements and consulting services commenced in the
second quarter. Services revenue and related costs increased sequentially as we
hired services personnel and grew our customer base.
On a quarterly basis we have increased the level of spending throughout the
organization. Total operating expenses increased primarily due to expenses
associated with building a sales and marketing infrastructure, and increased
spending on research and development to support new product introductions.
Specifically:
. Sales and Marketing. During the third and fourth quarters, sales and
marketing expenses increased due to additional personnel costs which
include commissions and travel expenditures, as we grew our direct sales
force and indirect sales channel. We also incurred expenses in this
period in connection with the launch and branding of the Support.com
name and Web site.
. Research and Development. In the third quarter, research and development
costs increased due to additional hiring of engineering personnel, as
well as legal expenses associated with obtaining patents on intellectual
property.
27
<PAGE>
. General and Administrative. In the fourth quarter, general and
administrative costs increased as we hired additional personnel to
manage our expanding operations and incurred expenses associated with
executive recruiting, information technology and other infrastructure
developments.
Interest and other income (expense), net increased in the third and fourth
quarters primarily due to the financing we obtained in June 1999. We invested
the proceeds of the financing in short term investments.
We have incurred operating losses since inception, and we may never achieve
profitability in the future. In the past a significant portion of our sales
have been realized near the end of the quarter. Accordingly, a delay in an
anticipated sale past the end of a particular quarter could negatively impact
our results of operations for that quarter. We believe that future operating
results will be subject to quarterly fluctuations due to a variety of factors,
many of which are beyond our control.
Liquidity and Capital Resources
Since our inception in December 1997, we have financed our operations
primarily through the private placement of our preferred stock, and to a lesser
extent through revenues, bank borrowings and capital equipment lease financing.
As of December 31, 1999, we had $12.5 million in cash, cash equivalents and
short-term investments. Net cash provided by financing activities was $17.9
million in 1999 and $5.5 million in 1998. In both cases, the cash was primarily
attributable to net proceeds from the issuance of preferred stock.
We have both a secured and subordinated debt facility with a single lender
under which we are entitled to borrow up to $2.5 million, all of which has been
used. We intend to repay $2.4 million in principal under secured and
subordinated debt facilities with the proceeds of this offering. We also have
an aggregate of $2.5 million available under equipment lease credit facilities,
of which $1.1 million is currently outstanding. Under the equipment lease line,
we are entitled to lease equipment with payment terms extending 48 months. The
ability to lease new equipment expires in July 2001. Amounts outstanding under
these facilities bear interest at rates ranging from 9.0% to 12.0% and are
secured by substantially all of our assets.
Net cash used in operating activities was $2.4 million in 1998 and $8.0
million in 1999. Cash used in operating activities was primarily the result of
net losses and increases in accounts receivable, partially offset by increases
in deferred revenue accounts payable and accrued expenses.
Net cash used in investing activities was $307,000 in 1998 and $8.7 million
in 1999. Net cash used in investing activities during 1999 included $8.5
million net purchases of short-term investments.
As of December 31, 1999, our principal commitments consisted of obligations
outstanding under notes payable, capital and operating leases. Although we have
no material commitments for capital expenditures, we anticipate a substantial
increase in our capital expenditures and lease commitments consistent with our
anticipated growth in operations, infrastructure and personnel. As of December
31, 1999, future lease commitments for our office facility were $1.3 million in
2000 and $850,000 in 2001. We expect to require additional space to meet our
needs in the next 12 months. Adequate space may not be available on
commercially reasonable terms.
We believe that the net proceeds from the sale of common stock in this
offering, together with our current cash balances, will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
12 months. In addition, although there are no present understandings,
commitments or agreements with respect to any acquisition of other businesses,
products and technologies, we from time to time evaluate potential acquisitions
of other businesses, products and technologies and may in the future require
additional equity or debt financings to consummate any potential acquisitions.
If we require additional capital resources to grow our business internally
or to acquire complementary technologies and businesses at any time in the
future, we may seek to sell additional equity or debt securities. The sale of
additional equity or convertible debt securities could result in additional
dilution to our
28
<PAGE>
stockholders. We cannot assure you that any financing arrangements will be
available to us, or be available in amounts or on terms acceptably to us.
Year 2000 Issues
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations causing disruptions of
operations for any company using such computer programs or hardware. We have
executed a plan designed to make our computer systems, applications, computer
and manufacturing equipment and facilities Year 2000 ready. To date, none of
our systems, applications, equipment or facilities have experienced material
difficulties from the transition to Year 2000. Although we have not experienced
any Year 2000 problems, it is possible that we could still face problems or
disruptions. For instance, we may face problems with systems that have not been
utilized since 1999 or in connection with the leap year. While we believe that
all of our systems are Year 2000 compliant, we cannot assure you that we will
not discover a problem during 2000 that needs to be upgraded, modified or
replaced. In addition, we depend on a number of third-party vendors to provide
both information and non-information technology systems and services. While we
believe that our material third-party systems and services are Year 2000
compliant, we cannot be sure that we will not experience any problems with
these systems and services during 2000. We also cannot provide any assurance
that governmental agencies, utility companies, Internet access companies and
others outside of our control will not experience any future Year 2000
problems.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for all fiscal quarters for fiscal
years beginning after June 15, 2000 and is not anticipated to have a
significant impact on our operating results or financial condition when
adopted.
Qualitative and Quantitative Disclosures about Market Risk
We develop products in the United States and market and sell in North
America, South American, Asia and Europe. As a result, our financial results
could be affected by factors such as changes in foreign currency exchange rates
or weak economic conditions in foreign markets. As all sales are currently made
in U.S. dollars, a strengthening of the dollar could make our products less
competitive in foreign markets. Our interest income is sensitive to changes in
the general level of U.S. interest rates, particularly since the majority of
our investments are in short-term instruments. Due to the nature of our short-
term investments, we have concluded that there is no material market risk
exposure.
Our investment policy requires us to invest funds in excess of current
operating requirements in:
. obligations of the U.S. government and its agencies;
. investment grade state and local government obligations;
. securities of U.S. corporations rated A1 or AA by Standard and Poors or
the Moody's equivalent; and
. money market funds, deposits or notes issued or guaranteed by U.S. and
non-U.S. commercial banks, meeting certain credit rating and net worth
requirements with maturities of less than two years.
At December 31, 1999, our cash and cash equivalents consisted primarily of
demand deposits and money market funds held by large institutions in the U.S.
and our short-term investments were invested in corporate debt securities
maturing in less than one year.
29
<PAGE>
BUSINESS
Overview
We are a leading provider of eBusiness infrastructure software that
optimizes, automates and personalizes user support over the Internet. Our
comprehensive suite of eSupport software services is designed to accelerate
eBusiness growth by increasing the strategic value of support organizations and
reducing support inefficiencies that would otherwise constrain expanding
Internet initiatives. We offer customers the ability to automate problem
avoidance through self-healing, promote call avoidance through user self-
service and improve problem resolution through optimized, assisted support. By
deploying our eSupport infrastructure, customers can transform eBusiness
support operations from inefficient cost centers to highly productive and
scalable competitive assets that increase customer loyalty, improve operational
efficiencies and generate incremental revenue. We sell our products and
services to corporate information technology departments, Internet service
providers, application service providers and support outsourcers. Our customers
include Bear Stearns, Compaq Professional Services, Computer Sciences Corp.,
everdream, Excite@Home, Globo Cabo, JCPenney and micronpc.com.
Industry Background
User Support Is Critical for eBusiness
Businesses are increasingly relying on the Internet to sell more products
and services, drive efficiencies in supply chains and distribution channels,
establish and improve customer relationships and increase employee
productivity. Among these organizations are traditional businesses that are
increasingly conducting business over the Internet, companies that are formed
specifically to deliver products and services over the Internet, and Internet-
related technology vendors and service providers. To support their eBusiness
initiatives, businesses are deploying Internet, intranet and extranet
technology solutions that automate and optimize the interaction between the
enterprise and its employees and customers, as well as the members of an
extended enterprise of suppliers, distributors and business partners.
In this environment, high-quality support is critical for customers and
eBusiness infrastructure users and the growth of eBusiness initiatives. As
businesses increase their reliance on the Internet, user support becomes a
primary interface between a business and its employees, supply chain partners
and customers. High-quality, personalized and continuous user support enables
internal and external systems to run more efficiently, improves employee
productivity and increases customer acquisition, retention and satisfaction.
Therefore, deploying a comprehensive Internet-based support infrastructure is
becoming a competitive asset that enables a company to differentiate its
products and services and improve the efficiency of its operations.
The Growing Difficulty in Delivering User Support
We believe technical support has become the most critical form of user
support, as businesses and users increasingly rely upon complex IT
infrastructure and the Internet to conduct business. IDC estimates that 59% of
businesses either lose business, or are no longer able to conduct business, if
their system or network is not available. In addition, delivering technical
support is increasingly complex and difficult as systems become more
sophisticated, different electronic devices proliferate and the number of users
and their demands grow.
Millions of Unique Users Are Leveraging the Power of the Web. According to
IDC, the number of people using the Web will grow from 196 million in 1999 to
502 million in 2003. These users have a broad range of support requirements and
levels of sophistication. Supporting this growing demographic is further
complicated by each user's dependence on different applications and devices.
These users also face a proliferation of new Web-based services and require
real-time training and electronic support.
Computing Environments Are Becoming More Complicated. A typical business
uses a broad range of operating systems, networking technologies, e-commerce
software, security solutions, server applications,
30
<PAGE>
legacy systems, packaged and internally developed applications and productivity
tools. In many cases, these applications are integrated within the corporation
and with the systems and applications of the extended enterprise, through a
variety of networks and protocols.
Electronic Devices Are Proliferating. Businesses and consumers use many
different electronic devices to conduct business, access the Internet and
purchase products and services, such as personal computers, personal digital
assistants and other mobile devices. Each device bears an individual profile--a
different configuration of applications, operating system components, network
access protocols and personal settings. To illustrate this proliferation,
according to IDC, the number of shipped personal computers alone will grow from
approximately 112 million in 1999 to 190 million in 2003.
Applications Are Multiplying. Meta Group estimates that the number of
programs on the average personal computer has risen from approximately 200 in
1997 to over 600 in 1999. These applications are frequently upgraded, and
combinations will increase exponentially. In addition, we believe that the
variability of device configurations will increase as customers download,
install and use thousands of programs from the Internet or access hosted
applications.
Existing Support Solutions Are Inadequate
Existing approaches to user support are increasingly inefficient and costly
in today's rapidly evolving and dynamic Internet economy. Providing scalable,
personalized technical support is especially difficult. Businesses have
traditionally provided support to users on-site or remotely through call
centers and help desks. These methods are highly labor intensive because
support is typically provided through time consuming phone interaction, e-mail
or on-site visits. Moreover, call centers and help desks generally experience
high turnover and have difficulty scaling. Support professionals are provided
with limited knowledge of users, their systems and business needs and therefore
cannot properly and rapidly diagnose and resolve users' problems. In addition,
user self-help options such as manuals and software help features have been of
limited effectiveness, as they are static and require intensive user effort.
The increasing complexity of support requires a highly personalized,
automated and Web-based approach to the development and delivery of support. To
date, support infrastructure technology investments have primarily focused on
making incremental improvements to existing call center and help desk
solutions. For example, work-flow solutions, such as automated call-tracking,
knowledge management systems, which develop knowledge bases, and Web-based
applications, such as email response management systems, have increased the
efficiency of support delivery. However, these solutions do not reduce the need
for assisted support, offer automated proactive support or provide Web-based
technologies for personalized problem diagnosis or resolution.
The Growth of eSupport
According to the Gartner Group, the volume of nonfinancial goods and
services sold through business-to-business e-commerce is expected to reach over
$7 trillion worldwide in 2004. However, most organizations lack an adequate
support infrastructure to meet the demands imposed by this increasing volume of
Internet commerce. The inadequacy of existing support infrastructure impedes
the growth and rapid acceptance of eBusiness. Therefore, businesses are seeking
more effective and efficient ways to deliver user support. Support solutions
must deliver highly personalized services that are able to automatically and
intelligently identify and resolve user problems and questions. Organizations
need to transform eBusiness support operations from inefficient cost centers to
highly productive and scalable competitive assets that increase customer
loyalty, improve operational efficiencies and generate incremental revenue. To
do so, businesses must fully build out their Web-based support infrastructure.
The market for eSupport, the automated delivery of user support over the
Internet, is estimated by IDC to grow from $3 billion in 1999 to over $14
billion in 2003.
The Support.com Solution
We are a leading provider of comprehensive eSupport infrastructure software
that optimizes, automates and personalizes user support. We sell and market our
products to corporate information technology
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departments, support outsourcers, Internet service providers, applications
service providers and other businesses that leverage the Internet. We offer a
comprehensive eSupport solution that automates problem avoidance through self-
healing, promotes call avoidance through user self-service, and optimizes
online assisted support. Our Web-based offerings are available in a variety of
configurations, including a full-service Web site, or support portal, that
serves as the nexus of an eBusiness support infrastructure.
The key features of our products include:
Personalized Support. Our software automatically discovers and tracks the
unique characteristics of each user's system and that system's components in
order to personalize and optimize the support process.
Self-Healing. Our software dynamically recognizes, diagnoses and proactively
resolves potential problems as they arise, without the need for the user to
request specific assistance.
Self-Service. Our software empowers users to resolve their own problems
through a single, intuitive interface that provides adaptive, context-sensitive
resolution of problems and queries.
Assisted Service. Our solution ensures that, if and when a problem or query
is escalated to the level at which it requires the assistance of a support
analyst, that analyst will have detailed information about the user's system
and access to dynamically evolving sets of support actions to optimize problem
resolution.
Web Support Content Authoring. Our solution enables support analysts to
develop support actions that automatically implement problem diagnosis and
repair, user training and "just-in-time" help through the Web. These actions
are made available to other support analysts and users to further automate the
support process.
Internet-Based Architecture. Our products are primarily Web-based, meaning
that they can be delivered and updated through the Internet, are secure,
scalable and extensible. By structuring our software this way, we are able to
offer solutions to users, corporate information technology departments and
other support providers that are geographically unconstrained and easy to use
and deploy. By leveraging the Internet to architect a new eSupport process, we
are able to fundamentally improve the effectiveness of support with dynamic and
detailed information exchange.
Through the above features, our solutions:
Accelerate eBusiness Growth. Our software's high degree of automation and
scalability provides our customers with a means for eliminating the support
bottlenecks that would otherwise constrain their rapidly expanding eBusiness
initiatives. Our products provide extensive information-gathering capabilities
that can add value outside the technical support context by helping our
customers convert the traditional help desk into a revenue generating business
services desk. For instance, one of our customers utilizes our eSupport
solution in their support portal to drive sales of additional products and
services.
Leverage the Web to Reduce Support Costs. Traditional support solutions
involve multiple instances of human interaction by telephone and in person. Our
products enable fully automated problem and query resolution directly by
users--that is, without necessarily requiring remote or in-person assistance.
We refer to this user self-service as "Tier Zero," and believe that it is a
uniquely effective and efficient means of providing support. By providing a 24
hour, seven-days-a-week automated "support button" on systems, our software
minimizes escalation of problems from Tier Zero to levels requiring human
interaction. As a result, our customers can leverage their existing support
infrastructure, significantly reduce their overall support costs, and create an
internal environment that allows them to attract and retain high-quality
support analysts.
Increase Customer Satisfaction through Rapid Problem Resolution. Our
products are personalized, context-sensitive, and adapt to dynamically changing
system environments. Our patented DNA Probe, for example, recognizes individual
system settings and provides our eSupport solution with the information
necessary to resolve technical problems at Tier Zero. In situations where
problems are not eliminated at Tier Zero, the Support.com infrastructure also
proactively provides support analysts with detailed user and process
information and problem history. Our approach resolves user problems faster and
more proactively than traditional support solutions, which significantly
increases user satisfaction and reduces downtime.
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Rapidly Deploy and Integrate with Existing Solutions. Our products are
architected to reduce customer configuration deployment times and installation
costs. Our software helps customers to preserve their investments in and
deployments of call center and help desk products, workflow tools, knowledge
bases and other applications. Our solution enhances these capabilities and
integrates them into a cohesive, automated and personalized Internet support
infrastructure. In addition to integrating with a customer's existing support
infrastructure, our solution is designed to effectively support third-party
software and does not require lengthy development, testing or maintenance
cycles.
Enable Businesses to Achieve Competitive Advantage. Our comprehensive
eSupport solution effectively accelerates problem resolution, reduces system
downtime and increases user productivity, each of which is important to
maintaining a competitive advantage in today's Internet economy. In addition,
we offer our customers the ability to differentiate their product offerings,
improve their customer satisfaction and enhance their online presence by
enabling them to brand their own version of our support portal.
Support.com Strategy
Our mission is to be the leading provider of comprehensive eSupport
infrastructure software. Key components of our strategy include:
Capitalize on the Growth of eBusiness and the Internet. We believe that as
businesses continue to leverage the power of the Internet to realize
efficiencies in their interactions with customers, supply chain partners and
employees, the opportunities to provide Web-based products that address the
support needs of these constituencies will be substantial. As companies
increasingly use the Internet to automate business processes, their contact
with customers is progressively becoming limited to those support interactions
that occur when a user has a problem. Our goal is to leverage our technologies
and Web-based architecture to help our customers capitalize on these
interactions, ultimately providing unprecedented levels of customer care via
the Internet.
Continue to Develop Leading-Edge Support Technologies. Our eSupport product
offerings are based on patented technology and solve many complex user support
problems, namely those revolving around technical support. We intend to
continue investing substantial resources in developing innovative technologies
that enhance the personalization, automation and overall effectiveness of our
solutions. We also plan to continue developing technologies to support
additional platforms and applications and to address the complex and evolving
natures of corporate computing environments and the Internet. We believe that
our focus on providing technical support infrastructure gives us a competitive
advantage as we develop solutions to address broader customer support
opportunities.
Extend Market Leadership Position by Expanding Our Sales and Distribution
Capabilities. We plan to continue developing both our internal sales force and
our indirect sales channel of resellers, systems integrators, support
outsourcers and other service providers. We also intend to expand our Web-based
sales strategies. We believe that leveraging our indirect sales channel and Web
sales will add tremendous cost efficiencies to and increase the scalability of
our sales process. Distribution of our products through Internet service
providers and application service providers, which typically have large numbers
of customers, will help promote recognition of our brand and enhance our market
penetration and position. We intend to further penetrate our markets by
leveraging our existing base of reference accounts to support our consultative
selling efforts and to attract new customers.
Leverage and Expand our Technology Relationships. Our relationships with key
technology vendors are important to delivering a comprehensive and robust
support solution and increasing our brand recognition. We work with leading
technology companies in such areas as knowledge management, customer
communications, call center and help desk software to ensure that our offerings
can be integrated with our customers' existing infrastructure. We intend to
deepen our relationships with these and other key technology providers in an
effort to enhance the functionality of our solutions, support additional
platforms and applications and extend the reach of our product offerings.
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Continue to Enhance Customer Value. We work in close partnership with our
customers to develop an in-depth understanding of their businesses, to optimize
their eSupport infrastructure and to increase their return on investment. We
intend to continue to provide a high level of customer service and support
through our services organization and by using our own eSupport technologies.
We will continue to proactively work with our customers to improve the quality
of our product offerings and to identify and address their new support
challenges as they grow with the Internet.
Products
Our eSupport infrastructure products and services enable our customers to
support their customers, supply chain partners and employees automatically and
via the Internet, extranets or intranets. Our software allows our customers to
provide their users with personalized, automated support solutions tailored to
meet the needs of their respective business environments. Support solutions
generated by our products are unique for each user and are "intelligent" in
that they are interactive, adaptable and have the capability to automatically
update themselves as the user's support requirements change. In addition, our
products are Web-based, which reduces user deployment and installation
expenses. This ease of deployment makes our software particularly scalable in
corporate environments.
The following table highlights the features of our products:
<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 proactively identifying and repairing
problems on users' systems.
- -------------------------------------------------------------------------------
Support Center A centralized support infrastructure and a suite of software
components for remote assisted service, enterprise-wide
problem resolution and management and administration of the
overall support environment. Builds on the Healing Agent's
support capabilities to optimize the support process when a
support request is escalated to a support analyst.
- -------------------------------------------------------------------------------
Support Portal An interactive Web platform that enables companies to drive
enhanced self-service and assisted service. Works with the
Internet-enabled Support Center and Healing Agent to provide
support organizations with the components and infrastructure
they need to provide interactive, full-service and
personalized online support.
- -------------------------------------------------------------------------------
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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Our eSupport suite consists of four products that provide a modular approach
to building comprehensive eSupport solutions. The following diagram illustrates
the components of our eSupport Suite and how they interact:
[GRAPHIC APPEARS HERE]
Healing Agent
The Healing Agent provides users with self-healing and automated self-
service capabilities to resolve problems and questions that otherwise would
require a call to the call center or help desk. The Healing Agent effectively
acts as the user's personalized, context-sensitive support assistant,
proactively identifying and automatically solving problems as they arise. In
addition, the Healing Agent provides a single source of information for
addressing software and system malfunctions, known as "break/fix" problems, and
responding to users' queries, called "how-to" questions. The result is fewer
calls to the call center or help desk, shorter problem resolution cycles and a
more satisfying user experience. The Healing Agent serves as the foundation for
our comprehensive support infrastructure.
The Healing Agent includes the following features:
Self-Healing Capabilities. Proactively identifies problems and resolves them
before they manifest themselves. By actively monitoring the applications and
components of a user's changing system, the Healing Agent can intelligently
eliminate problems before they cause downtime.
Automated Self-Service. Enables users to address support problems that
otherwise would require calls to the call center or help desk, including
"break/fix" problems, "how-to" questions and requests for system modifications.
This reduces the number of calls to the call center and provides users with a
more efficient and satisfying support experience.
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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. This increases receptiveness to self-service for both users
and support analysts by reducing the perceived risk of using the recommended
solution.
Support Center
The Support Center provides a centralized support infrastructure and a suite
of software components for remote assisted service, enterprise-wide problem
resolution and management and administration of the overall support
environment. This product suite provides support analysts with the ability to
deliver context-sensitive diagnosis and resolution of user problems. The
Support Center builds on the Healing Agent's support capabilities to optimize
the support process when a support request is escalated to the call center or
help desk. The Support Center provides support for a comprehensive range of
call types, including "break/fix" problems, "how-to" questions and requests for
system modifications.
The Support Center enables support analysts to provide enhanced assisted
service with a powerful set of tools for diagnosing and resolving problems from
remote locations. By integrating the Healing Agent's knowledge and user history
with remote assisted service, the Support Center automatically provides support
analysts with key information that they would otherwise have to gather
manually. The Support Center allows support analysts to automatically identify
the fundamental causes of problems and enable users and support staff to
systematically and rapidly resolve them without desktop visits or protracted
interactions between the user and the analyst. The result is significant
reductions in call times, which in turn results in improved service to users
and lower support costs.
The enterprise healing capabilities of the Support Center enable the support
organization to proactively solve problems for a large number of users across
the organization before user productivity becomes impaired. Enterprise healing
allows the support organization to identify problems that could potentially
affect large numbers of users and preemptively repair them before users suffer
downtime.
The administration and management capabilities of the Support Center provide
centralized user management, usage and status reporting, storage maintenance,
security administration and instructions for the Healing Agent. The Support
Center manages characteristics and privileges for users and support analysts
and reports on support activities. For instance, periodic maintenance can be
performed from the Support Center to manage security parameters and storage
requirements. The Support Center provides centralized instructions for the
Healing Agents, which control their behavior and activity.
The Support Center includes the following features:
Knowledge-Driven Remote Diagnosis. Provides the support analyst with the
knowledge and tools to remotely diagnose problems on a user's system. The
Support Center provides support analysts with information about the current
configuration of a user's system, a history of all prior actions taken to
resolve the user's problems and a comprehensive suite of tools to present
context-sensitive solutions to the support analyst for execution. This allows
for analysis of problems based on the status of the user's system and
personalized support requirements and results in better and quicker diagnosis
of the fundamental cause of the problem and its solution.
Remote Repair. Enables the support analyst to remotely solve problems with
no user interaction. This reduces desktop visits and costly, time-consuming
interaction with users. Remote repair allows the support analyst to initiate
online chat sessions with users, edit their files and execute commands on their
systems.
Reporting. Provides support organizations with information for monitoring
support transactions, proactively identifying trends and potential problems and
measuring the effectiveness of our eSupport suite.
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Extensibility. Provides an open architecture to enhance and extend the
capabilities of the Support Center to meet evolving support needs. In addition,
the Support Center enables support organizations to transfer and leverage
information with knowledge bases and automatically transfers information into
call tracking databases.
Security. The user can control which activities are allowed or disallowed by
the support analyst. In addition, support administrators manage overall user
and group security. All support activity occurs using industry standard
security, including encryption and the use of digital certificates.
Undo capabilities. Allows support analysts to undo actions taken from the
Support Center. This provides support analysts with flexibility in controlling
actions that may have a negative effect. This increases receptiveness to remote
assisted support for both users and support personnel by reducing the perceived
risk of using the recommended solution.
Support Portal
The Support Portal is an interactive Web platform that enables businesses to
add to or enhance self-service or assisted service capabilities. The Support
Portal works with the Internet-enabled Support Center and Healing Agent to
provide support organizations with the components and infrastructure they need
to build interactive, full-service, context-sensitive and personalized online
support. The Support Portal enhances existing support solutions, such as
knowledge bases and call tracking systems, by delivering context-sensitive
information that allows for better solution matching and automated problem
resolution. The result is a support experience in which the Support Portal
interacts with the user, the system and other support technologies to provide a
personalized solution to the user's support request.
The Support Portal includes the following features:
Web-Based Solution. Scales with the organization's eBusiness initiatives.
The Support Portal serves as a single point of integration for all support
content, technologies and processes.
Interactive, Context-Sensitive Support. Interacts with users' systems to
guide those users through the complexities of their specific environments,
offering them context-sensitive, personalized support.
Support Process Automation. Connects users to support providers and
automates and mitigates inefficiencies in the support process. This includes:
. self-service;
. routing of support requests to the support organization;
. user identification and privilege verification;
. problem description;
. diagnosis and repair; and
. logging of actions taken by all parties involved in the support
transaction.
Foundry
The Foundry is a development environment for authoring support actions and
managing support content that can then be utilized by the Healing Agent,
Support Center and Support Portal. The Foundry's authoring capabilities enable
support organizations to create automated solutions, or SupportActions, that
support user applications and operating system components, automate common
support activities and schedule jobs to manage user systems. SupportActions can
be created for a complete range of support requests, including "break/fix"
problems, "how-to" questions and requests for system modifications.
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The Foundry includes the following features:
Content Creation and Content Management. The Foundry enables support
organizations to create, publish, integrate and maintain automated
SupportActions. Product attributes include:
. a platform for authoring automated SupportActions from a point-and-click
interface. This includes support content automation and the ability to
easily integrate existing support content into a database of solutions
and content.
. automated categorizing and indexing of support content and
SupportActions, which enables users to quickly find the appropriate
solution to their problem.
Personalization. The Foundry enables the support organization to create
personalized support content. Using the Foundry's capabilities, a company can:
. create support solutions that automatically identify and address the
unique support requirements of each user. These solutions are
automatically updated to reflect any changes in the user's support
requirements.
. deliver automated support solutions to a single user or set of users
based on the unique characteristics of their systems, the history of
their support needs, and other criteria.
Technology
We believe that our core technologies provide the foundation for a scalable
support infrastructure. The intelligent nature of our core technologies enables
our products to automatically adapt to varying environments and to reduce the
manual labor associated with the support process.
DNA Probe--Personalized Support
The DNA Probe provides detailed data about each user, their system, and the
software on their system. The patented DNA Probe technology automatically
identifies the characteristics of each user's software applications and
operating system components and tracks them over time. This personalized data
can then be used to quickly sift through large amounts of information, compare
historical data and highlight potential fundamental causes of problems. For
example, the DNA Probe technology automatically identifies all of the network
settings for each individual user, including the network address, machine name,
Internet configuration and the specific drivers for their network card. In
contrast to other support process methodologies, which involve authoring
generic solutions and attempting to apply those to numerous unique users,
support organizations can use the DNA Probe's ability to learn about each
dynamic environment to efficiently provide users with personalized support
solutions.
ContextResponse--Context-Sensitive Support
ContextResponse analyzes the data gathered by the DNA Probe, identifies and
diagnoses the most relevant information, and then delivers a solution for a
user's problem or question. It is the ability to gather, analyze and transmit
context-sensitive information which efficiently automates the support process.
ContextResponse personalizes and automates the support process by:
. automatically gathering information that otherwise would require a time-
consuming and frequently complex interaction between the user and the
support analyst. For example, rather than asking a user to identify their
specific operating system parameters and software versions,
ContextResponse automatically gathers this information and electronically
relays the information to the support analyst.
. analyzing information to identify potential problems. ContextResponse is
designed to identify the fundamental cause of a problem by analyzing the
results of diagnostic programs and/or comparing the user's current system
configuration to a previous working configuration, a reference
configuration or another user's configuration.
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SupportActions--Point and Click Development and Delivery
Many custom support solutions can be packaged as SupportActions, which
enable the automation of common support activities such as answering
"break/fix" problems or "how-to" questions. Support analysts use the Foundry to
create custom SupportActions via a simple point-and-click interface. Support
organizations can integrate existing programs, commands and content into
SupportActions to turn static information into automated knowledge. For
example, the support organization could integrate frequently asked questions or
a diagnostic program into a SupportAction so that the user can automatically
perform the steps described by the answers to the frequently asked questions or
the diagnostics program. SupportActions can accomodate many scripting languages
and a wide range of content.
Change Management Infrastructure
Our change management infrastructure provides a common mechanism for the
distribution and application of changes to one or more machines. This
infrastructure is used across all products to ensure that changes made to a
user's machine are consistent, reversible and recorded. Repair to a user's
machine, comparison of one machine to another, installation, modification and
distribution can all be achieved using our common change management
infrastructure. Support solutions are easier to develop with this
infrastructure because steps that are done manually and are potentially error-
prone are replaced by automatic and consistent mechanisms. This can facilitate
rapid development and reduce the cost of on-going maintenance.
Nexus--Enhanced Communication Infrastructure
Our products communicate directly with each other using secure protocols,
but firewalls and other network components often restrict direct communication
across the Internet. In the event that a firewall or other device prevents
direct communication between remote parties, our products are designed to
communicate indirectly using our Nexus technology as an intermediary. Our Nexus
technology allows communication to take place between parties in circumstances
where direct communication is unreliable or impossible.
Software Vaults--Efficient Storage Management
Once a user's problem is diagnosed, the solution is delivered to the user
from the Software Vault. Support solutions generally require access to a large
amount of support content, in the form of files, programs and other
information, which must be available locally and/or across a network. Our
patent-pending Software Vault provides storage, retrieval and management of
this support content. All files and programs associated with supported
applications, operating system components and all SupportActions are stored in
the Software Vault.
The Software Vault provides a redundant, distributed mechanism for this
support content. For example, if a particular file on a user's system has been
corrupted and needs to be replaced, one or more Software Vaults will be
accessed in a logical sequence until the needed file has been found. Software
Vaults reside on servers to support thousands of users, and portions of
Software Vaults can also be placed locally on a user's system to provide
support for critical applications and operating system components when the user
is completely disconnected from the network.
The Software Vault's file storage mechanism is highly efficient. By storing
each unique file only once, the Software Vault minimizes disk space,
communications and bandwidth requirements. For example, if a number of users
have multiple applications that all use a particular version of a file or
program, only one copy of that file is kept in the Software Vault.
Services and Support
Our services organization provides a range of support offerings from
architectural design to on-going customer support and is critical to our focus
on customer satisfaction. Our services group configures solutions for our
customers that are deployed across all or parts of their organization. Our
services and support capabilities are divided into three areas:
. Implementation--Provides architectural design, transformation, product
integration and deployment services to our customers. Each implementation
is customized according to the customer's organizational and technical
requirements.
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. Education--Trains our customers and those parties with whom we have
alliances in the design, implementation and use of our products.
. Technical Support--Responds to design, feature, implementation and
deployment questions.
Under a maintenance contract, our customers receive generally available new
releases, corrections, enhancements, updates and other changes to the products
they have licensed.
As of January 31, 2000, we had 12 employees engaged in services and support
activities.
Customers
We market and sell our eSupport solutions to corporate information
technology departments, support outsourcers, Internet service providers,
application service providers and other businesses that leverage the Internet.
The following is a representative list of companies who have purchased our
products and services organized by our customer focus categories:
<TABLE>
<CAPTION>
Corporate ISP/ASP Support Outsourcers
--------- ------------- ----------------------------
<S> <C> <C>
Bear Stearns everdream Compaq Professional Services
Broadcom Excite@Home CompuCom
Cadence Design Systems Globo Cabo Computer Sciences Corp.
Chase H&Q Jamcracker Cotelligent
Equifax micronpc.com Service 911.com
JCPenney Xerox Connect
Madge Networks
McKesson HBOC
</TABLE>
Case Studies
The following case studies illustrate how our customers integrate our
solution:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Customer Description
<C> <S>
Bear, Stearns & Co. Bear, Stearns & Co. Inc. is a leading investment
Inc. banking and securities trading and brokerage firm
serving organizations and individuals worldwide. Bear
Stearns was seeking a solution to manage the more than
11,000 troubleshooting calls per month received by its
support organization from internal and external
traders. Bear Stearns selected us because of our
ability to solve complex problems related to the
diverse environments of its systems. By using our
software, Bear Stearns support analysts can remotely
support these users, streamline the support process and
solve their most common problems in a more effective
and timely manner. Bear Stearns support analysts now
have more time to focus on additional support issues.
- ------------------------------------------------------------------------------
Excite@Home Excite@Home is a global media company that provides
high-speed Internet access to over 1,000,000 consumer
and small business users. Excite@Home needed a solution
to better manage calls related to connectivity
difficulties, their most common support call,
representing 35% of all calls received. They chose the
Support.com Healing Agent, which is installed as a
standard part of Excite@Home's service. The Healing
Agent supports PC, network and Internet configurations,
provides continuous support for network components and
client software, and can automatically solve user's
connection problems. With the Support.com solution, the
number of calls to the call center have decreased and
the time it takes to solve problems when calls do come
in has decreased. We are also working with other
organizations to create an Excite@Home Support Portal
that will enable its users to access our eSupport
solutions, as well as the virus protection, aggregated
support content and e-commerce offerings of other
vendors.
</TABLE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Customer Description
<C> <S>
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 Professional Compaq Professional Services, a division of Compaq
Services Computer Corporation, operates one of the world's
largest and leading multi-lingual help desks, providing
service to more than one million corporate computer
users. Compaq was looking for a solution to resolve
user problems as quickly as possible and decrease
overall support costs. The eSupport solution for Compaq
is a part of the Compaq Professional Services global
help desk and provides comprehensive self-healing,
self-service and assisted service over the Internet.
- ------------------------------------------------------------------------------
everdream everdream is an application service provider that
delivers hardware, software, networking infrastructure
and support to small business customers, thereby
offering its customers a single point of support. With
the integration of our self-healing, self-service and
assisted service technology on the everdream platform,
everdream is able to increase the number of technical
problems solved for its customers and decrease the time
it takes to solve them. As a result, everdream's
customers can experience increased productivity and
cost savings.
</TABLE>
Strategic Alliances
An important element of our sales and marketing strategy is to leverage and
expand our strategic alliances with key industry leaders to increase market
awareness, acceptance and distribution of our products and services. We have
established formal and informal distribution and solutions alliances with
industry leaders to help us to deliver comprehensive solutions and allow us to
focus on our core area of expertise: developing eSupport software. We employ
this network of alliances to expand our sales, service and marketing
capabilities and to extend the technical and functional application of our
eSupport solutions.
Distribution Alliances
We have established distribution alliances with specialized technology and
services firms that deliver our solutions to specific market segments. These
distribution relationships allow us to benefit from the marketing and lead
generation capabilities of these firms and are intended to increase geographic
sales coverage and to address small- to-medium-sized businesses and large
corporate customers. In turn, the companies with which we have distribution
alliances can enhance their product and service offerings and increase customer
satisfaction with our products while effectively managing costs associated with
providing support to their customers.
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The following table illustrates our formal distribution alliances:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Target Category Company
<S> <C>
Support Outsourcers deliver outsourced Compaq Professional Services
technical support and help desk capabilities CompuCom
to large corporations. Computer Sciences Corp.
Cotelligent
Service 911.com
Sykes Enterprises
Xerox Connect
- -----------------------------------------------------------------------------
Internet Service Providers offer their Excite@Home
customers Internet access.
Globo Cabo
- -----------------------------------------------------------------------------
PC Vendors provide support to their customers Omni Tech
in connection with their hardware product
offerings. Premio Computer
- -----------------------------------------------------------------------------
Application Service Providers offer hardware, everdream
software, networking infrastructure with
Internet accessible applications and support Jamcracker
to small- and medium-sized companies. micronpc.com
- -----------------------------------------------------------------------------
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 provide us the ability to rapidly adapt our
solutions to our customers' needs. We also seek to generate referral sales from
these alliances. By establishing alliances with Support.com, these technology
providers can provide a more comprehensive support solution to their customers
while informing and educating their customers about new support products and
technologies.
The following table illustrates our formal and informal solutions alliances:
- --------------------------------------------------------------------------------
<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 IT resources, increase
application availability and improve customer service. Tivoli
- -------------------------------------------------------------------------------
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
ZDNet
- -------------------------------------------------------------------------------
Hardware Diagnostics solutions providers offer utilities PC-Doctor
to accurately determine the cause of hardware problems.
</TABLE>
42
<PAGE>
Research and Development
The emerging market for eSupport solutions is characterized by rapid
technological change, new product introductions and enhancements, evolving
customer requirements and rapidly changing industry standards. We devote a
substantial portion of our resources to developing new and enhanced versions of
our eSupport infrastructure software, conducting product testing and quality
assurance testing and improving our core technologies, ultimately strengthening
our technological expertise in the market for eSupport.
As of January 31, 2000, we had 30 employees in research and development
activities. Our research and development expenditures were approximately $1.1
million in 1998 and $2.4 million in 1999. We expect to continue to devote
significant resources to research and development for the next several years.
Sales and Marketing
Sales
Our sales efforts target corporate information technology departments,
support outsourcers, Internet service providers, application service providers
and other businesses that leverage the Internet, through a combination of
direct and indirect sales channels. Direct channels are characterized by direct
relationships with customers, while indirect channels utilize existing
customers and strategic alliances to generate new business. Our corporate
customers consist of clients which leverage their intranet and/or extranet for
their eBusiness initiatives. We address these corporate entities through direct
channels to targeted industries, including financial services,
telecommunications, retail and manufacturing, and indirect channels to
outsourcers, live support providers and system integrators. Our Internet market
customers consist of Internet service provider and application service provider
clients, which we address through direct sales channels. We have established
specialized task forces to oversee each of our targeted customer segments. A
telephone and Web sales team will be responsible for lead generation, customer
follow-up, add-on business and new sales via the Web to existing customers and
new market segments.
We maintain direct and indirect sales personnel in North America covering
the United States, Canada and Latin America, in the United Kingdom covering
Europe, the Middle East and Africa, and in Singapore covering the Asia Pacific
region. The direct and indirect sales force is organized into account teams
that include sales executives and system engineers. The direct sales force is
divided regionally and provides business and technical continuity to our
customers. Our indirect sales force is responsible for globally enabling large
service providers to sell and deploy our eSupport products to new customers.
The indirect team is focused on enabling these channels through training,
certification and sales and marketing assistance.
Our sales strategy utilizes partner relationships and consultative selling
techniques and incorporates a comprehensive communication infrastructure for
both our direct and indirect sales forces. We plan to continue to invest and
increase the size and geographical locations of both our direct and indirect
sales model on a global basis.
Marketing
Our marketing efforts include needs assessment and market analysis, brand
awareness, category education and lead generation, and educating organizations
in our target markets, including corporate information technology departments,
support outsourcers, Internet service providers, application service providers
and other businesses that leverage the Internet.
43
<PAGE>
Needs assessment and market analysis include such activities as:
. conducting market research;
. establishing and maintaining close relationships with leading industry
analysts;
. developing close relationships with professional associations for help
desk and support professionals; and
. capturing, organizing and prioritizing customer and industry feedback to
provide product direction to our research and development organization.
Brand awareness, category education and lead generation include such
activities as:
. performing educational seminars;
. developing and implementing direct mail and advertising campaigns;
. performing marketing programs including Web seminars and Web direct mail;
. managing and maintaining public relations campaigns
. participating in industry-related events, conferences and tradeshows; and
. developing and maintaining our Web site.
Our Solutions Alliances Program is comprised of a select group of technology
vendors in which together we focus on a range of joint marketing strategies and
programs to extend the reach of our presence in the marketplace. We intend to
continue to pursue these partnerships in the future.
As of January 31, 2000, approximately 45 of our employees were engaged in
sales and marketing activities.
Competition
The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Although we do not currently compete
against any one entity with respect to all aspects of our eSupport solution, we
do compete with various vendors in regards to specific elements of our eSupport
solution. These elements include automated development of support solutions,
automated delivery of support solutions, and an Internet support
infrastructure. For example, we currently compete with companies that provide
automated development of support solutions, such as Serena Software, Inc. We
also compete with companies that provide automated delivery of support
solutions, such as Motive Communications, Inc.
In the future, we may encounter competition from other software companies to
the extent that we enter each other's market. These companies may include:
customer communications software companies, such as Kana Communications, Inc.
and eGain Communications, Inc.; question/answer companies, such as Ask Jeeves;
customer relationship management, or CRM, solutions companies, such as Siebel
Systems, Inc., Oracle Corporation and Silknet Software, Inc.; consolidated
service desk (CSD) solution vendors, such as Clarify Inc., Peregrine Systems,
Inc. and Remedy Corporation; and operating systems providers, such as Microsoft
Corporation.
Our potential competitors may have longer operating histories, significantly
greater financial, technical, and other resources, or greater name recognition
than we do. Our competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements. Competition could
seriously harm our ability to sell additional software, maintenance renewals
and services on terms favorable to us. Competitive pressures could reduce our
market share or require us to reduce the price of products and services, any of
which could harm our business, financial condition and operating results.
44
<PAGE>
We believe that the principal competitive factors in our market include:
. establishing a significant base of reference customers;
. demonstrating ongoing value and return-on-investment;
. product functionality, quality and performance;
. introducing new products to the market in a timely manner;
. customer service and support; and
. pricing.
Although we believe our solutions compete favorably with respect to each of
these factors, the market for our products is new and rapidly evolving. We may
not be able to maintain our competitive position against current and potential
competitors, especially those with greater resources.
Intellectual Property
The status of United States patent protection in the software industry is
not well defined and will evolve as the U.S. Patent and Trademark Office grants
additional patents. We have one patent in the general area of automated
discovery of dynamic configurations. We currently have four patent applications
pending in the United States, and we may seek additional patents in the future.
We do not know if our patent applications or any future patent application will
result in a patent being issued with the scope of the claims we seek, if at
all, or whether any patents we have or may receive will be challenged or
invalidated. It is difficult to monitor unauthorized use of technology,
particularly in foreign countries where the laws may not protect our
proprietary rights as fully as in the United States, and our competitors may
independently develop technology similar to ours. We will continue to assess
appropriate occasions for seeking patent and other intellectual property
protections for those aspects of our technologies that we believe constitute
innovations providing significant competitive advantages. The pending and any
future applications may or may not result in the issuance of valid patents.
Our success depends in part upon our rights in proprietary software
technology, some of which is patented. We rely on a combination of copyright,
trade secret, trademark and contractual protection to establish and protect our
proprietary rights that are not protected by patent, and we enter into
confidentiality agreements with those of our employees and consultants involved
in product development. We routinely require our employees, customers and
potential business partners to enter into confidentiality and nondisclosure
agreements before we will disclose any sensitive aspects of our products,
technologies or business plans. In addition, we require employees to agree to
surrender to us any proprietary information, inventions or other intellectual
property they generate or come to possess while employed by us. Despite our
efforts to protect our proprietary rights through confidentiality and license
agreements, unauthorized parties may attempt to copy or otherwise obtain and
use our products or technology. These precautions may not prevent
misappropriation or infringement of our intellectual property.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties may assert infringement
claims against us. Although we have not received notice of any alleged
infringement, our products may infringe issued patents that may relate to our
products. In addition, because patent applications in the United States are not
publicly disclosed until the patent is issued, applications may have been filed
which relate to our software products. We may be subject to legal proceedings
and claims from time to time in the ordinary course of our business, including
claims of alleged infringement of the trademarks and other intellectual
property rights of third parties. Intellectual property litigation is expensive
and time-consuming and could divert management's attention away from running
our business. This litigation could also require us to develop non-infringing
technologies or enter into royalty or license agreements. These royalty or
license agreements, if required, may not be available on acceptable terms, if
at all, in the event of a successful claim of infringement. Our failure or
inability to develop non-infringing technologies or license the proprietary
rights on a timely basis would harm our business.
45
<PAGE>
Employees
As of January 31, 2000, we had 102 full-time employees, including 30 in
research and development, 12 in services, 45 in sales and marketing and 15 in
general and administrative. None of our employees are covered by collective
bargaining agreements. We believe our relations with our employees are good.
Legal Proceedings
We are not a party to any material legal proceeding. We may be subject to
various claims and legal actions arising in the ordinary course of business.
Facilities
Our corporate headquarters are located in Redwood City, California, where we
lease approximately 23,200 square feet under a lease that expires in August
2001. As of December 31, 1999, we also leased office space in 6 other cities
for our sales and support personnel. The terms of these leases expire beginning
in April 2000 and ending in July 2001, and automatically renew unless earlier
terminated. We are currently subleasing our previous office space in Palo Alto,
California, and anticipate continuing to do so until that lease expires in July
2001.
We expect to require additional space to meet our needs in the next 12
months. We are currently pursuing our options with respect to obtaining
additional facilities. Adequate space may not be available on commercially
reasonable terms.
46
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our directors, executive officers and key employees and their ages as of
December 31, 1999 are as follows:
<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 Chief Technical Officer
Cadir B. Lee................... 28 Chief Software Officer
Lucille K. Hoger............... 46 Vice President of Operations
Michael P. O'Rourke............ 40 Vice President of Engineering
Anthony C. Rodoni.............. 35 Vice President of Marketing
Matthew T. Cowan............... 28 Director
William L. Dunn(2)............. 63 Director
Bruce Golden(1)................ 40 Director
Edward S. Russell(2)........... 39 Director
Roger J. Sippl(1).............. 44 Director
</TABLE>
- --------
(1) Member of compensation committee.
(2) Member of audit committee.
Radha R. Basu. Ms. Basu has served as President, Chief Executive Officer and
as a director of Support.com since July 1999. Ms. Basu worked at Hewlett-
Packard Company, a computing and imaging solutions provider company, from
November 1978 to January 1999, and held various general management positions,
most recently the general manager of the Electronic Business Software
Organization. Ms. Basu also serves as chairman of the board of directors of
Seec, Inc., an eBusiness solutions company. Ms. Basu holds a B.S. in
Engineering from the University of Madras, a Masters degree in Electrical
Engineering and Computer Science from the University of Southern California and
is a graduate of the Stanford University Executive Management Program.
Mark J. Pincus. Mr. Pincus co-founded, and has served as the Chairman of
Support.com since its inception in December 1997. Mr. Pincus served as the
Chief Executive Officer and President of Support.com since its inception until
July 1999. Mr. Pincus is also a part-time employee of Support.com. From 1995 to
1997, Mr. Pincus was a co-founder and Chief Executive Officer of FreeLoader,
Inc., a Web-based push technology service. From 1994 to 1995, he served as Vice
President with Columbia Capital, a venture capital firm. From 1993 to 1994, he
served as Manager at Tele-Communications, Inc. now AT&T Cable. Mr. Pincus holds
a B.S. in Economics from Wharton, University of Pennsylvania and an MBA from
Harvard Business School.
Brian M. Beattie. Mr. Beattie has served as Executive Vice President of
Finance and Administration and Chief Financial Officer of Support.com since
October 1999. From May 1998 to May 1999, he served as Vice President of
Finance, Mergers and Acquisitions of Nortel Networks Corporation, a voice and
data networking company. From July 1996 to April 1998, Mr. Beattie served as
Group Vice President of Meridian Solutions of Nortel Networks Corporation. From
February 1993 to June 1996, Mr. Beattie served as Vice President Finance,
Enterprise Networks, for Nortel Networks Corporation. Mr. Beattie holds a
Bachelor of Commerce and an MBA from Concordia University in Montreal.
47
<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 inception in December 1997. From
January 1997 to December 1997, Mr. Dale served as a software consultant for M&I
Data Services, a financial transaction software company. From July 1992 to
January 1997, Mr. Dale served as a software consultant to Hewlett-Packard
Company, a computing and imaging solutions provider company. Mr. Dale holds a
B.S. in Computer Science from Stanford University.
Cadir B. Lee. Mr. Lee co-founded Support.com and has served as the Chief
Software Officer of Support.com since its inception in December 1997. From 1995
to 1997, Mr. Lee served as a software consultant to Hewlett-Packard Company, a
computing and imaging solutions provider company. Mr. Lee holds a B.S. in
Biological Sciences and a B.A. in Music from Stanford University.
Lucille K. Hoger. Ms. Hoger has served as the Vice President of Operations
of Support.com since February 2000. From 1996 to 2000, Ms. Hoger served as the
Chief Operating Officer at ConnectInc.com, an e-commerce software company. From
1992 to 1995, she served as a principal for Gemini Consulting, an affiliate of
Cap Gemini, a consulting company. Ms. Hoger holds a B.A. in Accounting from
Southwest Texas State University.
Michael P. O'Rourke. Mr. O'Rourke has served as the Vice President of
Engineering of Support.com since December 1999. From July 1999 to December 1999
he served as Vice President of Operations of Support.com. Prior to joining
Support.com, Mr. O'Rourke served in several executive positions at Tivoli
Systems, a provider of systems management software and subsidiary of
International Business Machines Corporation. Mr. O'Rourke served as Vice
President of the Packaged Solutions Business Unit at Tivoli Systems from
December 1998 to June 1999, as Vice President of the Enterprise Business Unit
from February 1998 to December 1998, as Vice President of Marketing and Partner
Programs from June 1996 to February 1998, as Director of Partner Programs from
July 1995 to June 1996 and as Director of Application Development from April
1993 to July 1995. Mr. O'Rourke holds a B.S. in Computer Science from the
University of Vermont.
Anthony C. Rodoni. Mr. Rodoni has served as Vice President of Marketing of
Support.com since June 1998. From March 1988 to June 1998, Mr. Rodoni served in
a variety of management positions, most recently as General Manager of the Data
Warehouse Business Unit, at Informix Software, Inc., a database software
company. Mr. Rodoni holds a B.S. in Computer Science from the University of
California at Santa Barbara and an MBA from Santa Clara University.
Matthew T. Cowan. Mr. Cowan has served as a director of Support.com since
June 1999. From September 1998 to the present, Mr. Cowan has served as General
Partner of Bowman Capital Management, a premier institutional investor
specializing in both public and private technology growth companies. From July
1994 to September 1998, Mr. Cowan served as Director, Corporate Business
Development of Intel Corporation. Mr. Cowan holds a B.A. degree in Political
Science from Tufts University.
William L. Dunn. Mr. Dunn has served as a director of Support.com since
April 1998. From 1961 to 1989, Mr. Dunn served as an Executive Vice-President
of Dow-Jones & Company, a publishing company. Mr. Dunn holds a B.A. in
Economics from Drake University.
Bruce Golden. Mr. Golden has served as a director of Support.com since June
1998. Since September 1997, Mr. Golden has served initially as entrepreneur-in-
residence and then as a Partner at Accel Partners, a
48
<PAGE>
venture capital firm. From 1993 to August 1996, Mr. Golden served as a Vice
President of Marketing at Illustra Information Technology, which was acquired
by Informix Corporation in 1996, at which time Mr. Golden was employed by
Informix Corporation, a database company. Mr. Golden holds a B.A. in Political
Science from Columbia University.
Edward S. Russell. Mr. Russell has served as a director of Support.com since
June 1998. Since October 1996, Mr. Russell served as a General Partner at
Softbank Technology Ventures, Inc. From 1988 to October 1996, Mr. Russell
served as the Executive Director at SBC Warburg. Mr. Russell is a director of
Buy.com, a multi-category Internet superstore. Mr. Russell received his B.S. in
Computer Science from Carnegie Mellon University and an Executive MBA from
London School of Business.
Roger J. Sippl. Mr. Sippl has served as a director of Support.com since
January 1999. Since August 1995, Mr. Sippl has served as the managing partner
of Sippl Macdonald Ventures, a venture capital firm. From 1980 to 1989, Mr.
Sippl was the founder and served as Chief Executive Officer and Chairman of the
Board of Informix Corporation a database company. From 1989 to 1993, Mr. Sippl
served as Chairman of the Board of Informix Corporation. From December 1990 to
1996, he co-founded and served as a director of The Vantive Corporation, a
customer relationship management solutions company. From 1996 to 1998, he
served as Chairman of the Board of The Vantive Corporation. From February 1993
until March 1998, Mr. Sippl was the founder and served as the Chief Executive
Officer and Chairman of the Board of Visigenic Software, Inc., a software tools
provider company. From March 1998 to July 1998, he served as Chief Technology
Officer of Borland International, Inc. Mr. Sippl holds a B.S. in Computer
Science from the University of California at Berkeley.
There are no family relationships among any of our directors or executive
officers.
Board Committees
Our board of directors has a compensation committee and an audit committee.
Our compensation committee is responsible for, among other things,
determining salaries, incentives and other forms of compensation for directors,
officers and other employees of Support.com and administering various incentive
compensation and benefit plans. Prior to December 1999, we did not have a
compensation committee. Our board of directors established executive
compensation levels for 1999. Bruce Golden and Roger J. Sippl are the current
members of the compensation committee. Radha R. Basu, our Chief Executive
Officer, will participate in all discussions and decisions regarding salaries
and incentive compensation for all employees and consultants of Support.com,
except that she will be excluded from decisions regarding her own salary and
incentive compensation.
Our audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
Edward S. Russell and William L. Dunn are the current members of the audit
committee.
Director Compensation
Except for the grant of stock options and the grant of common stock pursuant
to restricted stock purchase agreements, we do not currently compensate our
directors for their services as directors. Our directors are eligible to
participate in our 2000 Omibus Equity Incentive Plan and our directors who are
employees of Support.com are eligible to participate in our 2000 Employee Stock
Purchase Plan. We also reimburse each member of our board of directors for out-
of-pocket expenses incurred in connection with attending board meeting.
In addition, we granted Bruce Golden, a director of Support.com, an option
to purchase 50,000 shares of our common stock under our 1998 Stock Plan at a
purchase price of $0.10 per share. We granted William Dunn, a director of
Support.com, the right to purchase 80,000 shares of our common stock pursuant
to a
49
<PAGE>
restricted stock purchase agreement at a purchase price of $0.10 per share. On
February 18, 1999, Mr. Dunn purchased these shares of our common stock, subject
to our right of repurchase which lapses over time. We granted Roger J. Sippl, a
director of Support.com, the right to purchase 100,000 shares of our common
stock pursuant to a restricted stock purchase agreement, at a purchase price of
$0.10 per share. On January 14, 1999, Mr. Sippl purchased these shares of our
common stock, subject to our right of repurchase which lapses over time.
Executive Compensation
The following table provides summary information concerning compensation
earned by or paid to our chief executive officer, our former chief executive
officer and to our three other most highly compensated executive officers whose
total annual salary and bonus exceeded $100,000, for services rendered in all
capacities to Support.com during 1999. These individuals are referred to as the
"named executive officers." Other than the salary and bonus described below,
Support.com did not pay any executive officer named in the Summary Compensation
Table any fringe benefits, perquisites or other compensation in excess of 10%
of that executive officer's salary and bonus during 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual
Compensation(1) Security
---------------- Underlying
Name and Principal Position Salary Bonus Options (#)
- --------------------------- -------- ------- ------------
<S> <C> <C> <C>
Radha R. Basu(1).................................. $ 94,744 $45,834 1,680,189
President and Chief Executive Officer
Mark J. Pincus(2)................................. 146,692 -- 500,000
Chairman of the Board
Scott W. Dale..................................... 120,833 -- 250,000
Chief Technical Officer
Cadir B. Lee...................................... 120,833 -- 250,000
Chief Software Officer
Anthony C. Rodoni................................. 135,000 30,000 25,000
Vice President of Marketing
</TABLE>
- --------
(1) Ms. Basu became our Chief Executive Officer as of July 15, 1999. Ms. Basu's
salary on an annualized basis is $200,000.
(2) Mr. Pincus served as our Chief Executive Officer until July 15, 1999.
Option Grants in Last Fiscal Year
The percentage of total options granted is based on an aggregate of
6,326,139 options granted in 1999. The exercise price on the date of grant was
equal to the fair market value on the date of grant as determined by the board
of directors. Options have a maximum term of 10 years subject to earlier
termination for specified events related to cessation of employment. The 5% and
10%, assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission and do not represent Support.com's estimate or
projection of the future stock price.
50
<PAGE>
The values reflected in the table may never be achieved. The dollar values
have been calculated by determining the difference between the fair market
value of the securities underlying the options at December 31, 1999 and the
exercise prices of the options. Solely for purposes of determining the value of
the options at December 31, 1999, we have assumed that the fair market value of
shares of common stock issuable upon exercise of options was $ per share,
the assumed initial public offering price, since the common stock was not
traded in an established market prior to the offering.
These stock options were granted under the 1998 Stock Plan and are
immediately exercisable. We have a right to repurchase at cost any shares which
have been exercised but remain unvested at the time of the officer's cessation
of employment. Ms. Basu's options vest at a rate of 25% upon the first
anniversary of her vesting start date and 1/48 per month thereafter. In the
event we merge or consolidate with another entity or sell all or substantially
all of our assets and Ms. Basu is terminated without cause or if she terminates
her employment under certain circumstances following such event, all of her
remaining unvested shares will vest.
Of Mr. Pincus' 500,000 options, 250,000 options vest at a rate of 25% upon
the first anniversary of his vesting start date and 1/48 per month thereafter,
and 250,000 options vest at a rate of 1/12 per month over one year. In the
event we merge or consolidate with another entity or sell all or substantially
all of our assets and Mr. Pincus is terminated without cause or if he
terminates his employment under certain circumstances following such event, all
of his remaining unvested shares will vest.
Mr. Dale's and Mr. Lee's options vest at a rate of 25% upon the first
anniversary of each of their vesting start dates and 1/48 per month thereafter.
Mr. Rodoni's options were fully vested on the date of grant.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of
Stock Price
Percentage of Exercise Appreciation
Total Options or Base for Option Term
Options Granted in Price Expiration ---------------
Name Granted 1999 ($/Share) Date 5% 10%
- ---- --------- ------------- --------- ---------- ------- -------
<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>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table assumes a per-share fair market value equal to
$ , the mid-point of the initial public offering price of $ .
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Options at Fiscal In-the-Money Options at
Acquired on Value Year-End Fiscal Year-End(3)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- -------- ------------------------- -------------------------
<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>
Compensation Committee Interlocks and Insider Participation
The members of our compensation committee are currently Bruce Golden and
Roger J. Sippl. No interlocking relationship exists, or has existed in the
past, between the board of directors or compensation committee and the board of
directors or compensation committee of any other company.
51
<PAGE>
1998 Stock Option Plan
The board of directors in October 1998 adopted our 1998 Stock Option Plan.
Our 1998 Stock Option Plan provides for the grant of incentive stock options as
defined in Section 422 of the Internal Revenue Code to employees and the grant
of nonstatutory stock options to employees, non-employee directors and
consultants. A total of 8,124,434 shares of common stock have been reserved for
issuance under our 1998 Stock Option Plan as of December 31, 1999. In February
2000 we increased the number of shares of common stock reserved for issuance
under our 1998 Stock Option Plan by an aggregate of 1,300,000 shares.
Our compensation committee and our non-insider option committee administer
our 1998 Stock Option Plan. Our compensation committee consists of at least two
directors who are "non-employee directors," as defined in Rule 16b-3. The board
of directors may amend our 1998 Stock Option Plan as desired without further
action by Support.com's stockholders except as required by applicable law. Our
1998 Stock Option Plan will continue in effect until terminated by the board or
for a term of 10 years from its amendment and restatement date, whichever is
earlier.
The consideration for each award under our 1998 Stock Option Plan will be
established by the compensation committee, but in no event will the option
price for incentive stock options be less than 100% of the fair market value of
the stock on the date of grant. Awards will have such terms and be exercisable
in such manner and at such times as the compensation committee may determine.
However, each incentive stock option must expire within a period of not more
than 10 years from the date of grant.
Generally, options granted under the 1998 Stock Option Plan vest over four
years and are nontransferable other than by will or the laws of descent and
distribution. In the event of specified changes in control of Support.com, the
acquiring or successor corporation may assume or substitute for options
outstanding under the 1998 Stock Option Plan, or these options will terminate.
Some options granted to our executive officers provide for partial acceleration
upon a change in control of Support.com. As of December 31, 1999,
. 4,171,994 shares of common stock have been issued upon the exercise of
options; and
. 7,545 shares were available for future awards.
2000 Omnibus Equity Incentive Plan
The 2000 Omnibus Equity Incentive Plan was adopted by our board of directors
on February 15, 2000 and will be submitted for approval by our stockholders
prior to the completion of this offering. The 2000 Omnibus Equity Incentive
Plan will be administered by our compensation committee. The 2000 Omnibus
Equity Incentive Plan provides for the direct award or sale of shares of common
stock and for the grant of options to purchase shares of common stock. The 2000
Omnibus Equity Incentive Plan provides for the grant of incentive stock options
as defined in Section 422 of the Internal Revenue Code and the grant of
nonstatutory stock options and stock purchase rights to employees, non-employee
directors, advisors and consultants.
4,000,000 shares of common stock have been authorized for issuance under the
2000 Omnibus Equity Incentive Plan. However, in no event may one participant in
the 2000 Omnibus Equity Incentive Plan receive option grants or direct stock
issuances for more than 1,000,000 shares in the aggregate per fiscal year. The
number of shares reserved for issuance under the 2000 Omnibus Equity Incentive
Plan will be increased on the first day of each of our fiscal years from 2000
through 2009 by the lesser of:
. 2,000,000;
. 5% of our outstanding common stock on the last day of the immediately
preceding fiscal year; or
. the number of shares determined by the board of directors.
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<PAGE>
The 2000 Omnibus Equity Incentive Plan will have the following program
features:
. Qualified employees will be eligible for the grant of incentive stock
options to purchase shares of common stock;
. Qualified non-employee directors will be eligible to receive automatic
option grants, to be made at periodic intervals, to purchase shares of
common stock at an exercise price equal to 100% of the fair market value
of those shares on the date of grant;
. The compensation committee will determine the exercise price of options
or the purchase price of stock purchase rights, but in no event will the
option price for incentive stock options be less than 100% of the fair
market value of the stock on the date of grant;
. The exercise price or purchase price may, at the discretion of the
compensation committee, be paid in, among other things, cash, cash
equivalents, full-recourse promissory notes, past services or future
services.
The 2000 Omnibus Equity Incentive Plan will include change in control
provisions that may result in the accelerated vesting of outstanding option
grants and stock issuances. The committee may grant options or stock purchase
rights in which all or some of the shares shall become vested in the event of a
change in control of the company. Change in control is defined under the 2000
Omnibus Equity Incentive Plan as:
. a change in the composition of the board of directors, as a result of
which fewer than one-half of the incumbent directors are directors who
either:
. had been directors of the company 24 months prior to the change; or
. were elected, or nominated for election, to the board with the
affirmative votes of at least a majority of the directors who had been
directors 24 months prior to the change and who were still in office at
the time of the election or nomination; or
. an acquisition or aggregation of securities by a person, as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, as a result of which the person becomes the beneficial owner of
twenty percent or more of the voting power of Support.com's outstanding
securities.
The board of directors will be able to amend or modify the 2000 Omnibus
Equity Incentive Plan at any time, subject to any required stockholder
approval. The 2000 Omnibus Equity Incentive Plan will terminate no later than
.
2000 Employee Stock Purchase Plan
The board of directors adopted our 2000 Employee Stock Purchase Plan on
February 15, 2000, to be effective upon completion of this offering. We will be
submitting it for approval by our stockholders prior to the completion of this
offering. A total of 2,000,000 shares of common stock have been reserved for
issuance under our employee stock purchase plan. The number of shares reserved
for issuance under the 2000 Employee Stock Purchase Plan will be increased on
the first day of each of our fiscal years from 2000 through 2009 by the lesser
of:
. 2,000,000;
. 3% of our outstanding common stock on the last day of the immediately
preceding fiscal year; or
. the number of shares determined by the board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees (including
officers and employee directors of Support.com but excluding 5% or greater
stockholders) are eligible to participate if they are customarily employed for
more than 20 hours per week and for at least five months in any calendar year.
Our 2000 Employee Stock Purchase Plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 15% of an
employee's total compensation. The maximum number of shares a participant may
purchase during a single offering period is 1,000 shares.
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<PAGE>
The 2000 Employee Stock Purchase Plan will be implemented by a series of
overlapping offering periods of 24 months' duration, with new offering periods,
other than the first offering period, commencing on January and July of each
year. The board of directors will establish participation periods for our 2000
Employee Stock Purchase Plan, none of which will exceed six months. During each
participation period, payroll deductions will accumulate, without interest. On
the purchase dates set by the board of directors for each participation period,
accumulated payroll deductions will be used to purchase common stock. The
initial offering period is expected to commence on the date of this offering
and end on December 31, 2001. The initial purchase period is expected to begin
on the date of this offering and end on June 30, 2000.
The purchase price will be equal to 85% of the fair market value per share
of common stock on either the first day of the participation period or on the
purchase date, whichever is less. Employees may withdraw their accumulated
payroll deductions at any time. Participation in our 2000 Employee Stock
Purchase Plan ends automatically on termination of employment with Support.com.
Immediately prior to the effective time of a corporate reorganization, the
participation period then in progress shall terminate and stock will be
purchased with the accumulated payroll deductions, unless the 2000 Employee
Stock Purchase Plan is assumed by the surviving corporation or its parent
corporation pursuant to the plan of merger or consolidation.
401(k) Plan
We have established a tax-qualified employee savings and retirement plan for
which Support.com's employees will generally be eligible. Pursuant to the
401(k) Plan, employees may elect to reduce their current compensation and have
the amount of such reduction contributed to the 401(k) Plan. To date,
Support.com has made no matching contributions. The 401(k) Plan is intended to
qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so
that contributions to the 401(k) Plan, and income earned on plan contributions,
are not taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by Support.com, if any, will be deductible by Support.com when
made.
Employment Agreements and Change in Control Arrangements
We have offer letters with our Chief Executive Officer, our Chief Financial
Officer, our Senior Vice President of Sales and Business Development, our Vice
President of Engineering, our Vice President of Marketing and our Vice
President of Operations.
Ms. Basu's offer letter, dated July 15, 1999, provides for an initial annual
salary of $200,000 commencing on July 15, 1999 and eligibility for benefits and
an incentive bonus of up to $100,000. The offer letter also provides for her
election to our Board of Directors. Ms. Basu received an option to purchase
1,680,189 shares of our common stock at an exercise price of $0.40 per share
under our 1998 Stock Option Plan, of which options to purchase 420,047 shares
vest on July 15, 2000 and the remainder will vest ratably over a 36-month
period thereafter. The offer letter allows Ms. Basu to exercise her options
pursuant to a full-recourse promissory note. If we terminate her employment
without cause or if she terminates her employment under certain circumstances,
we must pay her salary and other benefits for twelve months following
termination, unless Ms. Basu is employed full-time by another employer, as well
as pay a pro-rata share of her bonus if certain criteria are met prior to
termination. In the event we merge or consolidate with another entity or sell
all or substantially all of our assets and Ms. Basu is terminated without cause
or if she terminates her employment under certain circumstances following such
event, all of her remaining unvested shares will vest and she will receive her
salary for 12 months in a lump sum and benefits for 12 months following
termination and a pro-rata share of her bonus if certain criteria are met prior
to termination. Ms. Basu's employment is at will and may be terminated at any
time, with or without formal cause.
Mr. Beattie's offer letter, dated September 27, 1999, provides for an
initial annual salary of $180,000 commencing on October 1, 1999 and a $15,000
bonus paid immediately upon signing of the letter. Mr. Beattie is also eligible
for benefits and an annual bonus of up to $72,000. Mr. Beattie received an
option to purchase 560,000 shares of our common stock at an exercise price of
$0.90 per share under our 1998 Stock Option Plan, of which options to purchase
140,000 shares vest on October 1, 2000 and the remainder will vest ratably over
a
54
<PAGE>
36-month period thereafter. If we terminate his employment without cause or if
he terminates his employment under certain circumstances, we must pay his
salary and other benefits for six months following termination, unless Mr.
Beattie is employed full-time by another employer, as well as pay a pro-rata
share of his bonus if certain criteria are met prior to termination. In the
event we merge or consolidate with another entity or sell all or substantially
all of our assets and Mr. Beattie is terminated without cause or if he
terminates his employment under certain circumstances following such event, his
shares will vest as to 50% of any unvested shares and he will receive his
salary for six months in a lump sum and benefits for six months following
termination and a pro-rata share of his bonus if certain criteria are met prior
to termination. Mr. Beattie's employment is at will and may be terminated at
any time, with or without formal cause.
Mr. Hilbert's offer letter, dated December 7, 1999, provides for an initial
annual salary of $150,000 commencing on December 9, 1999 and eligibility for
benefits and an incentive bonus. Mr. Hilbert received an option to purchase
500,000 shares of our common stock at an exercise price of $0.90 per share
under our 1998 Stock Option Plan, of which options to purchase 125,000 shares
vest on December 9, 2000 and the remainder will vest ratably over a 36-month
period thereafter. If we terminate his employment without cause or if he
terminates his employment under certain circumstances, we must pay his salary
and other benefits for six months following termination, unless Mr. Hilbert is
employed full-time by another employer. In the event we merge or consolidate
with another entity or sell all or substantially all of our assets and Mr.
Hilbert is terminated without cause or if he terminates his employment under
certain circumstances following such event, his shares will vest as to 50% of
any unvested shares and he will receive his salary for six months in a lump sum
and benefits for six months following termination and a pro-rata share of his
bonus if certain criteria are met prior to termination. Mr. Hilbert's
employment is at will and may be terminated at any time, with or without formal
cause.
Mr. O'Rourke's offer letter, dated May 26, 1999, provides for an annual
salary of $160,000 commencing on July 15, 1999, eligibility for benefits and an
annual incentive bonus for shares of common stock up to 25,000 shares per year
for two years related to certain criteria and a $30,000 bonus paid immediately
upon signing of the letter. Mr. O'Rourke received an option to purchase 350,000
shares of our common stock at an exercise price of $0.40 per share under our
1998 Stock Option Plan, of which options to purchase 87,500 shares vest on July
6, 2000 and the remainder will vest ratably over a 36-month period thereafter.
Mr. O'Rourke's employment is at will and may be terminated at any time, with or
without formal cause.
Mr. Rodoni's offer letter, dated June 24, 1998, provides for an annual
salary of $135,000 and eligibility for benefits and an incentive bonus of up to
$30,000 and options to purchase 25,000 shares of common stock in 1999 and
$15,000 in 1998 and shares of common stock tied to certain criteria. In lieu of
his cash bonus in 1998, Mr. Rodoni received a grant of 7,500 shares of our
common stock. Mr. Rodoni received an option to purchase 425,000 shares of our
common stock at an exercise price of $0.10 per share under our 1998 Stock
Option Plan, of which options to purchase 148,750 shares vest on June 25, 1999
and the remainder will vest ratably over a 36-month period thereafter. In the
event we merge or consolidate with another entity or sell all or substantially
all of our assets, his shares will vest as to 50% of any unvested shares. Mr.
Rodoni's employment is at will and may be terminated at any time, with or
without formal cause.
Ms. Hoger's offer letter, dated January 18, 2000, provides for an annual
salary of $160,000 commencing on February 1, 2000 and eligibility for benefits
and an incentive bonus of up to $20,000. In connection with this offer letter,
Ms. Hoger received an option to purchase 300,000 shares of our common stock at
an exercise price of $2.00 per share under our 1998 Stock Option Plan, of which
options to purchase 75,000 shares vest on January 20, 2001 and the remainder
vest ratably over a 36-month period thereafter. On January 20, 2001, Ms. Hoger
is eligible to receive an additional option to purchase 50,000 shares of our
common stock. If we terminate her employment without cause or if she terminates
her employment under certain circumstances, we must pay her salary and other
benefits for six months, unless Ms. Hoger is employed full-time by another
employer. In the event we merge or consolidate with another entity or sell all
or substantially all of our assets and Ms. Hoger is terminated without cause or
if she terminates her employment under certain circumstances
55
<PAGE>
following such event, her shares will vest as to 50% of any unvested shares
and she will receive her salary and benefits for six months following
termination. Ms. Hoger's employment is at will and may be terminated at any
time, with or without cause.
We have formal employment agreements with our Chief Technical Officer and
our Chief Software Officer.
Scott Dale, our Chief Technical Officer, entered into an employment
agreement with us in August 1999. This agreement establishes Mr. Dale's annual
salary of $150,000 and eligibility for benefits and bonuses tied to criteria
established by our Board of Directors. The initial term of the agreement is
one year and is automatically renewed for three successive additional one-year
terms unless terminated on or before 30 days prior to the last day of the
prior term. If we terminate his employment for cause, we must pay his salary
and other benefits through the date of his termination. If his employment is
terminated for disability, we must pay his salary and other benefits for a
three-month period following the date of termination. In connection with this
agreement, Mr. Dale received options to purchase 250,000 shares of our common
stock at an exercise price of $0.90 per share under our 1998 Option Plan, of
which options to purchase 62,500 shares vest on July 22, 2000 and the
remainder will vest ratably over a 36-month period thereafter. Mr. Dale's
agreement also contains a non-competition provision.
Cadir Lee, our Chief Software Officer, entered into an employment agreement
with us in August 1999. This agreement establishes Mr. Lee's annual salary of
$150,000 and eligibility for benefits and bonuses tied to criteria established
by our Board of Directors. The initial term of the agreement is one year and
is automatically renewed for three successive additional one-year terms unless
terminated on or before 30 days prior to the last day of the prior term. If we
terminate his employment for cause, we must pay his salary and other benefits
through the date of his termination. If his employment is terminated for
disability, we must pay his salary and other benefits for a three-month period
following the date of termination. In connection with this agreement, Mr. Lee
received options to purchase 250,000 shares of our common stock at an exercise
price of $0.90 per share under our 1998 Option Plan, of which options to
purchase 62,500 shares vest on July 22, 2000 and the remainder will vest
ratably over a 36-month period thereafter. Mr. Lee's agreement also contains a
non-competition provision.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemption; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. Our bylaws
also permit us to secure insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his or her actions in
such capacity, regardless of whether the bylaws would permit indemnification.
We are entering into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our certificate of
incorporation and bylaws. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
56
<PAGE>
CERTAIN TRANSACTIONS
Since our inception, there has not been any transaction or series of
transactions to which we were or are a party in which the amount involved
exceeded or exceeds $60,000 and in which any director, executive officer,
holder of more than 5% of any class of our voting securities or any member of
the immediate family of any of the foregoing persons had or will have a direct
or indirect material interest, other than the transactions described below.
Transactions with Management and Others
Between December 8, 1997 and June 22, 1998 we issued and sold 6,428,880
shares of common stock to our founders for an aggregate consideration of $646.
Between December 8, 1997 and June 14, 1999, we issued and sold 15,556,326
shares of our preferred stock for an aggregate consideration of $20,475,388.80.
Between December 8, 1997 and March 19, 1998 we issued and sold 3,571,600 shares
of Series A preferred stock at a price of $0.07 per share. We issued and sold
7,346,108 shares of Series B preferred stock at a price of $0.68747 per share
on June 22, 1998. We issued and sold 4,638,618 shares of Series C preferred
stock at a price of $3.27148 per share on June 14, 1999. Upon completion of
this offering, each share of Series A, Series B and Series C preferred stock
will convert into one share of common stock.
The following table summarizes purchases, valued in excess of $60,000, of
shares of our capital stock by our directors, executive officers and our 5%
stockholders:
<TABLE>
<CAPTION>
Shares
-----------------------------
Series A Series B 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)...... -- 3,618,503 775,394
Entities affiliated with Softbank Technology
Ventures IV (3)................................ -- 3,254,834 697,465
Entities affiliated with Spinnaker Founders
Fund, L.P. (4)................................. -- -- 1,528,359
</TABLE>
- --------
(1) Roger J. Sippl, one of our directors, is a managing partner of venture
funds associated with Sippl MacDonald Ventures, a venture fund associated
with 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 associated with Accel VI
L.P. and its related entities.
(3) Edward S. Russell, one of our directors, is a general partner of venture
funds associated with Softbank Technology Ventures, Inc. and its related
entities.
(4) Matthew T. Cowan, one of our directors, is a general partner of Bowman
Capital Management, a venture fund associated with Spinnaker Founders
Fund, L.P. and its related entities.
These affiliates purchased the securities described above at the same price
and on the same terms and conditions as the unaffiliated investors in the
private financings. Mark J. Pincus was affiliated with Support.com at the time
he purchased the above securities. Accel VI L.P, Softbank Technology Ventures
IV and their affiliated entities became affiliates of Support.com in connection
with the Series B preferred stock financing. Spinnaker Founders Fund, L.P. and
its affiliated entities became affiliates of Support.com in connection with the
Series C preferred stock financing.
Indebtedness of Management
It is our current policy that all transactions between us and our officers,
directors, 5% stockholders and their affiliates will be entered into only if
these transactions are approved by a majority of the disinterested
57
<PAGE>
directors, are on terms no less favorable to us than could be obtained from
unaffiliated parties and are reasonably expected to benefit us.
Options granted to our directors, executive officers and key employees are
immediately exercisable as to both vested and unvested shares, with unvested
shares being subject to a right of repurchase in our favor in the event of
termination of employment prior to vesting of all shares. The following
individuals have elected to pay the exercise price for certain of their
outstanding options pursuant to full recourse promissory notes secured by the
common stock underlying the options. The notes bear interest at 5.86% per year
and payment on the notes is set forth below. As of December 31, 1999, the
original and outstanding aggregate principal amounts of the promissory notes
executed by each executive officer in favor of Support.com are set forth below:
<TABLE>
<CAPTION>
Aggregate
Original
and
Outstanding
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)
</TABLE>
- --------
(1) 50% of such principal and interest shall be due and payable on the earlier
of the occurrence of an initial public offering of our common stock or two
years from the date of this note, with the remaining 50% due upon the
earlier of the occurrence of an initial public offering of our common
stock or four years from the date of this note.
(2) 50% of such principal and interest shall be due and payable on the earlier
of the occurrence of the date nine months following the effective date of
an initial public offering of our common stock or two years from the date
of this note, with the remaining 50% due upon the earlier of the
occurrence of the date nine months following the effective date of an
initial public offering of our common stock or four years from the date of
this note.
(3) 50% of such principal and interest shall be due and payable on the earlier
of one year from the effective date of an initial public offering of our
common stock or two years from the date of this note, with the remaining
50% due upon the earlier of the occurrence of one year from the effective
date of an initial public offering of our common stock or four years from
the date of this note.
All future transactions, including loans, between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested directors.
For information concerning indemnification of directors and officers, see
"Management--Limitation of Liability and Indemnification Matters."
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
common stock as of December 31, 1999, by:
. each person or entity known to us to own beneficially more than 5% of our
common stock;
. each of the named executive officers;
. each of our directors; and
. all executive officers and directors as a group.
The following table assumes no exercise of the underwriters' over-allotment
option. Applicable percentage ownership is based on 26,567,672 shares of common
stock outstanding as of December 31, 1999 and shares outstanding
immediately after completion of this offering.
Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of December 31, 1999 are
deemed outstanding. These shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable community
property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite that
stockholder's name.
Unless otherwise indicated, the address for the following stockholders is
c/o Support.com Corp., 575 Broadway, Redwood City, California 94063.
<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)..... 4,393,896
Entities affiliated with Softbank Technology
Ventures IV (2)............................... 3,952,299
Entities affiliated with Spinnaker Founders
Fund, L.P. (3)................................ 1,528,359
Executive Officers and Directors:
Radha R. Basu (4).............................. 1,680,189
Mark J. Pincus ................................ 5,250,228
Scott W. Dale (5).............................. 2,375,114
Cadir B. Lee (6)............................... 2,375,114
Anthony C. Rodoni (7).......................... 457,500
Matthew T. Cowan (3)........................... 1,528,359
William L. Dunn (8)............................ 80,000
Bruce Golden (1)(9)............................ 4,443,897
Edward S. Russell (2).......................... 3,952,299
Roger J. Sippl (10)............................ 405,672
All directors and executive officers as a group
(14 persons)(11).............................. 24,358,372
</TABLE>
- --------
* Less than 1%.
(1) Principal address for each entity affiliated with Accel VI L.P. is c/o
Accel Partners, 428 University Avenue, Palo Alto, California 94301.
Includes 3,576,631 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, 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 such powers.
Includes 456,965 shares held
59
<PAGE>
by Accel Internet Fund II L.P. Accel Internet Fund II Associates L.L.C., or
AIF2A, is the General Partner of Accel Internet Fund II L.P. and has the
sole voting and investment power. Arthur C. Patterson, ACP Family
Partnership L.P., James R. Swartz, James W. Breyer, Swartz Family
Partnership L.P., J. Peter Wagner, and G. Carter Sednaoui are the Managing
Members of AIF2A and share such powers. Includes 57,121 shares held by
Accel Keiretsu VI L.P. Accel Keiretsu VI Associates L.L.C. is the General
Partner of Accel Keiretsu VI L.P. and has the sole voting and investment
power. Arthur C. Patterson, James R. Swartz, James W. Breyer, J. Peter
Wagner, and G. Carter Sednaoui are the Managing Members of Accel Keiretsu
VI Associates L.L.C. and share such powers. Includes 303,179 shares held by
Accel Investors '98 L.P. Arthur C. Patterson, James R. Swartz, James W.
Breyer, J. Peter Wagner, and G. Carter Sednaoui are the General Partners of
Accel Investors '98 L.P. and therefore share the voting and investment
powers. Bruce Golden, a partner at Accel Partners and one of our directors,
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in entities affiliated with Accel Partners.
(2) Principal address for each entity affiliated with Softbank Technology
Ventures IV is 333 W. San Carlos St., Suite 1225, San Jose, California
95110. Number of shares includes 3,874,090 shares held by Softbank
Technology Ventures IV, L.P. and 78,209 shares held by Softbank
Technology Advisors Fund, L.P. Edward S. Russell, a general partner at
Softbank Technology Ventures, Inc. and one of our directors, disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest in entities affiliated with Softbank Technology
Ventures, Inc.
(3) Principal address for each entity affiliated with Spinnaker Founders Fund,
L.P. is c/o Bowman Capital Management, 1875 South Grand Street, Suite 600,
San Mateo, California 94402. Number of shares includes 470,315 shares held
by Spinnaker Founders Fund, L.P., 366,806 shares held by Spinnaker
Technology Fund, L.P., 366,806 shares held by Spinnaker Technology
Offshore Fund, Ltd., 263,297 shares held by Spinnaker Offshore Founders
Fund, Ltd. and 61,135 shares held by Spinnaker Clipper Fund, L.P. Mr.
Cowan is a General Partner of Bowman Capital Management and one of our
directors, disclaims beneficial ownership of all these shares except to
the extent of his pecuniary interest in entities affiliated with Spinnaker
Founders Fund, L.P.
(4) Includes 1,680,189 shares of common stock issuable upon immediately
exercisable options and subject to our right of repurchase.
(5) Includes 250,000 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase.
(6) Includes 250,000 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase.
(7) Includes 56,319 shares of common stock subject to our right of
repurchase, 166,806 shares of common stock issuable under immediately
exercisable options and subject to our right of repurchase and 25,000
shares of common stock immediately exercisable options.
(8) Includes 80,000 shares of common stock subject to our right of
repurchase.
(9) Includes 50,000 shares of common stock subject to our right of
repurchase.
(10) Includes 200,000 shares of common stock held by Sippl MacDonald Ventures
II, L.P., 105,672 shares of common stock held by Sippl Investments LLC
and 100,000 shares of common stock held by Mr. Sippl, subject to our
right of repurchase. Mr. Sippl, a managing partner of Sippl MacDonald
Ventures and one of our directors, disclaims beneficial ownership of the
shares held by Sippl MacDonald Ventures II, L.P. and Sippl Investments
LLC, except to the extent of his pecuniary interest in those entities.
(11) Includes 305,444 shares of common stock subject to our right of
repurchase and 2,350,745 shares of common stock issuable under
immediately exercisable options and subject to our right of repurchase.
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DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering and after giving effect to the conversion
of all outstanding preferred stock into common stock and the amendment of our
certificate of incorporation, our authorized capital stock will consist of
150,000,000 shares of common stock, $.0001 par value and 5,000,000 shares of
preferred stock, $.001 par value.
Common Stock
As of December 31, 1999, there were 10,874,374 shares of common stock
outstanding held by approximately 98 stockholders of record.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of common stock are entitled to the
following:
Dividends. Holders of common stock are entitled to receive dividends out of
assets legally available for the payment of dividends at the times and in the
amounts as the board of directors from time to time may determine.
Voting. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders, including the election of
directors, and will not have cumulative voting rights unless Support.com is
subject to Section 2115 of the California Corporations Code.
Cumulative voting for the election of directors is not authorized by our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.
Preemptive rights, conversion and redemption. The common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Liquidation, dissolution and winding-up. Upon liquidation, dissolution or
winding-up of Support.com, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation of any preferred stock.
Each outstanding share of common stock is, and all shares of common stock to
be outstanding upon completion of this offering will be, upon payment
therefore, duly and validly issued, fully paid and nonassessable.
Preferred Stock
The board of directors is authorized, without action by the stockholders, to
designate and issue up to 5,000,000 shares of preferred stock in one or more
series. The board of directors can fix the rights, preferences and privileges
of the shares of each series and any qualifications, limitations or
restrictions on these shares.
The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock.
The issuance of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes could have the effect
of delaying, deferring or preventing a change in control of Support.com. We
have no current plans to issue any shares of preferred stock.
Warrants
We issued warrants to purchase 98,511 shares of Series C preferred stock at
an exercise price of $1.979 per share and 38,461 shares of our Series C
preferred stock at an exercise price of $6.50 per share. These warrants expire
upon completion of this offering. We also issued warrants to purchase 27,511
shares of Series C preferred stock at an exercise price of $3.27 per share and
119,167 shares of Series C preferred stock at an exercise price of $18.00 per
share, which do not expire upon completion of this offering.
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Registration Rights
Upon completion of this offering, the holders of 15,594,787 shares of common
stock issuable upon conversion of the Series A, B and C preferred stock and
upon the exercise of warrants have the right to cause us to register these
shares under the Securities Act as follows:
. Demand Registration Rights. At the earlier of June 14, 2002 or six months
after this offering, one or more holders of 30% of the common stock
issued upon conversion of Series A, B or C preferred stock may request
that we register their shares.
. Piggyback Registration Rights. The holders of registrable securities may
request to have their shares registered anytime we file a registration
statement to register any of our securities for our own account or for
the account of others subject to a pro rata cutback to a minimum of 20%
of any offering other than our initial public offering.
. S-3 Registration Rights. The holders of at least 5% of registrable
securities have the right to request registrations on Form S-3 if we are
eligible to use Form S-3 and have not already effected such an S-3
registration within the past six (6) months and if the aggregate proceeds
are at least $1,000,000.
Registration of shares of common stock pursuant to the exercise of demand
registration rights, piggyback registration rights or S-3 registration rights
under the Securities Act would result in these shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness
of such registration. See "Shares Eligible for Future Sale" and "Certain
Transactions." Support.com will pay all registration expenses, other
underwriting discounts and commissions in connection with any registration. The
registration rights terminate five years following completion of this offering,
or, with respect to each holder of registrable securities, when the holder can
sell all of the holder's shares in any 90-day period under Rule 144 under the
Securities Act.
Section 2115
We are currently subject to Section 2115 of the California General
Corporation Law. Section 2115 provides that, regardless of a company's legal
domicile, some provisions of California corporate law will apply to that
company if more than 50% of its outstanding voting securities are held of
record by persons having addresses in California and the majority of the
company's operations occur in California. For example, while we are subject to
Section 2115, stockholders may cumulate votes in electing directors. This means
that each stockholder may vote the number of votes equal to the number of
candidates multiplied by the number of votes to which the stockholder's shares
are normally entitled in favor of one candidate. This potentially allows
minority stockholders to elect some members of the board of directors. When we
are no longer subject to Section 2115, cumulative voting will not be allowed
and a holder of 50% or more of our voting stock will be able to control the
election of all directors. In addition to this difference, Section 2115 has the
following effects:
. enables removal of directors with or without cause with majority
stockholder approval;
. places limitations on the distribution of dividends;
. extends additional rights to dissenting stockholders in any
reorganization, including a merger, sale of assets or exchange of shares;
and
. provides for information rights and required filings in the event we
effect a sale of assets or complete a merger.
We anticipate that our common stock will be qualified for trading as a
national market security on the Nasdaq National Market and that we will have at
least 800 stockholders of record by the record date for our
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2000 annual meeting of stockholders. If these two conditions occur, then we
will no longer be subject to Section 2115 as of the record date for our 2000
annual meeting of stockholders.
Delaware Anti-Takeover Law and Certain Charter Provisions
Delaware Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to some exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
. prior to this date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (x) by persons who are
directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
. on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66-2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
In general, Section 203 defines an interested stockholder as any entity or
person who, together with affiliates and associates owns, or within three
years, did own beneficially 15% or more of the outstanding voting stock of the
corporation. Section 203 defines business combination to include:
. any merger or consolidation involving the corporation and the interested
stockholder; and
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder.
. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
Certificate of Incorporation and Bylaws
Undesignated Preferred Stock. Under our certificate of incorporation, the
board of directors has the power to authorize the issuance of up to 5,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
further vote or action by the stockholders. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, may:
. delay, defer or prevent a change in control of Support.com;
. discourage bids for the common stock at a premium over the market price
of our common stock;
. adversely affect the voting and other rights of the holders of our common
stock; and
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. discourage acquisition proposals or tender offers for our shares and, as
a consequence, inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts.
Advance Notice Provisions. Our bylaws establish advance notice procedures
for stockholder proposals and nominations of candidates for election as
directors other than nominations made by or at the direction of the board of
directors or a committee of the board.
Special Meeting Requirements. Our bylaws provide that special meetings of
stockholders be called by the chairman of the board, the chief executive
officer or the board of directors.
Cumulative Voting. Both our certificate of incorporation and our bylaws do
not provide for cumulative voting in the election of directors.
The provisions described above may only be amended by approval of the
holders of at least 66 2/3% of the outstanding common stock and may have the
effect of deterring a hostile takeover or delaying a change in control or
management of Support.com.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Securities
Transfer & Trust.
Nasdaq National Market Listing
We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol "SPRT."
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RESCISSION OFFER
Shares issued, and option grants made under, our 1998 Stock Option Plan were
not exempt from registration or qualification under California state securities
laws. These stock issuances and option grants violated the registration
requirements of California state securities laws because registration or
qualification was not obtained. We intend to make a rescission offer to the
holders of these shares and options which will be held open for 30 days after
the effective date of this offering. Offerees will be able to accept our
rescission offer prior to its expiration date by returning to us shares to be
repurchased and an election notice that we will deliver to the offerees
together with the prospectus that becomes effective. If accepted, our
rescission offer could require us to make aggregate payments to the holders of
these shares and options of up to approximately $ plus statutory interest.
This rescission offer will cover an aggregate of shares issuable
pursuant to options granted under the 1998 Stock Option Plan, of which
shares were issued upon option exercises. These securities were granted or sold
in violation of the registration requirements of the California state
securities laws. Although we were able to rely upon Rule 701 exemption under
the federal securities law, we were unable to rely on the exemption provided by
Section 25102(f) of the California Corporation Code because these options were
granted, and these shares were issued, to more than 35 persons during a 12-
month period, or on the exemption provided by Section 25102(o) of the
California Corporation Code because the required filing under that section was
not made. We will offer to rescind such prior sales at the price per share paid
therefor, or $0.10 per share, under the 1998 Stock Option Plan, plus interest
thereon at a statutory rate as the case may be from the date of purchase by the
purchaser to the expiration of the rescission offer. In addition, we will offer
to rescind such prior option grants at a price of $ per share.
As of the date hereof, we are not aware of any claims for rescission of any
claims for rescission against us.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common stock,
and we cannot predict the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. As described below, only a limited number of shares will be
available for sale shortly after this offering due to contractual and legal
restrictions on resale.
Nevertheless, sales of substantial amounts of our common stock in the public
market after the restrictions lapse could cause the market price of our common
stock to decline.
When this offering is completed, we will have a total of shares
of common stock outstanding, assuming no exercise of outstanding options. The
shares offered by this prospectus will be freely tradable
unless they are purchased by our "affiliates," as defined in Rule 144 under the
Securities Act of 1933. The remaining 26,567,672 shares are "restricted," which
means they were originally sold in offerings that were not subject to a
registration statement filed with the Securities and Exchange Commission. These
restricted shares may be resold only through registration under the Securities
Act of 1933 or under an available exemption from registration, such as provided
through Rule 144.
Lock-up Agreements
The holders of shares of common stock have agreed to a 180-day
"lock-up" with respect to these shares. This generally means that they cannot
sell these shares during the 180 days following the date of this prospectus.
After the 180-day lock-up period, these shares may be sold in accordance with
Rule 144. Credit Suisse First Boston may release some or all of these shares
prior to the expiration of the lock-up period.
Rule 144
In general, under Rule 144, a person or persons whose shares are aggregated,
who has beneficially owned restricted securities for at least one year,
including the holding period of any holder who is not an affiliate, is entitled
to sell within any three-month period a number of our shares of common stock
that does not exceed the greater of:
. 1% of the then outstanding shares of our common stock, which will equal
approximately shares upon completion of this offering; or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of sale is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are subject to restrictions relating to manner of sale,
notice and the availability of current public information about us. Under Rule
144 and subject to volume limitations, of the restricted shares will
be eligible for sale beginning 180 days after the date of the final prospectus
and the remaining restricted shares will become salable at various times
thereafter.
Rule 144(k)
A person who is not deemed an affiliate of ours at any time during the 90
days preceding a sale and who has beneficially owned shares for at least two
years, including the holding period of any prior owner who is not an affiliate,
would be entitled to sell shares following this offering under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information or notice requirements of Rule 144.
Rule 701 and Options
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with some restrictions, including the holding period requirement, of
Rule 144. Any employee, officer or director or
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consultant who purchased his or her shares pursuant to a written compensatory
plan or contract may be entitled to rely on the resale provisions of Rule 701.
Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144
without complying with the holding period requirements of Rule 144. Rule 701
further provides that non-affiliates may sell such shares in reliance on Rule
144 without having to comply with the holding period, public information,
volume limitation or notice provisions of Rule 144. All holders of Rule 701
shares are required to wait 90 days after the date of this prospectus before
selling such shares. However, all shares issued by us pursuant to Rule 701 are
subject to lock-up provisions and will only become eligible for sale upon the
expiration of 180 days after the date of this prospectus.
Registration
Following this offering, we intend to file a registration statement under
the Securities Act covering shares of common stock subject to outstanding
options or issued or issuable under our 1998 Stock Plan, our 2000 Stock
Incentive Plan and our 2000 Employee Stock Purchase Plan. Based on the number
of shares subject to outstanding options at December 31, 1999, and currently
reserved for issuance under these plans, this registration statement would
cover approximately 15,424,434 shares.
This registration statement will automatically become effective upon filing.
Accordingly, shares registered under this registration statement will, subject
to Rule 144 volume limitations applicable to our affiliates, be available for
sale in the open market immediately after the expiration of the 180-day lock-up
agreements. In addition, holders of 15,594,787 shares of common stock will be
entitled to registration rights. See "Description of Capital Stock--
Registration Rights."
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Chase Securities
Inc., Bear, Stearns & Co. Inc. and SoundView Technology Group, Inc., are acting
as representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Chase Securities Inc...............................................
Bear, Stearns & Co. Inc............................................
SoundView Technology Group, Inc....................................
---
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.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<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.
We have agreed not to offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act relating to, any
shares of our common stock or securities convertible into or exchangeable or
exercisable for any of our common stock, or publicly disclose the intention to
make any such offer, sale, pledge, disposition or filing, without the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus, except issuances pursuant to the
exercise of employee stock options outstanding on the date hereof.
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Our officers and directors and all of our stockholders have agreed that they
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any
of the economic consequences of ownership of our common stock, whether any such
aforementioned transaction is to be settled by delivery of our common stock or
such other securities, in cash or otherwise, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, without the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days
after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for
sale to the general public in the offering will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares.
We have agreed to indemnify the underwriters against certain liabilities
under the Securities Act, or to contribute to payments which the underwriters
may be required to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "SPRT."
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include the following:
. the information included in this prospectus and otherwise available to
the representatives;
. market conditions for initial public offerings;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for our future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
Entities associated with Chase Securities Inc. beneficially own 61,135
shares of the Series C preferred stock of Support.com. Additionally, Access
Technology Partners, L.P., a fund of outside investors that is managed by an
entity affiliated with Chase Securities Inc. owns 244,538 shares of the Series
C Preferred Stock of Support.com. Chase Securities Inc. is also our customer.
In 1999, we had total revenue of $3.3 million. Bear, Stearns & Co. Inc.
accounted for 53% of our total revenue in 1999.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
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. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format will be made available on the Web sites
maintained by one or more of the underwriters participating in this offering.
The underwriters may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Distribution will be allocated
by the representatives of the underwriters to underwriters that may make
Internet distributions on the same basis as other allocations. Other than the
prospectus in electronic format, the information on the websites maintained by
the underwriters is not part of the prospectus or the registration statement of
which this prospectus forms a part, has not been approved and/or endorsed by
Support.com or any underwriter in its capacity as underwriter and should not be
relied upon by investors.
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NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of the common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or such persons outside of Canada.
Notice to British Columbia Residents
A purchaser of the common stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any common stock acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from us. Only one
such report must be filed in respect of common stock acquired on the same date
and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of the common stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in the
common stock in their particular circumstances and with respect to the
eligibility of the common stock for investment by the purchaser under relevant
Canadian legislation.
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LEGAL MATTERS
Selected legal matters with respect to the validity of the common stock
offered by this prospectus are being passed upon for Support.com by Pillsbury
Madison & Sutro LLP, Palo Alto, California. Certain partners of Pillsbury
Madison & Sutro LLP beneficially own an aggregate of 7,642 shares of
Support.com common stock. Legal matters in connection with this offering will
be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
Ernst & Young, LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999 and for the period from inception
(December 3, 1997) to December 31, 1998 and the year ended December 31, 1999,
as set forth in their report. We have included our financial statements in the
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For
further information with respect to Support.com and the common stock offered by
this prospectus, we refer you to the registration statement and the exhibits
and schedules filed as part of the registration statement. You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's Web site at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities and Exchange Act, as
amended, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the SEC. These periodic reports, proxy
statements and other information will be available for inspection and copying
at the SEC's public reference rooms and the Web site of the SEC referred to
above.
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SUPPORT.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Balance Sheets........................................................... F-3
Statements of Operations................................................. F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Equity (Deficit)........................................................ F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
</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 balance sheets of Support.com, Inc. as of
December 31, 1998 and 1999, and the related statements of operations,
redeemable convertible preferred stock and stockholders' equity (deficit), and
cash flows for the period from inception (December 3, 1997) to December 31,
1998 and for the year ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Support.com, Inc. at
December 31, 1998 and 1999, and the results of its operations and its cash
flows for the period from inception (December 3, 1997) to December 31, 1998 and
for the year ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Palo Alto, California
February 15, 2000
F-2
<PAGE>
SUPPORT.COM, INC.
BALANCE SHEETS
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
----------------- December 31,
1998 1999 1999
------- -------- -------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................... $ 2,807 $ 4,023
Short-term investments...................... -- 8,466
Accounts receivable, less allowance of $10
and $40, respectively...................... 65 3,450
Prepaids and other current assets........... 516 451
------- --------
Total current assets...................... 3,388 16,390
Property and equipment, net................... 256 881
Other assets.................................. 28 254
------- --------
$ 3,672 $ 17,525
======= ========
Liabilities and stockholders' equity (deficit)
Current liabilities:
Notes payable, current portion.............. $ 50 $ 921
Capital lease obligations, current portion.. -- 274
Accounts payable............................ 98 1,227
Accrued compensation........................ 60 1,168
Other accrued liabilities................... 159 494
Deferred revenue............................ 42 2,968
------- --------
Total current liabilities................. 409 7,052
Notes payable, net of current portion......... 449 1,478
Capital lease obligations, net of current
portion...................................... -- 799
Commitments
Redeemable convertible preferred stock;
7,346,108 and 12,156,108 shares authorized at
December 31, 1998 and 1999, $0.0001 par
value, issuable in series:
Series B redeemable convertible preferred
stock; 7,346,108 shares designated, issued
and outstanding at December 31, 1998 and
1999, and none pro forma (liquidation
preference at December 31, 1999 of
$5,668).................................... 5,237 5,641
Series C redeemable convertible preferred
stock; 4,810,000 shares designated;
4,638,618 shares issued and outstanding at
December 31, 1999, and none pro forma
(liquidation preference at December 31,
1999 of $15,844)........................... -- 15,808
Stockholders' equity (deficit):
Series A convertible preferred stock; par
value $0.0001, 3,571,600 shares authorized,
3,571,600 shares issued and outstanding at
December 31, 1998 and 1999, and none pro
forma (liquidation preference at December
31, 1999 of $250).......................... 1 1 $ --
Common stock; par value $0.0001, 31,060,000
shares authorized, 6,468,880 and 10,874,374
shares issued and outstanding at December
31, 1998 and 1999, respectively;
150,000,000 authorized, 26,430,700 shares
issued and outstanding pro forma........... 1 1 3
Additional paid-in capital.................. 478 19,491 40,939
Receivable from stockholders................ -- (1,450) (1,450)
Deferred compensation....................... (153) (14,252) (14,252)
Accumulated deficit......................... (2,750) (17,044) (17,044)
------- -------- --------
Total stockholders' equity (deficit)...... (2,423) (13,253) $ 8,196
------- -------- ========
Total liabilities and stockholders' equity
(deficit)................................ $ 3,672 $ 17,525
======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SUPPORT.COM, INC.
STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
<S> <C> <C>
Revenue:
License fees........................ $ 18 $ 2,746
Services............................ -- 569
------- --------
Net revenues...................... 18 3,315
------- --------
Costs and expenses:
Cost of license fees................ -- 4
Cost of services.................... -- 965
Research and development............ 1,132 2,401
Sales and marketing................. 1,197 8,974
General and administrative.......... 477 1,881
Amortization of deferred
compensation....................... 16 3,554
------- --------
Total costs and expenses.......... 2,822 17,779
------- --------
Loss from operations.................. (2,804) (14,464)
Interest income....................... 105 501
Interest expense...................... (51) (331)
------- --------
Net loss.............................. (2,750) (14,294)
Accretion on redeemable convertible
preferred stock...................... (214) (1,072)
------- --------
Net loss attributable to common
stockholders......................... $(2,964) $(15,366)
======= ========
Basic and diluted net loss per share.. $ (0.57) $ (2.31)
======= ========
Shares used in computing basic and
diluted net loss per share........... 5,227 6,643
======= ========
Pro forma basic and diluted net loss
per share (unaudited)................ $ (0.71)
========
Shares used in computing pro forma
basic and diluted net loss per share
(unaudited).......................... 20,137
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SUPPORT.COM, INC.
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
------------------ ---------------- ----------------- Paid-In From
Shares Amount Shares Amount Shares Amount Capital Stockholders
---------- ------- --------- ------ ---------- ------ ---------- ------------
<S> <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 and
stock options to
non-employees... -- -- -- -- -- -- 275 --
Accretion on
redeemable
convertible
preferred
stock........... -- 214 -- -- -- -- (214) --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 169 --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- --
---------- ------- --------- ---- ---------- ---- ------- -------
Balances at
December 31,
1998............ 7,346,108 5,237 3,571,600 1 6,468,880 1 478 --
Issuance of
Series C
redeemable
convertible
preferred stock
at $3.271 per
share for cash,
net of issuance
costs of $36.... 4,638,618 15,140 -- -- -- -- -- --
Issuance of
common stock
upon exercise of
options to
employees and to
consultants for
cash and
promissory
notes........... -- -- -- -- 4,131,994 -- 1,914 (1,450)
Issuance of
common stock and
restricted stock
to non-
employees....... -- -- -- -- 273,500 -- 169 --
Issuance of
warrants and
stock options to
non-employees... -- -- -- -- -- -- 349 --
Accretion on
redeemable
convertible
preferred
stock........... -- 1,072 -- -- -- -- (1,072) --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 17,653 --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- --
---------- ------- --------- ---- ---------- ---- ------- -------
Balances at
December 31,
1999............ 11,984,726 $21,449 3,571,600 $ 1 10,874,374 $ 1 $19,491 $(1,450)
- --------------------------------------------------
========== ======= ========= ==== ========== ==== ======= =======
<CAPTION>
Total
Deferred Stockholders'
Stock Accumulated Equity
Compensation Deficit (Deficit)
------------ ----------- -------------
<S> <C> <C> <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 and
stock options to
non-employees... -- -- 275
Accretion on
redeemable
convertible
preferred
stock........... -- -- (214)
Deferred
compensation
related to grant
of stock
options......... (169) -- --
Amortization of
deferred
compensation.... 16 -- 16
Net loss........ -- (2,750) (2,750)
------------ ----------- -------------
Balances at
December 31,
1998............ (153) (2,750) (2,423)
Issuance of
Series C
redeemable
convertible
preferred stock
at $3.271 per
share for cash,
net of issuance
costs of $36.... -- -- --
Issuance of
common stock
upon exercise of
options to
employees and to
consultants for
cash and
promissory
notes........... -- -- 464
Issuance of
common stock and
restricted stock
to non-
employees....... -- -- 169
Issuance of
warrants and
stock options to
non-employees... -- -- 349
Accretion on
redeemable
convertible
preferred
stock........... -- -- (1,072)
Deferred
compensation
related to grant
of stock
options......... (17,653) -- --
Amortization of
deferred
compensation.... 3,554 -- 3,554
Net loss........ -- (14,294) (14,294)
------------ ----------- -------------
Balances at
December 31,
1999............ $(14,252) $(17, 044) $(13,253)
- --------------------------------------------------
============ =========== =============
</TABLE>
See accompanying notes.
F-5
<PAGE>
SUPPORT.COM, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
<S> <C> <C>
Operating activities
Net loss............................. $(2,750) $(14,294)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization...... 23 294
Amortization of deferred
compensation...................... 16 3,554
Other.............................. 39 425
Changes in assets and liabilities:
Accounts receivable, net......... (65) (3,385)
Prepaids and other current
assets.......................... (29) (129)
Accounts payable................. 98 1,129
Accrued compensation............. 60 1,108
Other accrued liabilities........ 159 335
Deferred revenue................. 42 2,926
------- --------
Net cash used in operating
activities.......................... (2,407) (8,037)
------- --------
Investing activities
Purchases of property and equipment.. (279) (89)
Proceeds from sale of equipment...... -- 99
Other assets......................... (28) (226)
Purchases of short-term investments.. -- (12,266)
Sales of short-term investments...... -- 3,800
------- --------
Net cash used in investing
activities.......................... (307) (8,682)
------- --------
Financing activities
Proceeds from notes payable.......... 500 2,000
Proceeds from sale-leaseback......... -- 183
Proceeds from issuance of preferred
stock, net.......................... 5,017 15,390
Proceeds from issuances of common
stock............................... 5 501
Repayment of notes payable........... (1) (100)
Principal payments under capital
lease obligations................... -- (39)
------- --------
Net cash provided by financing
activities.......................... 5,521 17,935
------- --------
Net increase in cash and cash
equivalents........................... 2,807 1,216
Cash and cash equivalents at beginning
of period............................. -- 2,807
------- --------
Cash and cash equivalents at end of
period................................ $ 2,807 $ 4,023
======= ========
Supplemental disclosure of noncash
financing activities
Note received from stockholder in
exchange for preferred stock........ $ 250 $ --
======= ========
Note received from stockholders in
exchange for common stock........... $ -- $ 1,450
======= ========
Equipment acquired under capital
lease obligation.................... $ -- $ 1,112
======= ========
Supplemental schedule of cash flow
information
Interest paid........................ $ 39 $ 249
======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Nature of Operations
Support.com, Inc. ("Support.com" or the "Company"), formerly known as Tioga
Systems, Inc. and Replicase, Inc., was incorporated in the state of Delaware on
December 3, 1997. Support.com is a provider of eBusiness infrastructure
software that optimizes, automates and personalizes user support over the
Internet. The Company's suite of eSupport software products and services is
designed to accelerate eBusiness growth by enabling the elimination of user
support bottlenecks that would otherwise constrain expanding Internet
initiatives. The Company sells its products primarily in the United States and,
to a lesser extent in Europe, through its direct sales force.
The Company commenced operations in December 1997. Operations through
December 31, 1997 consisted of initial development activities. As such
activities were not significant, the results have been included in operations
for the period ended December 31, 1998.
The Company has incurred operating losses to date and had an accumulated
deficit of $17,044,000 at December 31, 1999. The Company's activities have been
primarily financed through private placements of equity securities and capital
lease financings. Support.com may need to raise additional capital through the
issuance of debt or equity securities and capital lease financings. Such
financing may not be available on terms satisfactory to the Company, if at all.
If adequate funds are not available, the Company may be required to reduce its
level of spending.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ materially from these
estimates.
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash investments and trade receivables.
Support.com invests cash which is not required for immediate operating needs
principally in money market funds and commercial paper, which incur minimal
risk. Support.com's customers are currently concentrated in the United States.
The Company performs ongoing evaluations of its customers' financial condition
and generally does not require collateral. The Company maintains reserves for
credit losses, and such losses have been within management's expectations.
For the year ended December 31, 1999, one customer accounted for 53% of
revenue.
Fair Value of Financial Instruments
The fair value of notes payable is estimated by discounting the future cash
flows using the current interest rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
The carrying value of the notes payable approximated its fair value. The fair
value of short-term and long-term capital lease obligations is estimated based
on current interest rates available to Support.com for debt instruments with
similar terms, degrees of risk and remaining maturities. The carrying values of
these obligations approximate their respective fair values.
F-7
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Cash, Cash Equivalents and Short-Term Investments
Support.com considers all highly liquid, low-risk debt instruments with an
original maturity at the date of purchase of three months or less to be cash
equivalents. Through December 31, 1998, Support.com maintained cash and cash
equivalents in money market accounts with major financial institutions for
which the carrying amount approximated its fair value. Upon the completion of
the Series C Financing (see Note 4), Support.com invested some of its proceeds
in short-term investments with original maturities of greater than three
months. At December 31, 1999, cash equivalents and short-term investments
consist primarily of commercial paper, other debt instruments and money market
funds. Support.com's cash equivalents and short-term investments are classified
as available-for-sale in accordance with the provisions of the FASB's Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
Currently, Support.com classifies its securities as available-for-sale,
which are reported at amortized cost which approximated fair value at December
31, 1998 and 1999. Material unrealized gains and losses, if any, are reported
in stockholders' equity (deficit) and included in other comprehensive loss. The
amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity, both of which are included in interest
income. Realized gains and losses are recorded using the specific
identification method. For the period from December 3, 1997 (inception) to
December 31, 1998 and for the year ended December 31, 1999, gross unrealized
gains and losses on available-for-sale securities were immaterial.
The following is a summary of available-for-sale securities at cost, which
approximates fair value (in thousands):
<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
License revenue is comprised of fees for perpetual and subscription licenses
of the Company's software by corporate customers and resellers. Revenue from
perpetual license fees is recognized when persuasive evidence of an agreement
exists, delivery of the product has occurred, no obligations remain, the fee is
fixed or determinable and collectibility is probable. If the fee due from the
customer is not fixed or determinable, revenue is recognized as payments become
due from the customers. If collectibility is not considered probable,
F-8
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
revenue is recognized when the fee is collected. Revenue related to
arrangements with resellers is recognized when the product is delivered to the
end user. Revenue from subscription licenses is recognized ratably over the
term of the subscription beginning upon the delivery of the licensed product.
Services revenue is primarily comprised of revenue from consulting fees,
maintenance arrangements and training. Arrangements that include software
services are evaluated to determine whether those services are essential to the
functionality of other elements of the arrangement. When software services are
considered essential, revenue under the arrangement is recognized as the
services are delivered in accordance with SOP 81-1, "Accounting for Performance
of Construction Type and Certain Production Type Contracts." When software
services are not considered essential, the revenue allocable to the software
services based on vendor-specific objective evidence is recognized as the
services are performed.
Maintenance agreements provide for technical support and include the right
to unspecified upgrades on an if-and-when-available basis. Maintenance revenue
is deferred and recognized on a straight-line basis as services revenue over
the life of the related agreement, which is typically one year.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.
Support.com adopted Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), and Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue Recognition" ("SOP
98-4"), as of January 1, 1998. SOP 97-2 and SOP 98-4 provide guidance for
recognizing revenue on software transactions and supersede SOP 91-1, "Software
Revenue Recognition." Full implementation guidelines for these standards have
not yet been issued. Once available, the current revenue accounting practices
may need to change and such changes could affect Support.com's future revenues
and results of operations. In December 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-9, "Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions" ("SOP 98-9"). SOP 98-9 amends SOP 98-4 to extend the deferral of
the application of certain passages of SOP 97-2 provided by SOP 98-4 through
fiscal years beginning on or before March 15, 1999. All other provisions of SOP
98-9 are effective for transactions entered into in fiscal years beginning
after March 15, 1999. Support.com does not expect the final adoption of SOP 98-
9 to have a material impact on its future revenues or results of operations.
Research and Development
Research and development expenditures are generally charged to operations as
incurred. Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed,"
requires the capitalization of certain software development costs subsequent to
the establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon the
completion of a working model. Costs incurred by the Company between the
completion of the working model and the point at which the product is ready for
general release have been insignificant. Accordingly, the Company has charged
all such costs to research and development expense in the accompanying
statement of operations. The Company did not incur any cost related to software
developed or obtained for internal use as defined SOP 98-1.
Advertising Costs
Advertising costs are recorded as sales and marketing expense in the period
in which they are incurred. Advertising expense for the period from inception
(December 3, 1997) to December 31, 1998 and the year ended December 31, 1999
were approximately $0 and $70,675, respectively.
F-9
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), and has adopted the disclosure only
alternative of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123").
Any deferred stock compensation calculated according to APB 25 is amortized
over the vesting period of the individual options, generally four years, using
the graded vesting method. The graded vesting method provides for vesting of
portions of the overall awards at interim dates and results in greater vesting
in earlier years than straight-line.
All stock-based awards to non-employees are accounted for at their fair
value, as calculated using the Black-Scholes model, in accordance with FAS No.
123 and Emerging Issues Task Force Consensus No. 96-18. The options are subject
to periodic re-valuation over their vesting terms.
Net Loss Per Share
Basic and diluted net loss per share are presented in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS
128"), for all periods presented. Pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin No. 98, ordinary shares and convertible
preferred shares issued or granted for nominal consideration prior to the
anticipated effective date of Support.com's initial public offering must be
included in the calculation of basic and diluted net loss per share as if they
had been outstanding for all periods presented. To date, Support.com has not
had any issuances or grants for nominal consideration.
Basic and diluted net loss per share has been computed using the weighted-
average number of shares of common stock outstanding during the period. Had
Support.com been in a net income position, diluted earnings per share would
have included the shares used in the computation of basic net loss per share as
well as the impact of common shares outstanding subject to repurchase and
outstanding options and warrants to purchase an additional 2,306,761 and
7,586,002 shares, prior to the application of the treasury stock method, for
the period from inception (December 3, 1997) to December 31, 1998 and the year
ended December 31, 1999, respectively. Such shares have been excluded because
they are antidilutive for all periods presented. Shares of convertible
preferred stock have been excluded from the computation.
Comprehensive Loss
Support.com adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130"), at December 31, 1998. Under FAS
130, Support.com is required to display comprehensive income and its components
as part of the financial statements. Other comprehensive income includes
certain changes in equity that are excluded from net loss. The Company has no
material components of other comprehensive loss and, as a result, the
comprehensive loss is the same as the net loss for all periods presented.
Segment Information
Support.com operates in one segment. For the year ended December 31, 1999,
revenue from customers located outside the United States was approximately
$46,000 and was derived from customers in Canada and the United Kingdom.
F-10
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Pro Forma Net Loss Per Share (Unaudited)
Pro forma net loss per share is computed using the weighted-average number
of shares of common stock outstanding, including the pro forma effects of the
automatic conversion of Support.com's convertible preferred stock into shares
of common stock, effective upon the closing of Support.com's initial public
offering as if such conversion occurred at the date of original issuance. Pro
forma stockholders' equity at December 31, 1999, as adjusted for the conversion
of the convertible preferred stock, is disclosed on the balance sheet.
A reconciliation of shares used in the calculation of basic and diluted and
pro forma net loss per share follows (In thousands except per share data):
<TABLE>
<CAPTION>
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
<S> <C> <C>
Net loss attributable to common
stockholders....................... $(2,964) $(15,366)
======= ========
Basic and diluted:
Weighted-average shares of common
stock outstanding................ 6,432 7,166
Less weighted-average shares
subject to repurchase............ (1,205) (523)
------- --------
Shares used in computing basic and
diluted net loss per share....... 5,227 6,643
======= ========
Basic and diluted net loss per
share.............................. $ (0.57) $ (2.31)
======= ========
Pro forma:
Net loss.......................... $(14,294)
========
Shares used above................. 6,643
Unaudited pro forma adjustment to
reflect weighted effect of
assumed conversion of convertible
preferred stock.................. 13,494
--------
Shares used in computing unaudited
pro forma basic and diluted net
loss per share................... 20,137
========
Unaudited pro forma basic and
diluted net loss per share......... $ (0.71)
========
</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.
F-11
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
2. Property and Equipment
Property and equipment are stated at cost and consist of the following (In
thousands):
<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, the Company entered into a Loan and Security Agreement, a
Subordinated Loan and Security Agreement and a Lease Agreement with a financial
institution. In connection with each of these agreements, the Company issued
warrants to the financial institution (see Note 4). Additionally, the Company
cannot declare or pay any cash dividends or make a distribution on any class of
stock without the consent of the lender.
The Loan and Security Agreement allows the Company to borrow up to
$1,500,000 in minimum installments of $500,000 evidenced by secured promissory
notes. Each promissory note bears interest at the rate of 9% per annum, is
payable in 36 monthly installments, and is secured by substantially all of the
Company's assets. At December 31, 1999, the Company had borrowed $1,500,000
under this agreement. Remaining principal payments under these notes for the
years ending December 31, 2000, 2001 and 2002 are approximately $639,000,
$699,000 and $61,000, respectively.
The Subordinated Loan and Security Agreement allows the Company to borrow up
to $1,000,000 in two installments of $500,000 evidenced by subordinated secured
promissory notes. Each promissory note bears interest at the rate of 12.5% per
annum, is payable in 9 monthly installments of interest only followed by
33 monthly installments of principal and interest. Each note is secured by
substantially all of the Company's assets. At December 31, 1999, the Company
had borrowed $1,000,000 under this agreement. Principal payments due for the
years ended December 31, 2000, 2001 and 2002 are approximately $282,000,
$362,000 and $356,000, respectively.
The Lease Agreement allows the Company to borrow up to $2,500,000. The
Company can borrow under this agreement until 2001 and advances may only be
used to finance purchases of equipment, software and tenant improvements,
subject to certain limitations. Advances are secured by the assets acquired.
Each equipment advance is payable in 48 monthly installments of principal and
interest, computed at the monthly rate of 2.9% of the principal balance. At
December 31, 1999, the Company had borrowed approximately $1,112,000 under this
agreement.
F-12
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
The Company leases its facilities under noncancelable operating lease
agreements which expire at various dates from 2000 to 2001. Rent expense was
approximately $783,000 for the year ended December 31, 1999 and approximately
$184,000 for the period from inception (December 3, 1997) to December 31, 1998.
The Company has subleased one of its facilities to a third party. Sublease
rental income was approximately $162,000 for the year ended December 31, 1999
and approximately $45,000 for the period from inception (December 3, 1997) to
December 31, 1998. Payments due under the sublease rental agreement are
approximately $309,000 in 2000 and $178,000 in 2001. The sublease rental
agreement expires in July 2001.
As of December 31, 1999, minimum payments under noncancelable lease
agreements were as follows (in thousands):
<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 the Company receives at least $15,000,000 in gross proceeds and
the market valuation for the Company is at least $125,000,000. Each class of
preferred stock automatically converts into common stock at the election of
holders of at least a majority of the outstanding shares.
As of December 31, 1999, convertible preferred stock consisted of the
following:
<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....................... 4,810,000 4,638,618 $0.262 $3.271
---------- ----------
15,727,708 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.
F-13
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
The liquidation preference of the convertible preferred stock is subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination, or other similar recapitalization affecting such share and, in
addition, an amount equal to all declared but unpaid dividends on the shares of
preferred stock. The liquidation preference of the Series B and C preferred
stock is increased at the rate, without compounding, of 8% per year, such rate
to be prorated over the length of any partial year. Any remaining assets would
then be distributed on a pro rata basis among the holders of common stock.
The majority of the holders of Series B redeemable convertible preferred
stock can require the Company to redeem one-third, two-thirds, and all of the
outstanding Series B redeemable convertible preferred stock, together with a 8%
annual rate of return, at any time after June 19, 2003, June 19, 2004 and June
19, 2005, respectively. The carrying amount of Series B redeemable convertible
preferred stock is being increased by periodic accretions so that its carrying
amount will equal the redemption amount at the redemption date.
The majority of the holders of Series C redeemable convertible preferred
stock can require the Company to redeem one-third, two-thirds, and all of the
outstanding Series C redeemable convertible preferred stock, together with a 8%
annual rate of return, at any time after June 14, 2004, June 14, 2005 and June
14, 2006, respectively. The carrying amount of Series C redeemable convertible
preferred stock is being increased by periodic accretions so that its carrying
amount will equal the redemption amount at the redemption date.
The preferred stockholders have voting rights equal to the common shares
issuable upon conversion of their preferred shares.
At December 31, 1998, the Company had a receivable from a stockholder for
$250,229 in connection with the purchase of Series B preferred stock. The
receivable was included in prepaids and other currents assets. The Company
collected the receivable during 1999.
Common Stock
The Company has reserved shares of common stock for issuance at December 31,
1999 as follows:
<TABLE>
<S> <C>
Stock Option Plan................................................. 3,952,440
Warrants.......................................................... 164,483
Conversion of preferred stock..................................... 15,556,326
----------
19,673,249
==========
</TABLE>
Certain option holders have exercised options to purchase shares of common
stock in exchange for four-year, full recourse promissory notes. The notes bear
interest at 5.9% and expire on various dates through 2003. The Company has the
right to repurchase all unvested shares purchased by the notes at the original
exercise price in the event of employee termination. The number of shares
subject to this repurchase right decreases as the shares vest under the
original option terms, generally over four years. As of December 31, 1999,
there were 1,560,000 shares subject to repurchase. These options were exercised
at prices ranging from $0.90 to $0.99, with a weighted-average exercise price
of $0.93 per share.
Subsequent to year end, an option holder exercised 1,680,189 options to
purchase shares of common stock in exchange for a four-year, full recourse
promissory note. The note has terms which are identical to the notes exercised
prior to year end. These options were exercised at at a price per share of
$0.40.
F-14
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Stock Warrants
In October 1998 and July 1999, the Company issued warrants to a financial
institution in conjunction with the Loan and Security Agreement, Subordinated
Loan and Security Agreement and the master lease agreement (see Note 3). The
warrant issued in October 1998 allows the financial institution to purchase
98,511 shares of the Company's Series C preferred stock at an exercise price of
$1.98 per share. The warrant issued in July 1999 allows the financial
institution to purchase 27,511 shares of the Company's Series C preferred stock
at an exercise price of $3.27 per share. The warrants became exercisable in
June 1999 and July 1999, respectively. The warrants granted in July 1999 shall
be exercisable for a period of seven years or three years from the effective
date of the Company's initial public offering, whichever is longer. The
warrants granted in October 1998 will expire 7 years from issuance or at the
time of the Company's initial public offering. The warrants were valued using
the Black-Scholes model. The total value of approximately $308,000 is being
amortized to interest expense over the term of the financing agreements.
In August 1999, the Company issued warrants to a lessor in conjunction with
a sublease agreement. The warrant allows the lessor to purchase 38,461 shares
of the Company's Series C preferred stock at an exercise price of $6.50 per
share. The warrant is immediately exercisable and expires in November 2001 or
at the time of the Company's initial public offering. The warrants were valued
using the Black-Scholes model. The total value of approximately $35,000 is
being amortized to interest expense over the term of the lease agreements.
1998 Stock Option Plan
During fiscal 1998, the Company adopted the 1998 Stock Option Plan (the
"Plan"). Under the Plan, up to 8,124,434 shares of the Company's common stock
may be granted as options or sold to eligible participants. Under the Plan,
options to purchase common stock may be granted at no less than 85% of the fair
value on the date of the grant (110% of fair value in certain instances), as
determined by the board of directors. Options under the plan are immediately
exercisable; however, shares issued are subject to the Company's right to
repurchase such shares at the original issuance price, which lapses in a series
of installments measured from the vesting commencement date of the option.
Options generally vest and the repurchase rights lapse over a 48-month period
from the date of grant and have a maximum term of 10 years.
Pro forma information regarding net loss is required by FAS 123 and has been
determined as if the Company had accounted for its employee stock options under
the fair value method of FAS 123. The fair value of these options was estimated
at the date of grant using the minimum value method with the following
weighted-average assumptions: risk-free interest rates of 6.5%; a dividend
yield of 0%; and a weighted-average expected life of the option of 4.5 years
for the years ended December 31, 1998 and 1999.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using a
graded vesting method. The effects of applying FAS 123 for pro forma
disclosures are not likely to be representative of the effects on reported net
loss for future years.
Support.com's pro forma information follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Period from inception
(December 3, 1997) to Year ended
December 31, 1998 December 31, 1999
--------------------- -----------------
<S> <C> <C>
Net loss:
As reported...................... $(2,964) $(15,366)
Pro forma........................ (2,969) (15,468)
Basic and diluted net loss per
share:
As reported...................... $ (0.57) $ (2.31)
Pro forma........................ (0.57) (2.33)
</TABLE>
F-15
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
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
========== ========== ===========
</TABLE>
At December 31, 1998 and 1999, zero and 3,299,905 shares which had been
issued upon exercise of options were subject to repurchase. At December 31,
1998 and 1999, options to acquire 5,500 and 444,899 shares were vested but not
exercised.
Exercise prices for options outstanding as of December 31, 1999 and the
weighted-average remaining contractual life are as follows:
<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 and 1999 was
$0.02 and $0.12, respectively.
Stock Compensation
During the period from December 31, 1997 (inception) to December 31, 1998
and for the year ended December 31, 1999, in connection with the grant of
certain share options to employees, Support.com recorded deferred stock
compensation of approximately $169,000 and $17.7 million, respectively,
representing the difference between the exercise price and the deemed fair
value of Support.com's common stock on the date such stock options were
granted. Such amounts are included as a reduction of stockholders' equity
(deficit) and are being amortized by charges to operations on a graded vesting
method. Support.com recorded amortization of deferred stock compensation
expense of approximately $16,000 in 1998 and $3.5 million in 1999. At
F-16
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
December 31, 1999, Support.com had a total of approximately $14.3 million
remaining to be amortized over the corresponding vesting period of each
respective option, generally four years. The amortization expense relates to
options awarded to employees in all operating expense categories. This amount
has not been separately allocated to these categories.
5. Income Taxes
The difference between the amount of income tax benefit calculated and the
amount of income tax recorded using the U.S. federal statutory rate of 35% is
primarily due to net operating losses not being benefited. Accordingly, there
is no provision for income taxes for the period from December 17, 1997
(inception) to December 31, 1998 and for the year ended December 31, 1999.
Significant components of Support.com's deferred tax assets are as follows
(in thousands):
<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>
The Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes," provides for the recognition
of deferred tax assets if realization of such assets is more likely than not.
Based upon the weight of available evidence, which includes Support.com's
historical operating performance and the reported cumulative net losses in all
periods, the Company has provided a full valuation allowance against its net
deferred tax assets.
The valuation allowance increased by approximately $1.1 million and $5.3
million during the period from December 17, 1997 (inception) to December 31,
1998 and for the year ended December 31, 1999, respectively.
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards each of approximately $10.1 million. The net operating loss
carryforwards will expire at various dates beginning in 2005 through 2019, if
not utilized.
Utilization of the net operating loss carryforwards may be subject to a
substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code and similar state provisions. The annual limitation
may result in the expiration of net operating loss carryforwards before
utilization.
F-17
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
6. Subsequent Events (Unaudited)
Initial Public Offering
In February 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed Initial Public
Offering ("IPO"). If the offering is consummated under the terms presently
anticipated, all of the currently outstanding convertible preferred stock will
convert to shares of common stock upon the closing of the IPO on a one-for-one
basis. The effect of this conversion has been reflected as unaudited pro forma
stockholders' equity in the accompanying balance sheet at December 31, 1999.
In February 2000, the Board of Directors also authorized 5,000,000 shares of
undesignated preferred stock, for which the Board of Directors is authorized to
fix the designation, powers, preferences and rights, and an increase in the
authorized number of shares of common stock to 150,000,000 shares.
2000 Employee Stock Purchase Plan
In February 2000, the Board of Directors approved the adoption of
Support.com's 2000 Employee Stock Purchase Plan (the "2000 Purchase Plan"). A
total of 2,000,000 shares of common stock have been reserved for issuance under
the 2000 Purchase Plan. On January 1 of each year, the number of shares
reserved automatically increases by the lesser of 2,000,000 shares, 3% of the
outstanding shares, or an amount determined by the Board of Directors. The 2000
Purchase Plan permits eligible employees to acquire shares of Support.com's
common stock through periodic payroll deductions of up to 15% of total
compensation. No more than 1,000 shares may be purchased on any purchase date
per employee. Each offering period will have a maximum duration of 24 months.
Purchases occur on the last day of each June and December of each offering
period. The price at which the common stock may be purchased is 85% of the
lesser of the fair market value of Support.com's common stock on each
employee's applicable enrollment date or on the last day of the respective
purchase period. The initial offering period commenced on the effectiveness of
the initial public offering and will end on the last business day of December
2001.
2000 Omnibus Equity Incentive Plan
In February 1999, the Board of Directors approved the adoption of
Support.com's 2000 Omnibus Equity Incentive Plan (the "2000 Incentive Plan"),
subject to stockholder approval. A total of 4,000,000 shares of common stock
have been reserved for issuance to eligible participants under the 2000
Incentive Plan. On January 1 of each year, the number of shares reserved
automatically increases by the lesser of 2,000,000 shares, 5% of outstanding
shares, or an amount determined by the Board of Directors. The types of awards
that may be made under the 2000 Incentive Plan include the grant of incentive
stock options, the grant of nonstatutory stock options and stock purchase
rights to employees, non-employee directors, advisors and consultants. Any
shares not yet issued under Support.com's 1998 Stock Option Plan as of the date
of Support.com's initial public offering will be available for grant under the
2000 Incentive Plan. The exercise price for incentive stock options may not be
less than 100% of the fair market value of Support.com's common stock on the
date of grant (85% for nonstatutory options).
Increase in Shares Available Under the 1998 Stock Option Plan
In February 2000, the Board of Directors authorized, and the stockholders
approved, an increase of 1,300,000 shares for issuance under Support.com's
stock option plan.
F-18
<PAGE>
SUPPORT.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
Option Activity
From January 1, 2000 to February 15, 2000, options to purchase 690,000
shares of common stock were granted to employees pursuant to the 1998 Stock
Option Plan with exercise prices of between $2.00 and $5.50 per share. The
Company estimates that additional deferred compensation of $3.7 million will be
recorded as a result of these option grants and will be amortized to expense in
accordance with the Company's policy. The Company also expects to incur non-
cash charges of at least $700,000 in the first quarter of 2000 associated with
other option arrangements.
Rescission Offer
Shares issued, and option grants made under, the Company's 1998 Stock Plan
were not exempt from registration or qualification under California state
securities laws, and these stock issuances and option grants violated the
registration requirements of California state securities laws because
registration or qualification was not obtained. The Company intends to make a
rescission offer to the holders of these shares and options which will be held
open for 30 days after the effective date of this offering. If accepted, the
rescission offer could require the Company to make payments including statutory
interest.
F-19
<PAGE>
[Company Logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the
securities being registered hereby, other than underwriting discounts and
commissions. All amounts are estimated except the Securities and Exchange
Commission registration fee and the National Association of Securities
Dealers, Inc. filing fee.
<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 such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article XI.B. of the
Registrant's Amended and Restated Certificate of Incorporation (Exhibit 3.1
hereto) and Article XII of the Registrant's Amended and Restated Bylaws
(Exhibit 3.2 hereto) provide for indemnification of the Registrant's
directors, officers, employees and other agents to the extent and under the
circumstances permitted by the Delaware General Corporation Law. The
Registrant has also entered into agreements with its directors and officers
that will require the Registrant, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or
service as directors or officers to the fullest extent not prohibited by law.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant, its directors and officers, and by the
Registrant of the Underwriters, for certain liabilities, including liabilities
arising under the Act and affords certain rights of contribution with respect
thereto.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
ourselves, our underwriters and our directors and officers of the
underwriters, for certain liabilities, including liabilities arising under the
Act and affords certain rights of contribution with respect thereto.
Item 15. Recent Sales of Unregistered Securities
1. From December 1997 to December 31, 1999, the Registrant issued and
sold 10,874,374 shares of common stock to employees, directors and
consultants at prices ranging from $0.0001 to $0.90 per share.
2. From December 8, 1997 to March 19, 1998, the Registrant issued and
sold 3,571,600 shares of Series A preferred stock to a total of 4 investors
for an aggregate purchase price of $250,012.00.
3. On June 22, 1998, the Registrant issued and sold 7,346,108 shares of
Series B preferred stock to a total of 9 investors for an aggregate
purchase price of $5,050,228.87.
4. On June 14, 1999, the Registrant issued and sold 4,638,618 shares of
Series C preferred stock to a total of 35 investors for an aggregate
purchase price of $15,175,147.93.
II-1
<PAGE>
The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701
promulgated under Section 3(b) of the Securities Act, as transactions by an
issuer not involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each of these transactions
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof,
and appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationship with the Registrant, to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
See exhibits listed on the Exhibit Index following the signature page of
the Form S-1, which is incorporated herein by reference.
(b) Financial Statement Schedules
Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) The Registrant will provide to the underwriters at the closing(s)
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redwood City, State of
California, on the 18th day of February, 2000.
Support.Com, Inc.
/s/ Radha Ramaswami Basu
By __________________________________
Radha Ramaswami Basu
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Radha Ramaswami Basu, Brian M. Beattie and Mark
A. Vranesh, and each of them, his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities, to
sign any and all amendments, including post-effective amendments, to this
Registration Statement, and any registration statement relating to the
offering covered by this Registration Statement and filed pursuant to Rule
462(b) under the Securities Act of 1933 and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
each of said attorneys-in-fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Radha Ramaswami Basu President, Chief Executive February 18, 2000
____________________________________ Officer and Director
Radha Ramaswami Basu (Principal Executive
Officer)
/s/ Brian M. Beattie Senior Vice President of February 18, 2000
____________________________________ Finance and Administration,
Brian M. Beattie Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Mark J. Pincus Director February 18, 2000
____________________________________
Mark J. Pincus
/s/ Matthew T. Cowan Director February 18, 2000
____________________________________
Matthew T. Cowan
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William L. Dunn Director February 18, 2000
____________________________________
William L. Dunn
/s/ Bruce Golden Director February 18, 2000
____________________________________
Bruce Golden
/s/ Edward S. Russell Director February 18, 2000
____________________________________
Edward S. Russell
/s/ Roger J Sippl Director February 18, 2000
____________________________________
Roger J. Sippl
</TABLE>
II-4
<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 1998 Stock Option Plan.
10.2 Registrant's 2000 Omnibus Equity Incentive Plan.
10.3 Registrant's 2000 Employee Stock Purchase Plan.
10.4 Form of Directors and Officers' Indemnification Agreement.
10.5 Employment Agreement, dated June 24, 1998, by and between the
registrant and Anthony C. Rodoni.
10.6 Employment Agreement, dated May 26, 1999, by and between the
registrant and Michael O'Rourke.
10.7 Employment Agreement, dated July 15, 1999, by and between the
registrant and Radha R. Basu.
10.8 Employment Agreement, dated August 16, 1999, by and between the
registrant and Scott Dale.
10.9 Employment Agreement, dated August 16, 1999, by and between the
registrant and Cadir Lee.
10.10 Employment Agreement, dated September 27, 1999, by and between the
registrant and Brian M. Beattie.
10.11 Employment Agreement, dated December 7, 1999, by and between the
registrant and Jim Hilbert.
10.12 Employment Agreement, dated January 18, 2000, by and between the
registrant and Lucille Hoger.
10.13* Employment Agreement, dated February , 2000, by and between the
registrant and Mark Pincus.
10.14 Sublease Agreement, dated August 6, 1999, by and between the
registrant and Excite, Inc.
10.15+ Enterprise License Agreement, dated May 27, 1999, by and between the
registrant and Bear, Stearns & Co., Inc.
10.16+ Amendment No. 1 to Enterprise License Agreement, dated October 6,
1999, by and between the registrant and Bear, Stearns & Co., Inc.
10.17* Enterprise License Agreement dated February 17, 2000 by and between
the registrant and General Electric Company.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Pillsbury Madison & Sutro LLP (contained in their opinion
filed as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to Page II-3.
27.1 Financial Data Schedule for Support.com, Inc. (in EDGAR format only).
</TABLE>
- -------
* To be filed by amendment.
+ Confidential Treatment Requested.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SUPPORT.COM, INC.
SUPPORT.COM, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
FIRST: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on December 3, 1997 under the name
Replicase, Inc.
SECOND: The Amended and Restated Certificate of Incorporation of the
Corporation in the form attached hereto as Exhibit A has been duly adopted in
---------
accordance with the provisions of Sections 245, 242 and 228 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation.
THIRD: The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and is hereby
---------
incorporated herein by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the President of the Corporation this ___ day of __________, 2000.
SUPPORT.COM, INC.
By _____________________________________
Radha R. Basu
President and Chief Executive Officer
-1-
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
OF
--
SUPPORT.COM, INC.
-----------------
ARTICLE I
The name of this Corporation is SUPPORT.COM, INC.
ARTICLE II
The registered office of the Corporation within the State of Delaware is
located at 30 Old Rudnick Lane, in the City of Dover, County of Kent, 19901.
The name of its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
A. Authorized Stock. The total number of shares of all classes of
----------------
capital stock which the Corporation shall have authority to issue is one hundred
fifty-five million (155,000,000), of which one hundred fifty million
(150,000,000) shares of the par value of one hundredth of one cent ($.0001) each
shall be Common Stock (the "Common Stock") and five million (5,000,000) shares
of the par value of one hundredth of one cent ($.0001) each shall be Preferred
Stock (the "Preferred Stock"). The number of authorized shares of Common Stock
or Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the then outstanding shares of Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such Preferred Stock holders is required pursuant to the provisions established
by the Board of Directors of this Corporation (the "Board of Directors") in the
resolution or resolutions providing for the issue of such Preferred Stock, and
if such holders of such Preferred Stock are so entitled to vote thereon, then,
except as may otherwise be set forth in this Amended and Restated Certificate of
Incorporation, the only stockholder approval required shall be the affirmative
vote of a majority of the combined voting power of the Common Stock and the
Preferred Stock so entitled to vote.
-2-
<PAGE>
B. Preferred Stock. The Preferred Stock may be issued in any number of
---------------
series, as determined by the Board of Directors. The Board of Directors may by
resolution fix the designation and number of shares of any such series, and may
determine, alter, or revoke the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series. The Board of Directors
may thereafter in the same manner, within the limits and restrictions stated in
any resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, increase or decrease the number of
shares of any such series (but not below the number of shares of that series
then outstanding). In case the number of shares of any series shall be
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Amended and
Restated Certificate of Incorporation or the Bylaws of the Corporation, the
directors are hereby empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the Corporation.
-3-
<PAGE>
B. Changes. The Board of Directors of this Corporation, by amendment to
-------
the Corporation's bylaws, is expressly authorized to change the number of
directors of the Corporation without the consent of the stockholders.
D. Elections. Elections of directors need not be by written ballot
---------
unless the Bylaws of the Corporation shall so provide.
ARTICLE VII
A. Power of Stockholder to Act by Written Consent. No action required or
----------------------------------------------
permitted to be taken at any annual or special meeting of the stockholders may
be taken without a meeting and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
B. Special Meetings of Stockholders. Special meetings of the
--------------------------------
stockholders of the Corporation may be called for any purpose or purposes,
unless otherwise prescribed by statute or by this Amended and Restated
Certificate of Incorporation, only at the request of the Chief Executive Officer
of the Corporation or by a resolution duly adopted by the affirmative vote of a
majority of the Board of Directors.
C. Cumulative Voting. The stockholders of Corporation shall not have
-----------------
cumulative voting.
ARTICLE VIII
The Board of Directors is expressly empowered to adopt, amend or repeal the
Bylaws of the Corporation; provided, however, that any adoption, amendment or
repeal of the Bylaws of the Corporation by the Board of Directors shall require
the approval of at least sixty-six and two-thirds percent (66 2/3%) of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution providing for
adoption, amendment or repeal is presented to the Board of Directors). The
stockholders shall also have the power to adopt, amend or repeal the Bylaws of
the Corporation, provided, however, that in addition to any vote of the holders
of any class or series of stock of the Corporation required by law or by this
Amended and Restated Certificate of Incorporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all of the then outstanding shares of the stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required for such adoption, amendment or repeal by the
stockholders of any provisions of the Bylaws of the Corporation.
-4-
<PAGE>
ARTICLE IX
The books of the Corporation may be kept at such place within or without
the State of Delaware as the bylaws of the Corporation may provide or as may be
designated from time to time by the board of directors of the Corporation.
ARTICLE X
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receivers appointed for the Corporation under the provisions of section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the Corporation under the
provisions of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE XI
A. Limitation on Liability. A director of the Corporation shall not be
-----------------------
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Corporation or its stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) under Section 174 of the Delaware
General Corporation Law; or (4) for any transaction from which the director
derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to further
eliminate or limit the liability of directors, then the liability of a director
of the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law.
B. Indemnification. Each person who is or is made a party or is
---------------
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise,
-5-
<PAGE>
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in the second
paragraph hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred in
this section shall be a contract right and shall include the right to be paid by
the Corporation for any expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
If a claim under the first paragraph of this section is not paid in full by
the Corporation within thirty (30) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
-6-
<PAGE>
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Amended and Restated
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
C. Insurance. The Corporation may maintain insurance, at its expense, to
---------
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
D. Repeal and Modification. Any repeal or modification of the foregoing
-----------------------
provisions of this Article XI shall not adversely affect any right or protection
of any director, officer, employee or agent of the Corporation existing at the
time of such repeal or modification.
ARTICLE XII
The Corporation reserves the right to amend or repeal any provision
contained in this Amended and Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon a
stockholder herein are granted subject to this reservation.
ARTICLE XIII
Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then outstanding shares of the stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend in any respect or repeal this Article XIII, or Articles VI,
VII, VIII and XI.
-7-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
B Y L A W S
OF
SUPPORT.COM, INC.
(a Delaware corporation)
Adopted effective _______ __, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Offices..................................................................................... 1
Section 1. Registered Office.............................................................. 1
Section 2. Other Offices.................................................................. 1
ARTICLE II Meetings of Stockholders................................................................... 1
Section 1. Annual Meetings................................................................ 1
Section 2. Special Meetings............................................................... 2
Section 3. Notice of Meeting.............................................................. 2
Section 4. List of Stockholders........................................................... 2
Section 5. Quorum......................................................................... 2
Section 6. Adjournments................................................................... 3
Section 7. Voting......................................................................... 3
Section 8. Proxies........................................................................ 3
Section 9. Judges of Election............................................................. 3
Section 10. Written Consent............................................................... 3
Section 11. Waiver of Notice.............................................................. 3
ARTICLE III Board of Directors........................................................................ 4
Section 1. Number......................................................................... 4
Section 2. Election and Term of Office.................................................... 4
Section 3. Nominations.................................................................... 4
Section 4. Vacancies and Additional Directorships......................................... 5
Section 5. Powers......................................................................... 5
Section 6. Resignation and Removal of Directors........................................... 5
Section 7. Compensation of Directors...................................................... 5
Section 8. Chairman of the Board.......................................................... 5
ARTICLE IV Meeting of the Board of Directors.......................................................... 5
Section 1. Place.......................................................................... 5
Section 2. Regular Meetings............................................................... 6
Section 3. Special Meetings............................................................... 6
Section 4. Quorum......................................................................... 6
Section 5. Adjourned Meetings............................................................. 6
Section 6. Written Consent................................................................ 6
Section 7. Communications Equipment....................................................... 6
Section 8. Waiver of Notice............................................................... 7
ARTICLE V Committees of the Board..................................................................... 7
Section 1. Designation, Power, Alternate Members and Term of Office....................... 7
Section 2. Meetings, Notices and Records.................................................. 7
Section 3. Quorum and Manner of Acting.................................................... 8
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 4. Resignations................................................................... 8
Section 5. Removal........................................................................ 8
Section 6. Vacancies...................................................................... 8
Section 7. Compensation................................................................... 8
ARTICLE VI Officers................................................................................... 8
Section 1. Officers....................................................................... 8
Section 2. Duties......................................................................... 9
Section 3. Resignations................................................................... 9
Section 4. Removal........................................................................ 9
Section 5. Vacancies...................................................................... 9
Section 6. Chief Executive Officer........................................................ 9
Section 7. President...................................................................... 9
Section 8. Vice President................................................................. 9
Section 9. Secretary...................................................................... 10
Section 10. Assistant Secretaries......................................................... 10
Section 11. Chief Financial Officer and Treasurer......................................... 10
Section 12. Assistant Treasurers.......................................................... 11
Section 13. Salaries...................................................................... 11
ARTICLE VII Certificates of Stock..................................................................... 11
Section 1. Stock Certificates............................................................. 11
Section 2. Books of Account and Record of Stockholders.................................... 11
Section 3. Transfers of Shares............................................................ 12
Section 4. Regulations.................................................................... 12
Section 5. Lost, Stolen or Destroyed Certificates......................................... 12
Section 6. Stockholder"s Right of Inspection.............................................. 12
ARTICLE VIII Deposit of Corporate Funds............................................................... 13
Section 1. Borrowing...................................................................... 13
Section 2. Deposits....................................................................... 13
Section 3. Checks, Drafts, Etc............................................................ 13
ARTICLE IX Record Dates............................................................................... 13
ARTICLE X Dividends................................................................................... 14
ARTICLE XI Fiscal Year................................................................................ 14
ARTICLE XII Indemnification........................................................................... 14
Section 1. Right to Indemnification....................................................... 14
Section 2. Right of Claimant to Bring Suit................................................ 15
Section 3. Non-Exclusivity of Rights...................................................... 15
Section 4. Insurance...................................................................... 15
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 5. Severability................................................................... 16
Section 6. Intent of Article.............................................................. 16
ARTICLE XIII Corporate Seal........................................................................... 16
ARTICLE XIV Amendments................................................................................ 16
</TABLE>
-iii-
<PAGE>
BYLAWS
OF
SUPPORT.COM, INC.
(a Delaware corporation)
ARTICLE I
---------
Offices
-------
Section 1. Registered Office. The registered office of the Corporation
-----------------
within the State of Delaware is located at 30 Old Rudnick Lane in the City of
Dover, County of Kent, in the State of Delaware and CorpAmerica, Inc. is the
registered agent.
Section 2. Other Offices. The Corporation may also have other offices,
-------------
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
Corporation may require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
Section 1. Annual Meetings. Annual meetings of stockholders shall be held
---------------
at such date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of meeting. At the annual meeting the
stockholders shall elect by a plurality vote the number of Directors equal to
the number of Directors of the class whose term expires at such meetings (or, if
fewer, the number of Directors properly nominated and qualified for election) to
hold office until the third succeeding annual meeting of stockholders after
their election.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, otherwise properly brought before the meeting by or at the direction
of the Board of Directors, or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation, not less
than fifty (50) days nor more than seventy-five (75) days prior to the meeting;
provided, however, that in the event that less than sixty-five (65) days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be
-1-
<PAGE>
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and record address of the stockholder
proposing such business, (c) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, (d) any material interest of
the stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 1 by any stockholder of any business properly brought
before the annual meeting in accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section, and if he or she
should so determine, he or she shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 2. Special Meetings. Special meetings of the stockholders for any
----------------
proper purpose or purposes may be called only by the Chief Executive Officer of
the Corporation or by a resolution adopted by the affirmative vote of a majority
of the Board of Directors.
Section 3. Notice of Meeting. Notice, signed by the Chief Executive
-----------------
Officer, the President, any Vice President, the Secretary or an Assistant
Secretary, of every annual or special meeting of stockholders stating the
purpose or purposes for which the meeting is called, and the date and time when,
and the place where it is to be held, shall be prepared in writing and
personally delivered or mailed, postage prepaid by first class mail, to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the meeting, except as otherwise provided by
statute. If mailed, such notice shall be directed to a stockholder at his or her
address as it shall appear on the stock record book of the Corporation, unless
the stockholder shall have filed with the Secretary a written request that
notices intended for him or her be mailed to some other address, in which case
it shall be mailed to the address designated in such request. Notice shall be
deemed given when personally delivered or deposited to the United States mail,
as the case may be; provided, however, that such notice may also be given by
telegram, cablegram, radiogram or other means of electronically transmitted
written copy and in such case shall be deemed given when ordered or, if a
delayed delivery is ordered, as of such delayed delivery time, or when
transmitted, as the case may be.
Section 4. List of Stockholders. A complete list of the stockholders
-------------------
entitled to vote at each meeting of stockholders, arranged in alphabetical order
and showing the address of each such stockholder and the number of shares
registered in the name of each such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to such meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of such meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting and during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 5. Quorum. The presence at any meeting, in person or by proxy, of
------
the holders of record of a majority of the shares then issued and outstanding
and entitled to vote shall be
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<PAGE>
necessary and sufficient to constitute a quorum for the transaction of business,
except where otherwise provided by statute.
Section 6. Adjournments. In the absence of a quorum, stockholders
------------
representing a majority of the shares then issued and outstanding and entitled
to vote, present in person or by proxy, or, if no stockholder entitled to vote
is present in person or by proxy, any officer entitled to preside at or act as
secretary of such meeting, may adjourn the meeting from time to time without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting originally noticed. If the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the holders of
------
a majority of the shares of the Corporation, present in person or by proxy,
shall decide any question brought before the meeting, unless the question is one
upon which by express provision of the statutes or of the certificate of
incorporation a different vote is required in which case such express provision
shall govern and control the decision of such question.
Section 8. Proxies. Any stockholders entitled to vote may vote by proxy,
-------
provided that the instrument authorizing such proxy to act shall have been
executed in writing (which shall include telegraphing, cabling or other means of
electronically transmitted written copy) by the stockholder himself or herself
or by his or her duly authorized attorney-in-fact. No proxy shall be voted or
acted upon after three (3) years from its date, unless the proxy provides for a
longer period.
Section 9. Judges of Election. The Board of Directors may appoint judges
------------------
of election to serve at any election of directors and at balloting on any other
matter that may properly come before a meeting of stockholders. If no such
appointment shall be made, or if any of the judges so appointed shall fail to
attend, or refuse or be unable to serve, then such appointment may be made by
the presiding officer of the meeting at the meeting.
Section 10. Written Consent. No action required or permitted to be taken at
---------------
any annual or special meeting of the stockholders of the Corporation may be
taken without a meeting and the power of the stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Section 11. Waiver of Notice. Notice of any meeting need not be given to
----------------
any stockholder who shall attend such meeting in person or shall waive notice
thereof, before or after such meeting, in writing or by telegram, radiogram,
cablegram or other means of electronically transmitted written copy.
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<PAGE>
ARTICLE III
-----------
Board of Directors
------------------
Section 1. Number. The number of directors which shall constitute the whole
------
Board of Directors shall be fixed at seven (7). Thereafter, the number of
directors which shall constitute the whole Board of Directors shall be fixed
from time to time by resolution of the Board of Directors or stockholders at the
annual meeting or any special meeting called for that purpose.
Section 2. Election and Term of Office. Directors shall be elected at the
---------------------------
annual meeting of the stockholders except as provided in Section 4 of this
Article. Each Director (whether elected at an annual meeting or to fill a
vacancy or otherwise) shall continue in office until a successor shall have been
elected and qualified or until his or her death, resignation or removal in the
manner hereinafter provided, whichever shall first occur.
Section 3. Nominations. Subject to the rights of holders of any class or
-----------
series of stock having a preference over the common stock as to dividends or
upon liquidation, nominations for election to the Board of Directors of the
Corporation at a meeting of stockholders may be made on behalf of the Board by
the Nominating Committee appointed by the Board, or by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting. Such
nominations, other than those made by the Nominating Committee on behalf of the
Board, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary or Assistant Secretary of
the Corporation, and received by him or her not less than one hundred twenty
(120) days prior to any meeting of stockholders called for the election of
directors; provided, however, that if less than one hundred (100) days notice of
the meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary or the Assistant Secretary of the Corporation not
later than the close of business on the seventh (7th) day following the day on
which the notice of meeting was mailed. Such notice shall set forth as to each
proposed nominee who is not an incumbent director (a) the name, age, business
address and, if known, residence address of each nominee proposed in such
notice, (b) the principal occupation or employment of each such nominee, (c) the
number of shares of stock of the Corporation which are beneficially owned by
each such nominee and by the nominating stockholder, and (d) any other
information concerning the nominee that must be disclosed of nominees in proxy
solicitations regulated by Regulation 14A of the Securities Exchange Act of
1934, as amended.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he or
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<PAGE>
she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 4. Vacancies and Additional Directorships. If any vacancy shall
--------------------------------------
occur among the directors by reason of death, resignation, or removal, or as the
result of an increase in the number of directorships, the directors then in
office shall continue to act and may fill any such vacancy by a vote of the
majority of directors then in office, though less than a quorum, and each
director so chosen shall hold office until the next annual election at which the
term of the class to which he or she has been elected expires and until his or
her successor shall be duly elected and shall qualify, or until his or her
earlier death, resignation or removal.
Section 5. Powers. The business of the Corporation shall be managed by its
------
Board of Directors, which may exercise all powers of the Corporation and do all
lawful acts and things as are not by law or by the Certificate of Incorporation
or these Bylaws reserved to the stockholders.
Section 6. Resignation and Removal of Directors. Any director may resign at
------------------------------------
any time by giving written notice of such resignation to the Board of Directors
or the Chief Executive Officer. Any such resignation shall take effect at the
time specified therein or, if no time be specified, upon receipt thereof by the
Board of Directors or one of the above named officers; and, unless specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Any director or the entire Board of Directors may be removed, but
only for cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, unless otherwise specified by law or the Restated
Certificate of Incorporation. Any director or the entire Board of Directors may
be removed without cause, by the holders of sixty-six and two-thirds percent (66
2/3%) of the shares then entitled to vote at an election of directors, unless
otherwise specified by law or the Restated Certificate of Incorporation.
Section 7. Compensation of Directors. Directors shall receive such
-------------------------
reasonable compensation for their services as such, whether in the form of
salary or a fixed fee for attendance at meetings, with expenses, if any, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 8. Chairman of the Board. The Chairman of the Board of Directors,
---------------------
if there be one, shall perform such duties as from time to time may be assigned
to him or her by the Board of Directors.
ARTICLE IV
----------
Meeting of the Board of Directors
---------------------------------
Section 1. Place. The Board of Directors of the Corporation may hold
-----
meetings, both regular and special, either within or without the State of
Delaware.
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<PAGE>
Section 2. Regular Meetings. The Board of Directors by resolution may
----------------
provide for the holding of regular meetings and may fix the times and places at
which such meetings shall be held. Notice of regular meetings shall not be
required to be given, provided that whenever the time or place of regular
meetings shall be fixed or changed, notice of such action shall be mailed
promptly to each Director who shall not have been present at the meeting at
which such action was taken, addressed to him or her at his or her residence or
usual place of business, unless he or she shall have filed with the Secretary a
written request that notices intended for him or her be mailed to some other
address, in which case it shall be mailed to the address designated in such
request.
Section 3. Special Meetings. Special meetings of the Board of Directors may
----------------
be called by the Chief Executive Officer and shall be called by the Chief
Executive Officer at the written request of any two (2) directors. Except as
otherwise required by statute, notice of each special meeting shall be given to
each director, if by mail, when addressed to him or her at his or her residence
or usual place of business, unless he or she shall have filed with the Secretary
a written request that notices intended for him or her be mailed to some other
address, in which case it shall be mailed to the address designated in such
request, on at least two (2) days' notice prior to the time of the meeting, or
shall be sent to him or her at such place by telegram, radiogram or cablegram,
or other electronic means, or delivered to him or her personally, not later than
four (4) hours before the time the meeting is to be held. Such notice shall
state the time and place of such meeting, but need not state the purposes
thereof, unless otherwise required by statute, the Certificate of Incorporation
of the Corporation or these Bylaws.
Section 4. Quorum. At any meeting of the Board of Directors a majority of
------
the whole Board of Directors shall constitute a quorum for the transaction of
business, and the act of the majority of those present at any meeting at which a
quorum is present shall be sufficient for the act of the Board of Directors,
except as may be otherwise specifically provided by law or by the Certificate of
Incorporation.
Section 5. Adjournment of Meetings. If a quorum shall not be present at a
-----------------------
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, until a quorum shall be present. Four (4) hours
notice of any such adjournment shall be given personally to each director who
was not present at the meeting at which such adjournment was taken and, unless
announced at the meeting, to the other directors; provided, that two (2) days'
notice shall be given if notice is given by mail.
Section 6. Written Consent. Any action required or permitted to be taken at
---------------
any meeting of the Board of Directors may be taken without a meeting if all the
members of the Board consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of the Board of Directors.
Section 7. Communications Equipment. Any one or more members of the Board
------------------------
of Directors may participate in any meeting of the Board by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall be constitute presence in person at such meeting.
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<PAGE>
Section 8. Waiver of Notice. Notice of any meeting need not be given to any
----------------
director who shall attend such meeting in person or shall waive notice thereof,
before or after such meeting, in writing or by telegram, radiogram or cablegram
or other means of electronically transmitted written copy.
ARTICLE V
---------
Committees of the Board
-----------------------
Section 1. Designation, Power, Alternate Members and Term of Office. The
--------------------------------------------------------
Board of Directors may, by resolution passed by a majority of the whole Board of
Directors, designate one (1) or more committees. Each such committee shall
consist of one (1) or more of the directors of the Corporation. Any such
committee, to the extent provided in such resolution, shall have and may
exercise the power of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. The Board of Directors may
designate one (1) or more directors as alternate members of any committee who,
in the order specified by the Board of Directors, may replace any absent or
disqualified member at any meeting of the committee. The term of office of the
members of each committee shall be as fixed from time to time by the Board,
subject to the term of office of the directors and these Bylaws; provided,
however, that any committee member who ceases to be a member of the Board of
Directors shall ipso facto cease to be a committee member. Each committee shall
appoint a secretary, who may be the Secretary or an Assistant Secretary of the
Corporation.
Section 2. Meeting, Notices and Records. Each committee may provide for the
----------------------------
holding of regular meetings, with or without notice, and a majority of the
members of any such committee may fix the time, place and procedure for any such
meeting. Special meetings of each committee shall be held upon call by or at the
direction of its chairman or, if there be no chairman, by or at the direction of
any one (1) of its members, at the time and place specified in the respective
notices or waivers of notice thereof. Notice of each special meeting of a
committee shall be mailed to each member of such committee, addressed to him or
her at his or her residence or usual place of business, unless he or she shall
have filed with the Secretary a written request that notices intended for him or
her be mailed to some other address, in which case it shall be mailed to the
address designated in such request, at least two (2) days before the day on
which the meeting is to be held, or shall be sent by telegram, radiogram or
cablegram, or other means of electronically transmitted written copy, addressed
to him or her at such place, or telephoned or delivered to him or her
personally, not later than four (4) hours before the time the meeting is to be
held. Notice of any meeting of a committee need not be given to any member
thereof who shall attend the meeting in person or who shall waive notice thereof
by telegram, radiogram, cablegram or other means of electronically transmitted
written copy. Notice of any adjourned meeting need not be given. Each committee
shall keep a record of its proceedings.
Each committee may meet and transact any and all business delegated to that
committee by the Board of Directors by means of a conference telephone or
similar communications equipment provided that all persons participating in the
meeting are able to hear and
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<PAGE>
communicate with each other. Participation in a meeting by means of conference
telephone or similar communication shall constitute presence in person at such
meeting.
Section 3. Quorum and Manner of Acting. At each meeting of any committee
---------------------------
the presence of a majority of its members then in office shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the act
of a majority of the members present at any meeting at which a quorum is present
shall be the act of such committee; in the absence of a quorum, a majority of
the members present at the time and place of any meeting may adjourn the meeting
from time to time until a quorum shall be present. Subject to the foregoing and
other provisions of these Bylaws and except as otherwise determined by the Board
of Directors, each committee may make rules for the conduct of its business. Any
determination made in writing and signed by all the members of such committee
shall be as effective as if made by such committee at a meeting.
Section 4. Resignations. Any member of a committee may resign at any time
------------
by giving written notice of such resignation to the Board of Directors or the
Chief Executive Officer of the Corporation. Unless otherwise specified in such
notice, such resignation shall take effect upon receipt thereof by the Board of
Directors or any such officer.
Section 5. Removal. Any member of any committee may be removed at any time
-------
by the affirmative vote of a majority of the whole Board of Directors with or
without cause.
Section 6. Vacancies. If any vacancy shall occur in any committee by
----------
reason of death, resignation, disqualification, removal or otherwise, the
remaining members of such committee, though less than a quorum, shall continue
to act until such vacancy is filled by the Board of Directors.
Section 7. Compensation. Committee members shall receive such reasonable
------------
compensation for their services as such, whether in the form of salary or a
fixed fee for attendance at meetings, with reasonable expenses, if any, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any committee member from serving the Corporation
in any other capacity and receiving compensation therefor.
ARTICLE VI
----------
Officers
--------
Section 1. Officers. The officers of the Corporation shall be a Chief
--------
Executive Officer, a President, a Chief Financial Officer and Treasurer and a
Secretary, and may also include one or more Vice Presidents, Assistant
Secretaries or Assistant Treasurers, each of whom shall be elected by the
directors, and shall hold office until his or her successor is duly elected and
qualified or until his or her earlier resignation or removal. None of the
officers of the Corporation except the Chairman or any Vice Chairman of the
Board need be directors. Any number of offices may be held by the same person.
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<PAGE>
Section 2. Duties. All officers, as between themselves and the Corporation,
------
shall have such authority and perform such duties in the management of the
Corporation as may be provided in these Bylaws, or, to the extent not so
provided, as may be provided by resolution of the Board of Directors or, as to
all other officers except by the Chief Executive Officer.
Section 3. Resignations. Any officer may resign at any time by giving
------------
written notice of such resignation to the Board of Directors, the Chief
Executive Officer, the President, a Vice President or the Secretary. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or any such officer.
Section 4. Removal. Any officer may be removed at any time, either with or
-------
without cause, by the vote of a majority of all the directors then in office.
Section 5. Vacancies. A vacancy in any office by reason of death,
----------
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed by these Bylaws for
regular election or appointment to such office.
Section 6. Chief Executive Officer. Subject to the direction of the Board
-----------------------
of Directors, the Chief Executive Officer shall supervise and direct the daily
management of the business, affairs and property of the Corporation. In the
absence or disability of the Chief Executive Officer, or if there be none, the
Chairman of the Board shall preside at all meetings of the stockholders. The
Chief Executive Officer shall be charged with seeing that all orders and
resolutions of the Board of Directors are carried into effect. The Chief
Executive Officer may sign, with any other officer thereunto duly authorized,
certificates of stock of the Corporation the issuance of which shall have been
duly authorized (the signature to which may be facsimile signature), and may
sign and execute in the name of the Corporation, deeds, mortgages, bonds,
contracts, agreements, and other instruments. From time to time he or she shall
report to the Board of Directors all matters within his or her knowledge which
the interests of the Corporation may require to be brought to its attention. The
Chief Executive Officer shall also perform such other duties as are assigned by
these Bylaws or as from time to time may be assigned to him or her by the Board
of Directors.
Section 7. President. The President, if there be one, shall perform such
---------
duties as from time to time may be assigned to him or her by the Board of
Directors or the Chief Executive Officer. The President may sign, with any other
officer thereunto duly authorized, certificates of stock of the Corporation the
issuance of which shall have been duly authorized (the signature to which may be
facsimile signature), and may sign and execute in the name of the Corporation,
deeds, mortgages, bonds, contracts, agreements, and other instruments.
Section 8. Vice President. In the absence or disability of the Chief
--------------
Executive Officer and President, the Vice President, or if there be more than
one, the Vice Presidents in the order of priority determined by the Board of
Directors, shall perform all the duties of the Chief Executive Officer or
President and, when so acting, shall have all the powers of and be subject to
all restrictions upon the Chief Executive Officer or President, as the case may
be. Any Vice President may also sign, with any other officer thereunto duly
authorized, certificates of stock of the Corporation the issuance of which shall
have been duly authorized (the signature to which may be a facsimile signature),
and may sign and execute in the name of the Corporation deeds,
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<PAGE>
mortgages, bond and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent. Each Vice President shall perform such other duties as
are assigned by these Bylaws or as from time may be assigned by the Board of
Directors, the Chief Executive Officer or the President.
Section 9. Secretary. The Secretary shall: (i) record all the proceedings
---------
of the meetings of the stockholders, the Board of Directors, and all committees
of the Board of Directors in a book or books to be kept for that purpose; (ii)
cause all notices to be duly given in accordance with the provisions of these
Bylaws as required by statute; (iii) whenever any committee shall be appointed
in pursuance of a resolution of the Board of Directors, furnish the chairman of
such committee with a copy of such resolution; (iv) be custodian of the records
and of the seal of the Corporation, and cause such seal to be affixed to all
certificates representing capital stock of the Corporation prior to the issuance
thereof and to all instruments the execution of which on behalf of the
Corporation under its seal shall have been duly authorized; (v) see that the
lists, books, reports, statements, certificates and other documents and records
required by statute are properly kept and filed; (vi) have charge of the stock
record and stock transfer books of the Corporation, and exhibit such stock books
at all reasonable times to such persons as are entitled by statute to have
access thereto; (vii) sign (unless the Treasurer or an Assistant Secretary or an
Assistant Treasurer shall sign) certificates representing capital stock of the
Corporation the issuance of which shall have been duly authorized (the signature
to which may be a facsimile signature); and (viii) in general, perform all
duties incident to the office of Secretary and such other duties as are given to
him or her by these Bylaws or as from time to time may be assigned to him or her
by the Board of Directors, the Chief Executive Officer or the President.
Section 10. Assistant Secretaries. At the request of the Secretary or in
---------------------
his or her absence or disability, the Assistant Secretary designated by him or
her (or in the absence of such designation, the Assistant Secretary designated
by the Board of Directors or the President) shall perform all the duties of the
Secretary, and, when so acting, shall have all the powers of and be subject to
all restrictions upon the Secretary. The Assistant Secretaries shall perform
such other duties as from time to time may be assigned to them by the Board of
Directors, the President, Chief Executive Officer or the Secretary.
Section 11. Chief Financial Officer and Treasurer. The Chief Financial
-------------------------------------
Officer and Treasurer shall: (i) have charge of and supervision over and be
responsible for the funds, securities, receipts and disbursements of the
Corporation; (ii) cause the monies and other valuable effects of the Corporation
to be deposited in the name and to the credit of the Corporation in such banks
or trust companies or with such bankers or other depositaries as shall be
selected in accordance with Article VIII, Section 2 of these Bylaws or to be
otherwise dealt with in such manner as the Board of Directors may direct; (iii)
cause the funds of the Corporation to be disbursed by checks or drafts upon the
authorized depositaries of the Corporation, and cause to be taken and preserved
proper vouchers for all monies disbursed; (iv) render to the Board of Directors
or the Chief Executive Officer, whenever required, a statement of the financial
condition of the Corporation and of all his or her transactions as Chief
Financial Officer and Treasurer; (v) cause to be kept at the Corporation's
principal office correct books of account of all its business and transactions
and such duplicate books of account as he or she shall determine and upon
application cause such books or duplicates thereof to be exhibited to any
Director; (vi) be empowered, from time to time, to require from the officers or
agents of the Corporation
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<PAGE>
reports or statements giving such information as he or she may desire with
respect to any and all financial transactions of the Corporation; (vii) sign
(unless the Secretary or an Assistant Secretary or Assistant Treasurer shall
sign) certificates representing stock of the Corporation the issuance of which
shall have been duly authorized (the signature to which may be a facsimile
signature); and (viii) in general, perform all duties incident to the office of
Treasurer and such other duties as are given to him or her by these Bylaws or as
from time to time may be assigned to him or her by the Board of Directors or the
Chief Executive Officer.
Section 12. Assistant Treasurers. At the request of the Chief Financial
--------------------
Officer and Treasurer or in his or her absence or disability, the Assistant
Treasurer designated by him or her (or in the absence of such designation, the
Assistant Treasurer designated by the Board of Directors or the President) shall
perform all the duties of the Chief Financial Officer and Treasurer, and, when
so acting, shall have all the powers of an be subject to all restrictions upon
the Chief Financial Officer and Treasurer. The Assistant Treasurers shall
perform such other duties as from time to time may be assigned by the Board of
Directors, the Chief Executive Officer or the Chief Financial Officer and
Treasurer.
Section 13. Salaries. The salaries of the officers of the Corporation shall
--------
be fixed from time to time by the Board of Directors. No officer shall be
prevented from receiving such salary by reason of the fact that he or she is
also a director of the Corporation.
ARTICLE VII
-----------
Certificates of Stock
---------------------
Section 1. Stock Certificates. Every holder of capital stock of the
------------------
Corporation shall be entitled to have a certificate or certificates in such form
as shall be approved by the Board of Directors, certifying the number of shares
of capital stock of the Corporation owned by him or her. The certificates
representing shares of capital stock shall be signed in the name of the
Corporation by the Chief Executive Officer or the President or any Vice
President, and by the Secretary, an Assistant Secretary, the Chief Financial
Officer and Treasurer or an Assistant Treasurer (which signatures may be
facsimiles) and sealed with the seal of the Corporation (which seal may be a
facsimile). In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificates are issued, they may nevertheless be issued by the Corporation with
the same effect as if such officer, transfer agent, or registrar were still such
at the date of their issue.
Section 2. Books of Account and Record of Stockholders. The books and
-------------------------------------------
records of the Corporation may be kept at such places, within or without the
State of Delaware, as the Board of Directors may from time to time determine.
The stock record books and the blank stock certificate books shall be kept by
the Secretary or by any other officer or by the transfer agent or registrar, if
any, designated by the Board of Directors. There shall be entered on the stock
books of the Corporation the number of each certificate issued, the number of
shares represented
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<PAGE>
thereby, the name of the person to whom such certificate was issued and the date
of issuance thereof.
Section 3. Transfers of Stock. Transfers of shares of capital stock of the
------------------
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his or her attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary or with the transfer agent, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon, if any. Except as
otherwise provided by law, the Corporation shall be entitled to recognize the
exclusive right of a person in whose name any share or shares stand on the
record of stockholders as the owner of such share or shares for all purposes,
including, without limitation, the rights to receive dividends or other
distributions, and to vote as such owner, and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person whether or not the Corporation shall have
express or other notice thereof.
Section 4. Regulations. The Board of Directors may make such additional
-----------
rules and regulations, not inconsistent with these Bylaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the capital stock of the Corporation. It may appoint, or authorize any
officer or officers to appoint, one or more transfer agents or one or more
registrars and may further provide that no stock certificate shall be valid
until countersigned by one of such transfer agents and registered by one of such
registrars. Nothing herein shall be construed to prohibit the Corporation from
acting as its own transfer agent or registrar.
Section 5. Lost, Stolen or Destroyed Certificates. The holder of any
--------------------------------------
certificate representing any share or shares of the capital stock of the
Corporation shall immediately notify the Corporation of any loss, theft, or
destruction of such certificate. The Board of Directors may direct that a new
certificate or certificates be issued in the place of any certificate or
certificates theretofore issued by it which the owner thereof shall allege to
have been lost, stolen or destroyed upon the furnishing to the Corporation of an
affidavit to that effect by the person claiming that the certificate has been
lost, stolen or destroyed. When authorizing such issue of a new certificate of
certificates, the Board of Directors may, in its discretion, require such owner
or his or her legal representatives to give to the Corporation and its transfer
agent(s) and registrar(s) a bond in such sum, limited or unlimited, and in such
form and with such surety or sureties as the Board of Directors in it absolute
discretion shall determine, sufficient to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate, or the issuance of a new certificate.
Section 6. Stockholder's Right of Inspection. Any stockholder of record of
---------------------------------
the Corporation, in person or by attorney or other agent, shall upon written
demand under oath stating the purpose thereof, have the right during the usual
hours for business to inspect for any proper purpose the Corporation's stock
ledger, a list of its stockholders, and its other books and records, and to make
copies or extracts therefrom. A proper purpose shall mean a purpose reasonably
related to such person's interest as a stockholder. In every instance where an
attorney or other
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<PAGE>
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorized the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in Delaware or at its principal place of business.
ARTICLE VIII
------------
Deposit of Corporate Funds
--------------------------
Section 1. Borrowing. No loans or advances shall be obtained or contracted
---------
for, by or on behalf of the Corporation and no negotiable paper shall be issued
in its name, unless and except as authorized by the Board of Directors. Such
authorization may be general or confined to specific instances.
Section 2. Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to its credit in such banks or trust
companies or with such bankers or other depositaries as the Board of Directors
may select, or as may be selected by any officer or officers or agent or agents
authorized to do so by the Board of Directors.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the
-------------------
payment of money, and all negotiable and non-negotiable notes or other
negotiable or non-negotiable evidences of indebtedness issued in the name of the
Corporation, shall be signed by such officer or officers or agent or agents of
the Corporation, and in such manner, as from time to time shall be determined by
the Board of Directors.
ARTICLE IX
----------
Record Dates
------------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall be not
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. Only those
stockholders of record on the date so fixed shall be entitled to any of the
foregoing rights, notwithstanding the transfer of any such stock on the books of
the Corporation after any such record date fixed by the Board of Directors.
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<PAGE>
ARTICLE X
---------
Dividends
---------
Subject to any agreement to which the Corporation is a party or by which it
is bound, the Board of Directors may declare to be payable, in cash, in other
property or in stock of the Corporation of any class or series, such dividends
in respect of outstanding stock of the Corporation of any class or series as the
Board of Directors may at any time deem to be advisable. Before declaring any
such dividend, the Board of Directors may cause to be set aside any funds or
other property or assets of the Corporation legally available for the payment of
dividends.
ARTICLE XI
----------
Fiscal Year
-----------
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors.
ARTICLE XII
-----------
Indemnification
---------------
Section 1. Right to Indemnification. Each person who was or is made a party
------------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or another
person of whom such person is the legal representative, is or was a director,
officer, or employee of the corporation or is or was serving at the request of
the corporation as a director, officer, or employee of, or in some other
representative capacity for, another corporation or a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, or employee or in any other capacity
while serving as a director, officer, or employee, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, or employee and shall inure to the benefit of such person's heirs,
executors and administrators; provided, however, that except as provided in
Section 2 hereof with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
board of directors of the corporation. The right to indemnification conferred in
this Article shall be a contract right and shall include the right to be
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<PAGE>
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law so requires, the payment of such expenses incurred by a
director, officer, employee or representative in such person's capacity as a
director, officer, employee or representative (and not in any other capacity in
which service was or is rendered by such person while a director, officer,
employee or representative, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the corporation of an undertaking, by or on
behalf of such person, to repay all amounts so advanced if it shall ultimately
be determined that such director or officer is not entitled to be indemnified
under this Article or otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 of
-------------------------------
this Article is not paid in full by the corporation within ninety (90) days
after a written claim has been received by the corporation, the claimant may at
any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. Non-Exclusivity of Rights. The right to indemnification and the
-------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee or agent of the corporation and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Section 4. Insurance. The corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, or employee of the
corporation serving in any capacity on behalf of the corporation or at its
request for any other entity to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, whether
or not the corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.
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<PAGE>
Section 5. Severability. If any word, clause or provision of this Article
------------
XII or any award made hereunder shall for any reason be determined to be
invalid, the provisions hereof shall not otherwise be affected thereby but shall
remain in full force and effect.
Section 6. Intent of Article. The intent of this Article XII is to provide
-----------------
for indemnification to the fullest extent permitted by section 145 of the
Delaware General Corporation Law. To the extent that such section or any
successor section may be amended or supplemented from time to time, this Article
XII shall be amended automatically and construed so as to permit indemnification
to the fullest extent from time to time permitted by law. Neither an amendment
nor repeal of this Article XII, nor the adoption of any provision of these
Bylaws inconsistent with this Article XII, shall eliminate or reduce the effect
of this Article XII in respect of any matter occurring, or action or proceeding
accruing or arising or that, but for this Article XII, would accrue or arise,
prior to such amendment repeal or adoption of any inconsistent provision.
ARTICLE XIII
------------
Corporate Seal
--------------
The Corporate Seal shall be circular in form and shall bear the name of the
Corporation and the words and figures denoting its organization under the laws
of the State of Delaware and year thereof and otherwise shall be in such form as
shall be approved from time to time by the Board of Directors.
ARTICLE XIV
-----------
Amendments
----------
The Board of Directors is expressly empowered to adopt, amend or repeal
Bylaws of the Corporation, provided, however, that any adoption, amendment or
repeal of Bylaws of the corporation by the Board of Directors shall require the
approval of at sixty-six and two-thirds percent (66 2/3%) of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any resolution providing for adoption,
amendment or repeal is presented to the Board). The stockholders shall also have
power to adopt, amend or repeal these Bylaws, provided, however, that in
addition to any vote of the holders of any class or series of stock of this
corporation required by law or by the Restated Certificate of Incorporation of
this corporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the voting power of all of the then outstanding
shares of the stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required for
such adoption, amendment or repeal by the stockholders of any provisions of
these Bylaws.
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<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, hereby certify:
1. That I am the duly elected, acting and qualified Secretary of
SUPPORT.COM, INC., a Delaware corporation; and
2. That the foregoing Bylaws, comprising 16 pages, constitute the
Bylaws of such corporation as duly adopted at a meeting of the board of
directors of such corporation held on February 15, 2000.
Dated: _______ __, 2000.
_____________________________________
Secretary
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<PAGE>
Exhibit 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TIOGA SYSTEMS, INC.
TIOGA SYSTEMS, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of the Corporation
-----
was filed with the Secretary of State of Delaware on December 3, 1997 under the
name Replicase, Inc.
SECOND: The Restated Certificate of Incorporation of the Corporation
------
in the form attached hereto as Exhibit A has been duly adopted in accordance
---------
with the provisions of Sections 245, 242 and 228 of the General Corporation Law
of the State of Delaware by the directors and stockholders of the Corporation.
THIRD: The Restated Certificate of Incorporation so adopted reads in
-----
full as set forth in Exhibit A attached hereto and is hereby incorporated herein
---------
by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the Chief Executive Officer of the Corporation this 30th day of
----
November, 1999.
TIOGA SYSTEMS, INC.
By /s/ Radha R. Basu
--------------------------------------
Radha R. Basu
Chief Executive Officer
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TIOGA SYSTEMS, INC.
FIRST: The name of this Corporation is Support.com, Inc.
-----
SECOND: The address of this Corporation's registered office in the
------
State of Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is CorpAmerica, Inc.
THIRD: The purpose of this Corporation is to engage in any lawful act
-----
or activity for which a Corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: This Corporation is authorized to issue 46,717,708 shares of
------
capital stock consisting of 31,060,000 shares of common stock, par value $0.0001
per share (the "Common Stock") and 15,657,708 shares of preferred stock, par
value $0.0001 per share (the "Preferred Stock") of which 3,571,600 shares shall
be designated "Series A Convertible Preferred Stock," 7,346,108 shares shall be
designated "Series B Convertible Preferred Stock" and 4,800,000 shares shall be
designated "Series C Convertible Preferred Stock."
This Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock shall, except as
otherwise specifically provided herein, with respect to dividend rights and
rights on liquidation, dissolution and winding-up, rank pari passu with each
other and senior and prior to all other class or series of stock of this
Corporation (collectively, the "Junior Securities"). The designations, powers,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof in respect of the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock
and the Series C Convertible Preferred Stock are as follows:
Section 1. Dividends. The holders of the outstanding Series B
---------
Convertible Preferred Stock and Series C Convertible Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of any
assets at the time legally available therefor, dividends at the rate of
$0.0549976 per share of Series B Convertible Preferred Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares) and
$0.261718 per share of Series C Convertible Preferred Stock (as adjusted for any
stock dividends, combinations or splits with respect to such shares), per annum
(payable other than in Common Stock or other securities
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<PAGE>
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of the Corporation). The
holders of the outstanding Series A Convertible Preferred Stock shall not be
entitled to annual cash dividends. Dividends paid to the holders of Preferred
Stock pursuant to this Section 1 shall be paid pari passu with respect to each
series of Preferred Stock, to the extent such series of Preferred Stock is
entitled to such dividends. No cash dividend shall be declared or paid with
respect to the Common Stock or any Junior Securities unless an equivalent
dividend (which shall be in addition to any dividend on the Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock referred to in the
first sentence of this Section 1) is declared and set apart or paid with respect
to the Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock (each, on an as-converted basis).
The right to dividends on shares of Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock set forth in the first sentence of this
Section 1 shall not be cumulative, and no right shall accrue to holders of
shares of Series B Convertible Preferred Stock or Series C Convertible Preferred
Stock by reason of the fact that dividends on said shares are not declared in
any prior year.
Section 2. Liquidation Preference. In the event of any liquidation,
----------------------
dissolution or winding up of this Corporation, either voluntary or involuntary,
distributions to the stockholders of this Corporation shall be made in the
following manner:
(a) The holders of Series A Convertible Preferred Stock shall be entitled
to receive, prior to and in preference to any distribution of any of the assets
or surplus funds of this Corporation to the holders of the Junior Securities by
reason of their ownership of such stock, an amount equal to $0.07 (as adjusted
for any recapitalizations, stock combinations, stock dividends, stock splits and
the like with respect to such shares) per share, plus an amount equal to all
declared but unpaid dividends on each share of Series A Convertible Preferred
Stock held by them.
(b) The holders of Series B Convertible Preferred Stock shall be entitled
to receive, prior to and in preference to any distribution of any of the assets
or surplus funds of this Corporation to the holders of the Junior Securities by
reason of their ownership of such stock, an amount equal to $0.68747 (as
adjusted for any recapitalizations, stock combinations, stock dividends, stock
splits and the like with respect to such shares) per share, increased at the
rate, without compounding, of eight percent (8%) per year, such rate to be
prorated over the length of any partial year.
(c) The holders of Series C Convertible Preferred Stock shall be entitled
to receive, prior to and in preference to any distribution of any of the assets
or surplus funds of this Corporation to the holders of the Junior Securities by
reason of their ownership of such stock, an amount equal to $3.27148 (as
adjusted for any recapitalizations, stock combinations, stock dividends, stock
splits and the like with respect to such shares) per share, increased at the
rate, without compounding, of eight percent (8%) per year, such rate to be
prorated over the length of any partial year.
(d) If upon any such liquidation, dissolution or winding up of this
Corporation remaining assets of this Corporation available for distribution to
its stockholders shall be insufficient to pay the holders of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and the
Series C Convertible Preferred Stock the full amount to which they shall be
entitled, then
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<PAGE>
the entire assets and funds of this Corporation legally available for
distribution shall be distributed ratably to the holders of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and the
Series C Convertible Preferred Stock in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
(e) After payment has been made to the holders of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and the
Series C Convertible Preferred Stock of the full amounts to which they shall be
entitled as described above, the holders of the Common Stock shall be entitled
to the remaining assets based on the number of shares of Common Stock held by
them.
(f) For purposes of this Section 2, a merger or consolidation of this
Corporation with or into any other corporation or corporations, or the merger of
any other corporation or corporations into this Corporation, or the sale of all
or substantially all of the assets of this Corporation or any other corporate
reorganization in which consolidation, merger, sale of assets or reorganization
the stockholders of this Corporation receive distributions in cash or securities
or another corporation or corporations as a result of such consolidation,
merger, sale of assets or reorganization, shall be treated as a liquidation,
dissolution or winding up of this Corporation unless the stockholders of this
Corporation hold more than fifty percent (50%) of the voting equity securities
or assets of the successor or surviving corporation immediately following such
consolidation, merger, sale of assets or reorganization, in which case such
consolidation, merger, sale of assets or reorganization shall not be treated as
a liquidation, dissolution or winding up.
Section 3. Voting Rights.
-------------
(a) At any meeting of stockholders of this Corporation (and in connection
with any written action of stockholders in lieu of a meeting) with respect to
any and all matters presented to the stockholders of this Corporation for their
actions or consideration, each holder of outstanding shares of Preferred Stock
shall be entitled to the number of votes (rounded down to the next whole number)
equal to the number of shares of Common Stock into which the shares of Preferred
Stock held by such holder are convertible (as adjusted from time to time
pursuant to Section 4 hereof). Except as provided by law or by the provisions
of Section 3(b) or Section 3(c) below, holders of Preferred Stock shall vote
together with the holders of Common Stock as a single class, on an as converted
basis.
(b) So long as at least twenty-five percent (25%) of the initially
authorized shares of Series A Convertible Preferred Stock shall remain
outstanding (as adjusted for stock splits, stock dividends and the like), this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the outstanding shares of
Series A Convertible Preferred Stock:
(i) amend or repeal any provision of this Corporation's Certificate of
Incorporation or Bylaws if such action would materially and adversely alter
or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Convertible
Preferred Stock;
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<PAGE>
(ii) authorize or issue shares of any class or series of stock having
any preference or priority as to dividends or assets superior to or pari
passu with any such preference or priority of the Series A Convertible
Preferred Stock; or
(iii) merge or consolidate with, or sell substantially all of this
Corporation's assets to, any other person or entity, unless the
stockholders of this Corporation immediately prior to such transaction
would hold more than fifty percent (50%) of the voting equity securities or
assets of the surviving corporation or acquiring corporation, as the case
may be, immediately following such merger, consolidation or sale of assets.
(c) So long as at least twenty-five percent (25%) of the initially
authorized shares of Series B Convertible Preferred Stock shall remain
outstanding (as adjusted for stock splits, stock dividends and the like), this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the outstanding shares of
Series B Convertible Preferred Stock:
(i) take any action that changes the rights, preferences or powers of
the Series B Convertible Preferred Stock;
(ii) take any action that authorizes any class of stock having rights,
preferences and privileges superior to the Series B Convertible Preferred
Stock;
(iii) take any action that reclassifies any outstanding shares into
shares having rights as to dividends or assets senior to or on a parity
with the Series B Convertible Preferred Stock; or
(iv) amend this Corporation's Certificate of Incorporation in a manner
that adversely affects the rights of the Series B Convertible Preferred
Stock. Corporation.
(d) So long as at least twenty-five percent (25%) of the initially
authorized shares of Series C Convertible Preferred Stock shall remain
outstanding (as adjusted for stock splits, stock dividends and the like), this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of the outstanding shares of
Series C Convertible Preferred Stock:
(i) take any action that changes the rights, preferences or powers of
the Series C Convertible Preferred Stock;
(ii) take any action that authorizes any class of stock having rights,
preferences and privileges superior to the Series C Convertible Preferred
Stock;
(iii) take any action that reclassifies any outstanding shares into
shares having rights as to dividends or assets senior to or on a parity
with the Series C Convertible Preferred Stock; or
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<PAGE>
(iv) amend this Corporation's Certificate of Incorporation in a manner
that adversely affects the rights of the Series C Convertible Preferred
Stock.
(e) So long as at least twenty-five percent (25%) of the initially
authorized shares of Series B and Series C Convertible Preferred Stock shall
remain outstanding (as adjusted for stock splits, stock dividends and the like),
this Corporation shall not, without first obtaining the affirmative vote or
written consent of the holders of not less than a majority of the outstanding
shares of Series B and C Convertible Preferred Stock, voting together as a
class:
(i) make any declaration or payment of a dividend on the Common Stock
(other than a dividend payable solely in shares of Common Stock);
(ii) effect any redemption or repurchase of Common Stock except in the
event of termination of employment at cost;
(iii) approve a sale of all or substantially all of the assets of this
Corporation or a merger (other than a merger in which the holders of the
stock of this Corporation immediately prior to the effectiveness of such
merger constitute a majority of the stockholders of the surviving entity),
or a liquidation of this Corporation;
(iv) effect any material change in this Corporation's line of
business;
(v) enter into any material agreement between this Corporation and
any officer or director other than transactions in the ordinary course of
business or with the unanimous consent of the Board of Directors of this
Corporation;
(vi) issue debt in excess of the net worth of this Corporation; or
(vii) issue Common Stock or grant of options to purchase Common Stock
other than (A) the grant of options to purchase up to 5,624,434 shares of
Common Stock and the issuance of shares upon the exercise of such options,
each as provided for under this Corporation's employee stock option plan
and (B) the grant of options to purchase Common Stock or the issuance of
shares of Common Stock in transactions unanimously approved by this
Corporation's Board of Directors.
Section 4. Conversion. The holders of Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of this Corporation or any transfer agent
for the Preferred Stock. Each share of Series A Convertible Preferred Stock
shall be convertible into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $0.07 by the Series A Conversion
Price, determined as hereinafter provided, in effect at the time of conversion.
Each share of Series B Convertible Preferred Stock shall be convertible into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $0.68747 by the Series B Conversion Price,
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<PAGE>
determined as hereinafter provided, in effect at the time of conversion. Each
share of Series C Convertible Preferred Stock shall be convertible into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing $3.27148 by the Series C Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. The price at which shares of
Common Stock shall be deliverable upon conversion of shares of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and Series
C Convertible Preferred Stock shall initially be $0.07 with respect to each
share of Series A Convertible Preferred Stock (the "Series A Conversion Price"),
$0.68747 with respect to each share of Series B Convertible Preferred Stock (the
"Series B Conversion Price") and $3.27148 with respect to each share of Series C
Convertible Preferred Stock (the "Series C Conversion Price"). The initial
Series A Conversion Price, the initial Series B Conversion Price and the initial
Series C Conversion Price shall each be subject to adjustments as hereinafter
provided.
(b) Automatic Conversion of Preferred Stock. Each share of Convertible
---------------------------------------
Preferred Stock shall automatically be converted into shares of Common Stock at
the then-effective Series A, Series B or Series C Conversion Price upon the
earlier of (i) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement on Form S-1 or any successor
form under the Securities Act of 1933, as amended, covering the offer and sale
of shares of Common Stock for the account of this Corporation to the public that
is at market valuation for this Corporation of at least $125 million and results
in gross proceeds to this Corporation in excess of $15 million or (ii) the
election of holders of at least a majority of the outstanding shares of Series
A, Series B or Series C Convertible Preferred Stock, as appropriate. In the
event of the automatic conversion of the Series A, Series B or Series C
Convertible Preferred Stock upon a public offering as aforesaid, the person(s)
entitled to receive the Common Stock issuable upon such conversion of Series A,
Series B or Series C Convertible Preferred Stock shall not be deemed to have
converted such Series A, Series B or Series C Convertible Preferred Stock until
immediately prior to the closing of such sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall
-----------------------
be issued upon conversion of the Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, this Corporation shall
pay cash equal to such fraction multiplied by the then-effective Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price, as
applicable. Before any holder of Preferred Stock shall be entitled to convert
the same into full shares of Common Stock and to receive certificates therefor,
the holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this Corporation or of any transfer agent of the
Preferred Stock, and shall give written notice to this Corporation at such
office that the holder elects to convert the same; provided, however, that in
the event of an automatic conversion pursuant to Section 4(b), the applicable
outstanding shares of Preferred Stock shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to this Corporation or its
transfer agent and provided further, that this Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless the certificates evidencing such shares of
Preferred Stock are either delivered to this Corporation or its transfer agent
as provided above, or the holder notifies this Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to this Corporation to indemnify this Corporation from
any loss incurred by it in connection with such certificates. This Corporation
shall, as soon as practicable after such
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<PAGE>
delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Preferred Stock,
a certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and a check payable to the holder in
the amount of any cash amounts payable as a result of a conversion into
fractional shares of Common Stock. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, or in the case of automatic
conversion then on the date of closing of the offering, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. All shares of Preferred Stock which
shall have been surrendered for conversion as herein provided shall, upon
surrender, no longer be deemed to be outstanding and all rights with respect to
such shares, including the rights, if any, to receive notices and to vote, shall
immediately cease and terminate on the applicable conversion date, except only
the right of the holders thereof to receive shares of Common Stock in exchange
therefor and payment of any accrued and unpaid dividends thereon. Any shares of
Preferred Stock so converted shall be retired and canceled and shall not be
reissued, and this Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Preferred Stock accordingly.
(d) Adjustments to Series A Conversion Price. The Series A Conversion
----------------------------------------
Price shall be subject to adjustment from time to time as follows:
(i) Adjustments to Conversion Price for Dividends and Distributions.
---------------------------------------------------------------
If at any time or from time to time after the date on which any shares of
Series A Convertible Preferred Stock were issued there is a stock split,
reverse stock split, stock dividend or other pro rata distribution on the
Common Stock for which there is no corresponding distribution on the Series
A Convertible Preferred Stock (all of the foregoing being referred to
herein as a "Diluting Distribution"), the Series A Conversion Price shall
be adjusted as necessary to provide the holder of Series A Convertible
Preferred Stock upon conversion with the same number of shares of Common
Stock as such holder would have held if such conversion had taken place
prior to the effective date of such Diluting Distribution. Any adjustment
under this Section 4(d) shall become effective at the close of business on
the date such Diluting Issue becomes effective. Any other rights to accrued
and unpaid cash dividends shall be distinguished, without any adjustment of
the Series A Conversion Price, upon conversion of the Series A Convertible
Preferred Stock into Common Stock.
(ii) Adjustment for Reclassification, Exchange, or Subscription. If
----------------------------------------------------------
the Common Stock issuable upon the conversion of the Series A Convertible
Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification, distribution of securities, or otherwise (other than a
Diluting Distribution providing for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the holder of each such share of Series A Convertible Preferred Stock
shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and
-7-
<PAGE>
property receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock into which such
shares of Series A Convertible Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
(iii) Adjustment for Merger or Reorganization. In case of any
---------------------------------------
consolidation or merger of this Corporation with or into another
corporation or the sale of all or substantially all of the assets of this
Corporation to another corporation (other than a consolidation, merger or
sale which is treated as a liquidation pursuant to Section 2(f) hereof),
each share of Series A Convertible Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock of
this Corporation deliverable upon conversion of such Series A Convertible
Preferred Stock would have been entitled upon such consolidation, merger or
sale; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of the
provisions of this Section 4(f) set forth with respect to the rights and
interest thereafter of the holders of the Series A Convertible Preferred
Stock, to the end that the provision set forth in this Section 4(f)
(including provisions with respect to adjustment of the Series A Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable
upon the conversion of the Series A Convertible Preferred Stock.
(iv) Notices of Record Date. In the event that this Corporation shall
----------------------
propose at any time:
(A) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether
or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(B) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any
class or series or other rights;
(C) to effect any reclassification or capitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(D) to merge or consolidate with or into any other Corporation,
or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up;
then, in connection with each such event, this Corporation shall send to
each holder of Series A Convertible Preferred Stock:
-8-
<PAGE>
(1) at least twenty (20) days prior written notice of the date
on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of
Common Stock shall be entitled thereto) or for determining rights to
vote in respect of the matters referred to in (A) and (B) above; and
(2) in the case of the matters referred to in (C) and (D) above,
at least twenty (20) days prior written notice of the date when the
same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such
event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Series A
Convertible Preferred Stock at the address for each such holder as shown on
the books of this Corporation.
(e) Adjustments to Series B Conversion Price and Series C Conversion
----------------------------------------------------------------
Price. The Series B Conversion Price and Series C Conversion Price shall be
- -----
subject to adjustment from time to time as follows:
(i) Adjustments to Conversion Price for Dividends and Distributions.
---------------------------------------------------------------
If at any time or from time to time after the date on which any shares of
Series B Convertible Preferred Stock or Series C Convertible Preferred
Stock were issued there is a stock split, reverse stock split, stock
dividend or other pro rata distribution on the Common Stock for which there
is no corresponding distribution on the Series B Convertible Preferred
Stock or Series C Convertible Preferred Stock (all of the foregoing being
referred to herein as a "Diluting Distribution"), the Series B Conversion
Price and Series C Conversion Price shall be adjusted as necessary to
provide the holder of Series B Convertible Preferred Stock or Series C
Convertible Preferred Stock upon conversion with the same number of shares
of Common Stock as such holder would have held if such conversion had taken
place prior to the effective date of such Diluting Distribution. Any
adjustment under this Section 4(e) shall become effective at the close of
business on the date such Diluting Issue becomes effective. Any other
rights to accrued and unpaid cash dividends shall be distinguished, without
any adjustment of the Series B Conversion Price or Series C Conversion
Price, upon conversion of the Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock into Common Stock.
(ii) Adjustment for Reclassification, Exchange, or Subscription. If
----------------------------------------------------------
the Common Stock issuable upon the conversion of the Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock shall be changed
into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, distribution of
securities, or otherwise (other than a Diluting Distribution providing for
above, or a reorganization, merger, consolidation, or sale of assets
provided for below), then and in each such event the holder of each such
share of Series B Convertible Preferred Stock or
-9-
<PAGE>
Series C Convertible Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series B Convertible Preferred Stock or Series C Convertible Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(iii) Adjustment for Merger or Reorganization. In case of any
---------------------------------------
consolidation or merger of this Corporation with or into another corporation or
the sale of all or substantially all of the assets of this Corporation to
another corporation (other than a consolidation, merger or sale which is treated
as a liquidation pursuant to Section 2(f) hereof), each share of Series B
Convertible Preferred Stock or Series C Convertible Preferred Stock shall
thereafter be convertible into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of this Corporation deliverable upon conversion of such Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions of this Section 4(e) set forth with respect
to the rights and interest thereafter of the holders of the Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock, to the end that the
provision set forth in this Section 4(e) (including provisions with respect to
adjustment of the Series B Conversion Price or the Series C Conversion Price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the conversion
of the Series B Convertible Preferred Stock or the Series C Convertible
Preferred Stock.
(iv) Adjustment for Sale of Shares below Dilution Price. For purpose
--------------------------------------------------
of this Section 4(e), the "Series B Dilution Price" shall be equal to $0.68747
per share, subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such share,
adjusted as provided in Sections 4(e)(i) and 4(e)(ii), and the "Series C
Dilution Price" shall be equal to $3.27148 per share, subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such share, adjusted as provided in Sections
4(e)(i) and 4(e)(ii); the "Determination Date" shall be June __, 1999; and the
"Determination Date Outstanding Amount" shall be the number of shares of Common
Stock out-standing on the Determination Date, assuming the exercise on that date
of all outstanding options for the purchase of Common Stock and the conversion
of all shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock outstanding on that
date.
(A) If at any time, or from time to time, this Corporation shall
issue or sell Additional Shares of Common Stock (as defined below), other
than as a Diluting Distribution or in a transaction subject to Section
-10-
<PAGE>
4(e)(iii), for a consideration per share less than the Series B
Dilution Price in effect at the time of such issuance or sale, then
the Series B Conversion Price shall be adjusted, as of the opening of
business on the date of any such issue or sale, to a rate determined
by multiplying the Series B Conversion Price then in effect by a
fraction (x) the numerator of which shall be (1) the number of shares
of Common Stock equal to the Determination Date Outstanding Amount of
Common Stock as of the Determination Date, plus (2) the aggregate
number of Additional Shares of Common Stock issued during a period
from the Determination Date to the date of such issue or sale (the
"Adjustment Period"), and (y) the denominator of which shall be (1)
the number of shares of Common Stock equal to the Determination Date
Outstanding Amount of Common Stock as of the Determination Date, plus
(2) the number of Additional Shares of Common Stock that the aggregate
consideration received by this Corporation for the total number of
Dilutive Shares of Common Stock issued during the Adjustment Period
would purchase at such Series B Conversion Price. Similarly, if at any
time, or from time to time, this Corporation shall issue or sell
Additional Shares of Common Stock, other than as a Diluting
Distribution or in a transaction subject to Section 4(e)(iii), for a
consideration per share less than the Series C Dilution Price in
effect at the time of such issuance or sale, then the Series C
Conversion Price shall be adjusted, as of the opening of business on
the date of any such issue or sale, to a rate determined by
multiplying the Series C Conversion Price then in effect by a fraction
(x) the numerator of which shall be (1) the number of shares of Common
Stock equal to the Determination Date Outstanding Amount of Common
Stock as of the Determination Date, plus (2) the aggregate number of
Additional Shares of Common Stock issued during a the Adjustment
Period, and (y) the denominator of which shall be (1) the number of
shares of Common Stock equal to the Determination Date Outstanding
Amount of Common Stock as of the Determination Date, plus (2) the
number of Additional Shares of Common Stock that the aggregate
consideration received by this Corporation for the total number of
Dilutive Shares of Common Stock issued during the Adjustment Period
would purchase at such Series C Conversion Price.
(B) For the purpose of making any adjustment in the Series B
Conversion Price or Series C Conversion Price, or the number of shares
of Common Stock issuable on the conversion of Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock as provided
hereto, the consideration received by this Corporation for any issue
or sale of securities shall:
(1) to the extent it consists of cash, be computed at the net
amount of cash received by this Corporation before deduction of any
underwriting or similar commissions, concessions, or compensation paid
or allowed by this Corporation in connection with such issue or sale;
-11-
<PAGE>
(2) to the extent it consists of property other than cash be
computed at the fair market value of that property as determined in
good faith by a unanimous vote of the Board of Directors or, if the
Board of Directors is unable to unanimously agree on such a value, as
reasonably determined by the appraisal of an investment bank of
national reputation to be selected by the holders of the majority of
shares of the Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock then outstanding, voting together as a
single class, with the consent of this Corporation, which consent
shall not be unreasonably withheld (the "Investment Bank"); and
(3) if Additional Shares of Common Stock, Convertible Securities
(as defined in Section 4(e)(iv)(C) hereof), or other rights or options
to purchase either Additional Shares of Common Stock or Convertible
Securities, are issued or sold together with other stock or securities
or other assets of this Corporation for a consideration that covers
both, be computed as the portion of the consideration so received that
may be determined in good faith by unanimous vote of the Board of
Directors or, if necessary, an Investment Bank to be allocable to such
Additional Shares of Common Stock, Convertible Securities, or rights
or options.
(C) For purposes of the adjustment provided in this Section
4(e)(iv), if at any time or from time to time after the Determination
Date this Corporation shall issue any rights or options for the
purchase of, or stock or other securities convertible into, Additional
Shares of Common Stock (such rights, options, convertible stock or
securities being hereinafter referred to as the "Convertible
Securities," which shall also include any rights or options
convertible into Convertible Securities), then, in each case, if the
Effective Price (defined below) of such rights, options, or
Convertible Securities shall be less than the Series B Dilution Price
or the Series C Dilution Price, as applicable, this Corporation shall
be deemed to have issued at the time of the issuance of such rights or
options of Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares
an amount equal to the total amount of the consideration, if any,
received by this Corporation for the issuance of such rights or
options or Convertible Securities, plus, in the case of such options
or rights, the maximum amounts of consideration, if any, payable to
this Corporation upon exercise or conversion of such options or
rights. "Effective Price" shall mean the quotient determined by
dividing the total amount of such consideration by such maximum number
of Additional Shares of Common Stock as determined pursuant to this
subsection. No further adjustment of the Series B Conversion Price or
the Series C Conversion Price adjusted upon the issuance of such
rights, options, or Convertible Securities shall be made as a result
of the actual issuance of Additional Shares of Common Stock on
-12-
<PAGE>
the exercise of any such rights or options or the conversion of any
such Convertible Securities.
(D) If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without
having been exercised, the Series B Conversion Price or Series C
Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted with respect to any shares
of Series B Convertible Preferred Stock or Series C Convertible
Preferred Stock remaining outstanding at the time of such expiration
to the Series B Conversion Price or Series C Conversion Price that
would have been in effect had an adjustment been made on the basis
that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on
the exercise of such rights or options or rights of conversion of such
Convertible Securities, plus the consideration received for issuing or
selling the Convertible Securities actually converted plus the
consideration, if any, actually received by this Corporation on the
conversion of such Convertible Securities and in the case of such
rights or options, the amount of the consideration, if any, actually
received by this Corporation on the exercise of such rights or
options.
(v) Additional Shares of Common Stock. The term "Additional Shares
---------------------------------
of Common Stock" as used in this Section 4(e) shall mean all shares of
Common Stock issued by this Corporation after the Determination Date,
whether or not subsequently reacquired or retired by this Corporation,
excluding: (1) shares of Common Stock issued upon conversion of the Series
A Convertible Preferred Stock, the Series B Convertible Preferred Stock and
the Series C Convertible Preferred Stock, (2) up to 5,624,434 shares of
Common Stock reserved under this Corporation's employee incentive option
plan for issuance to employees, officers, or directors of this Corporation
or consultants to this Corporation in consideration for services provided
to this Corporation, as approved by the Board of Directors, (3) shares of
Common Stock issued in consideration for the acquisition of another
corporation or entity, or assets of another corporation or entity (other
than in the ordinary course of business), (4) shares of capital stock of
this Corporation issued in transactions unanimously approved by the Board
of Directors of this Corporation, and (5) any other shares of Common Stock
otherwise already included in the calculation of the Determination Date
Outstanding Amount.
(vi) Notices of Record Date. In the event of (A) any taking by this
----------------------
Corporation of record of the holders of any class or series of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution or vote on any transaction or
proposed event, or (B) any reclassification or recapitalization of the
capital stock of this Corporation or any voluntary or involuntary
dissolution, liquidation or winding up of this Corporation, this
Corporation shall send by facsimile or certified or registered mail return
receipt requested, postage prepaid, to each holder of Series B
-13-
<PAGE>
Convertible Preferred Stock or Series C Convertible Preferred Stock at the
facsimile number or address provided by such holder at least thirty (30)
days prior to the record date specified therein a notice specifying (1) the
date on which any such record is to be taken for the purpose of such
dividend or other distribution or vote and a description including the
amount of such dividend or distribution or nature of the matter to be voted
upon, (2) the date on which any such reorganization, reclassification,
dissolution, liquidation or winding up is expected to become effective, (3)
the time, when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, dissolution, liquidation or winding up,
(which, with respect to holders of Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock, shall be within ten (10) business
days of the effective date of a reorganization or reclassification and as
soon as practicable after the Liquidation Event), and (4) if available, the
nature and amount of such securities or property deliverable upon such
reorganization, reclassification, dissolution, liquidation or winding up.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Series A Conversion Price, the Series B
Conversion Price or the Series C Conversion Price pursuant to this Section 4,
this Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock, as applicable, a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (A) such
adjustments and readjustments, and (B) the Series A Conversion Price, the Series
B Conversion Price or the Series C Conversion Price then in effect and (C) the
number of shares of Common Stock and the amounts, if any, of other property
which are at the time would be received upon conversion of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock or the
Series C Convertible Preferred Stock.
(g) No impairment. This Corporation will not, by amendment of this
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by this Corporation but will at
all times in good faith assist taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock
or Series C Convertible Preferred Stock against impairment.
-14-
<PAGE>
Section 5. Redemption.
----------
(a) Timing of Series B Redemption.
-----------------------------
(i) At any time on or after June 19, 2003, and prior to June 19,
2004, any holder of Series B Convertible Preferred Stock then issued and
outstanding (a "Requesting Holder") shall have the right to require the
Corporation to redeem up to one-third of the Series B Convertible Preferred
Stock then held by the Requesting Holder at the Redemption Price (as
hereinafter defined) by delivery of written notice to the Corporation (a
"Redemption Notice").
(ii) At any time on or after June 19, 2004, and prior to June 19,
2005, a Requesting Holder shall have the right to require the Corporation
to redeem up to two-thirds of the Series B Convertible Preferred Stock then
held by the Requesting Holder (less any amount previously redeemed) at the
Redemption Price (as hereinafter defined) by delivery of a Redemption
Notice.
(iii) At any time on or after June 19, 2005, a Requesting Holder
shall have the right to require the Corporation to redeem all of the Series
C Convertible Preferred Stock then held by the Requesting Holder at the
Redemption Price (as hereinafter defined) by delivery of a Redemption
Notice.
(b) Timing of Series C Redemption.
-----------------------------
(i) At any time on or after June 14, 2004, and prior to June 14,
2005, any holder of Series C Convertible Preferred Stock then issued and
outstanding (a "Requesting Holder") shall have the right to require the
Corporation to redeem up to one-third of the Series C Convertible Preferred
Stock then held by the Requesting Holder at the Redemption Price (as
hereinafter defined) by delivery of written notice to the Corporation (a
"Redemption Notice").
(ii) At any time on or after June 14, 2005, and prior to June 14,
2006, a Requesting Holder shall have the right to require the Corporation
to redeem up to two-thirds of the Series C Convertible Preferred Stock then
held by the Requesting Holder (less any amount previously redeemed) at the
Redemption Price (as hereinafter defined) by delivery of a Redemption
Notice.
(iii) At any time on or after June 14, 2006, a Requesting Holder
shall have the right to require the Corporation to redeem all of the Series
C Convertible Preferred Stock then held by the Requesting Holder at the
Redemption Price (as hereinafter defined) by delivery of a Redemption
Notice.
(c) Procedures for Redemption. Upon receipt of notice of such
-------------------------
election(s), the Corporation shall be obligated to redeem the Preferred Stock
specified therein and in the Redemption Notice for cash not later than 90 days
after the receipt by the Corporation of the Redemption Notice. The Corporation
shall not less than 15 days nor more than 60 days prior to the date fixed for
such Redemption (which date shall be within 90 days after the receipt by the
Corporation of the Redemption Notice (the "Redemption Date")) give written
notice to each holder of Series B
-15-
<PAGE>
or Series C Convertible Preferred Stock whose shares are to be redeemed at their
respective addresses appearing on the books of the Corporation of the Redemption
Date with respect to such shares of Series B or Series C Convertible Preferred
Stock, the Redemption Price of such shares, and the time, place and manner in
which the holder is to surrender to the Corporation the certificate or
certificates representing such shares, and shall include with such notice
financial statements of the Corporation for the prior fiscal year and notice of
all rights under this Section 5.
(d) Limitations on Redemption. The Corporation shall not be required to
-------------------------
redeem Preferred Stock pursuant to this Section 5 to the extent (but only to the
extent) that the Corporation does not have funds legally available therefor,
provided that the Corporation shall use all legally permissible methods in the
reduction of capital and in the revaluation of its assets, including appraisal,
in obtaining such legally available funds, and the Corporation shall give
written notice to the holders of Series B or Series C Convertible Preferred
Stock within thirty (30) business days after the date of the Redemption Notice
that it is not required to redeem the number of shares of Series B or Series C
Convertible Preferred Stock set forth in such notice by reason of this Section
5(c) and setting forth the facts relating thereto. In the event the Corporation
does not have funds legally available to redeem all of the Series B or Series C
Convertible Preferred Stock that the holders of Series B or Series C Convertible
Preferred Stock have requested the Corporation to redeem under this Section 5,
the Corporation shall redeem the maximum number of shares of Series B or Series
C Convertible Preferred Stock that it may redeem with such funds legally
available pro rata from all holders of Series B or Series C Convertible
Preferred Stock in proportion to the number of shares of Series B or Series C
Convertible Preferred Stock held by each such holder, and the Corporation shall
redeem the remainder of such Series B or Series C Convertible Preferred Stock as
soon as it has funds legally available to do so.
(e) Redemption Price. For purposes of this Section 5, the "Redemption
----------------
Price" of a share of Series B Convertible Preferred Stock shall be equal to the
liquidation value of such share (calculated in accordance with Section 2 hereof)
on the date of redemption of such share and of a share of Series C Convertible
Preferred Stock shall be equal to the liquidation value of such share
(calculated in accordance with Section 2 hereof) on the date of redemption of
such share.
(f) Rights of Holders on Redemption. No shares of Series B or Series C
-------------------------------
Convertible Preferred Stock shall be entitled to any dividends accruing after
the redemption date for such shares of Series B or Series C Convertible
Preferred Stock (provided that on or prior to such redemption date the
Corporation shall have irrevocably deposited funds for such redemption in trust
for the holders of Series B or Series C Convertible Preferred Stock to be
redeemed) unless the Corporation shall default in the payment of the Redemption
Price for such shares of Series B or Series C Convertible Preferred Stock. On
such redemption date, all rights of the holder or holders of such shares of
Series B or Series C Convertible Preferred Stock (other than the right to
receive payment of the applicable Redemption Price) shall cease, and such shares
shall be deemed not to be outstanding and shall be deemed to represent only the
right to receive the applicable Redemption Price.
FIFTH: In addition to any other rights provided by law, so long as any
-----
Common Stock and Preferred Stock of this Corporation shall be outstanding, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than seventy-five
-16-
<PAGE>
percent (75%) of the outstanding shares of Common Stock and Preferred Stock,
voting together as a single class:
(a) merge or consolidate with, or sell substantially all of this
Corporation's assets to, any other person or entity, unless the stockholders of
this Corporation would hold more than fifty percent (50%) of the voting equity
securities or assets of the surviving corporation or acquiring corporation, as
the case may be, immediately following such merger, consolidation or sale of the
assets.
(b) voluntarily liquidate, dissolve or wind up the affairs of this
Corporation; or
(c) amend, repeal or adopt any provision of this Corporation's Certificate
of Incorporation inconsistent with this Article FIFTH.
SIXTH: In furtherance and not in limitation of the powers conferred by
-----
statute, the Board of Directors shall have the power, subject to the provisions
of Article FOURTH, Section 3, both before and after receipt of any payment for
any of the Corporation's capital stock, to adopt, amend, repeal or otherwise
alter the Bylaws of the Corporation without any action on the part of the
stockholders; provided, however, that the grant of such power to the Board of
Directors shall not divest the stockholders of nor limit their power, subject to
the provisions of Article FOURTH, Section 3, to adopt, amend, repeal or
otherwise alter the Bylaws.
SEVENTH: Elections of directors need not be by written ballot except and
-------
to the extent provided in the Bylaws of this Corporation.
EIGHTH: To the fullest extent permitted by the Delaware General
------
Corporation Law, as the same exists or as may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages of breach of fiduciary duty as director.
(a) Right to Indemnification. Each person who was or is made a party or
------------------------
is threatened to be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding"), by reason of the fact that he or she is or was a
director, officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "Indemnitee"), whether
the basis of such Proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such Indemnitee in connection
therewith and such indemnification shall continue as to an Indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the Indemnitee's heirs, executors and administrators; provided,
-17-
<PAGE>
however, that, except as provided in paragraph (c) of this Article EIGHTH with
respect to Proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such Indemnitee in connection with a Proceeding (or part
thereof) initiated by such Indemnitee only if such Proceeding (or part thereof)
was authorized by the board of directors of the Corporation.
(b) Right to Advancement of Expenses. The right to indemnification
--------------------------------
conferred in paragraph (a) of this Article EIGHTH shall include the right to be
paid by the Corporation the expenses incurred in defending any Proceeding for
which such right to indemnification is applicable in advance of its final
disposition (hereinafter an "Advancement of Expenses"); provided, however, that,
-------- -------
if the Delaware General Corporation Law requires, an Advancement of Expenses
incurred by an Indemnitee in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
Indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "Undertaking"), by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "Final
Adjudication") that such Indemnitee is not entitled to be indemnified for such
expenses under this Article EIGHTH or otherwise.
(c) Right of Indemnitee to Bring Suit. The rights to indemnification and
---------------------------------
to the Advancement of Expenses conferred in paragraphs (a) and (b) of this
Article EIGHTH shall be contract rights. If a claim under paragraph (a) or (b)
of this Article EIGHTH is not paid in full by the Corporation within sixty (60)
days after a written claim has been received by the Corporation, except in the
case of a claim for an Advancement of Expenses, in which case the applicable
period shall be twenty (20) days, the Indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the Indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an Advancement
of Expenses pursuant to the terms of an Undertaking the Corporation shall be
entitled to recover such expenses upon a Final Adjudication that, the Indemnitee
has not met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an Advancement of Expenses hereunder,
or by the Corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such Advancement of Expenses, under this
Article EIGHTH or otherwise shall be on the Corporation.
-18-
<PAGE>
(d) Non-Exclusivity of Rights. The rights to indemnification and to the
-------------------------
Advancement of Expenses conferred in this Article EIGHTH shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, this Amended and Restated Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
(e) Insurance. The Corporation may maintain insurance, at its expense,
---------
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(f) Indemnification of Employees and Agents of the Corporation. The
----------------------------------------------------------
Corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification, and to the Advancement of Expenses
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article EIGHTH with respect to the indemnification and
Advancement of Expenses of directors and officers of the Corporation.
(g) Amendment. Neither any amendment nor repeal of this Article EIGHTH,
---------
nor the adoption of any provision of the Corporation's Amended and Restated
Certificate of Incorporation inconsistent with this Article EIGHTH, shall
eliminate or reduce the effect of this Article EIGHTH in respect of any matter
occurring, or action or proceeding accruing or arising or that, but for this
Article EIGHTH, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
NINTH: To the extent not inconsistent with the provisions herein, the
-----
Corporation reserves the right to adopt, repeal, rescind or amend in any respect
any provisions contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
* * * * *
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<PAGE>
EXHIBIT 3.4
CERTIFICATE OF CORRECTION OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF SUPPORT.COM, INC.
Support.com, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the corporation is Support.com, Inc. (the "Company").
2. That an Amended and Restated Certificate of Incorporation was
filed by the Secretary of State of Delaware on December 13, 1999,
and that said Amended and Restated Certificate of Incorporation
requires correction as permitted by Section 103 of the General
Corporation Law of the State of Delaware.
3. Due to clerical error, the first paragraph of Article FOURTH
inadvertently stated as follows:
"FOURTH: This Corporation is authorized to issue 46,717,708
------
shares of capital stock consisting of 31,060,000 shares of common
stock, par value $0.0001 per share (the "Common Stock") and 15,657,708
shares of preferred stock, par value $0.0001 per share (the "Preferred
Stock") of which 3,571,600 shares shall be designated "Series A
Convertible Preferred Stock," 7,346,108 shares shall be designated
"Series B Convertible Preferred Stock" and 4,800,000 shares shall be
designated "Series C Convertible Preferred Stock."
4. The first paragraph of Article FOURTH of the Amended and Restated
Certificate of Incorporation is hereby corrected to read in its
entirety as follows:
"FOURTH: This Corporation is authorized to issue 46,787,708
------
shares of capital stock consisting of 31,060,000 shares of common
stock, par value $0.0001 per share (the "Common Stock") and 15,727,708
shares of preferred stock, par value $0.0001 per share (the "Preferred
Stock") of which 3,571,600 shares shall be designated "Series A
Convertible Preferred Stock," 7,346,108 shares shall be designated
"Series B Convertible Preferred Stock" and 4,810,000 shares shall be
designated "Series C Convertible Preferred Stock."
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Correction to the Amended and Restated Certificate of Incorporation of
Support.com, Inc. this 16th day of February, 2000.
By /s/ Radha R. Basu
-----------------------------------------
Radha R. Basu
Chief Executive Officer and President
<PAGE>
EXHIBIT 3.5
BYLAWS
OF
REPLICASE, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1-STOCKHOLDERS................................................................................ 1
1.1 ANNUAL MEETINGS............................................................................ 1
1.2 SPECIAL MEETINGS........................................................................... 1
1.3 NOTICE OF MEETINGS......................................................................... 1
1.4 ADJOURNMENTS............................................................................... 1
1.5 QUORUM..................................................................................... 2
1.6 ORGANIZATION............................................................................... 2
1.7 VOTING; PROXIES............................................................................ 2
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.................................... 3
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE...................................................... 3
1.10 ACTION BY CONSENT OF STOCKHOLDERS.......................................................... 4
ARTICLE 2-BOARD OF DIRECTORS.......................................................................... 4
2.1 NUMBER; QUALIFICATIONS..................................................................... 4
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES.................................................. 4
2.3 REGULAR MEETINGS........................................................................... 5
2.4 SPECIAL MEETINGS........................................................................... 5
2.5 TELEPHONIC MEETINGS PERMITTED.............................................................. 5
2.6 QUORUM; VOTE REQUIRED FOR ACTION........................................................... 5
2.7 ORGANIZATION............................................................................... 5
2.8 INFORMAL ACTION BY DIRECTORS............................................................... 5
ARTICLE 3-COMMITTEES.................................................................................. 6
3.1 COMMITTEES................................................................................. 6
3.2 COMMITTEE RULES............................................................................ 6
ARTICLE 4-OFFICERS.................................................................................... 6
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION; REMOVAL;
VACANCIES.................................................................................. 6
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS.................................................... 7
ARTICLE 5-STOCK....................................................................................... 7
5.1 CERTIFICATES............................................................................... 7
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES................. 7
ARTICLE 6-INDEMNIFICATION............................................................................. 8
6.1 RIGHT TO INDEMNIFICATION................................................................... 8
6.2 PREPAYMENT OF EXPENSES..................................................................... 8
6.3 CLAIMS..................................................................................... 8
6.4 NON-EXCLUSIVITY OF RIGHTS.................................................................. 8
6.5 OTHER INDEMNIFICATION...................................................................... 9
6.6 AMENDMENT OR REPEAL........................................................................ 9
ARTICLE 7-MISCELLANEOUS............................................................................... 9
7.1 FISCAL YEAR................................................................................ 9
7.2 SEAL....................................................................................... 9
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES..................... 9
7.4 INTERESTED DIRECTORS; QUORUM............................................................... 9
7.5 FORM OF RECORDS............................................................................ 10
7.6 AMENDMENT OF BYLAWS........................................................................ 10
</TABLE>
-ii-
<PAGE>
BYLAWS
------
OF
--
REPLICASE, INC.
---------------
ARTICLE 1
STOCKHOLDERS
------------
1.1 ANNUAL MEETINGS
---------------
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the Board of Directors from time
to time. Any other proper business may be transacted at the annual meeting.
1.2 SPECIAL MEETINGS
----------------
Special meetings of stockholders for any purpose or purposes may be called
at any time by the Board of Directors, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as expressly provided in a resolution of the Board of
Directors, include the power to call such meetings, but such special meetings
may not be called by any other person or persons.
1.3 NOTICE OF MEETINGS
------------------
Whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Unless otherwise provided
by law, the Certificate of Incorporation or these Bylaws, the written notice of
any meeting shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at his or her address as
it appears on the records of the corporation.
1.4 ADJOURNMENTS
------------
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be given
of any such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment
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<PAGE>
a new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
1.5 QUORUM
------
Except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws, at each meeting of stockholders the presence in person or by proxy
of the holders of shares of stock having a majority of the votes which could be
cast by the holders of all outstanding shares of stock entitled to vote at the
meeting shall be necessary and sufficient to constitute a quorum. In the
absence of a quorum, the stockholders so present may, by majority vote, adjourn
the meeting from time to time in the manner provided in Section 1.4 of these
Bylaws until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
1.6 ORGANIZATION
------------
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his or her absence by the Vice Chairman of the Board, if
any, or in his or her absence by the President, or in his or her absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his or her absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
1.7 VOTING; PROXIES
---------------
Except as otherwise provided by the Certificate of Incorporation, each
stockholder entitled to vote at any meeting of stockholders shall be entitled to
one vote for each share of stock held by him which has voting power upon the
matter in question. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three (3) years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or another duly executed proxy bearing a later date
with the Secretary of the corporation. Voting at meetings of stockholders need
not be by written ballot and need not be conducted by inspectors of election
unless so determined by the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote thereon which are present in person or by proxy at such
meeting. At all meetings of stockholders for the election of directors a
plurality of the votes cast shall be sufficient to elect. All other elections
and questions shall, unless otherwise provided by law,
-2-
<PAGE>
the certificate of incorporation or these Bylaws, be decided by the vote of the
holders of shares of stock having a majority of the votes which could be cast by
the holders of all shares of stock entitled to vote thereon which are present in
person or represented by proxy at the meeting.
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
-------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days from the date
upon which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
(60) days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action of
the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The Secretary shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the
-3-
<PAGE>
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors,
they shall be ineligible for election to any office at such meeting. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
1.10 ACTION BY CONSENT OF STOCKHOLDERS
---------------------------------
Unless otherwise restricted by the Certificate of Incorporation, any action
required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE 2
BOARD OF DIRECTORS
------------------
2.1 NUMBER; QUALIFICATIONS
----------------------
The Board of Directors shall consist of three (3) or more members, the
number thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES
-----------------------------------------
The Board of Directors shall initially consist of the persons named as
directors in the Certificate of Incorporation or as elected by the sole
incorporator, and each director so elected shall hold office until the first
annual meeting of stockholders or until his or her successor is elected and
qualified. At the first annual meeting of stockholders and at each annual
meeting thereafter, the stockholder shall elect directors of whom shall hold
office for a term of one (1) year or until his or her successor is elected and
qualified. Any director may resign at any time upon written notice to the
corporation. Any newly created directorship or any vacancy occurring in the
Board of Directors for any cause may be filled by a majority of the remaining
members of the Board of Directors, although such majority is less than a quorum,
or by a plurality of the votes cast at a meeting of stockholders, and each
director so elected shall hold office until the expiration of the term of office
of the director whom he has replaced or until his or her successor is elected
and qualified.
-4-
<PAGE>
2.3 REGULAR MEETINGS
----------------
Regular meetings of the Board of Directors may be held at such places
within or without the State of Delaware and at such times as the Board of
Directors may from time to time determine, and if so determined notices thereof
need not be given.
2.4 SPECIAL MEETINGS
----------------
Special meetings of the Board of Directors may be held at any time or place
within or without the State of Delaware whenever called by the President, any
Vice President, the Secretary, or by any member of the Board of Directors.
Notice of a special meeting of the Board of Directors shall be given by the
person or persons calling the meeting at least twenty-four (24) hours before the
special meeting.
2.5 TELEPHONIC MEETINGS PERMITTED
-----------------------------
Members of the Board of Directors, or any committee designated by the Board
of Directors, may participate in a meeting thereof by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Bylaw shall constitute presence in person at such meeting.
2.6 QUORUM; VOTE REQUIRED FOR ACTION
--------------------------------
At all meetings of the Board of Directors a majority of the whole Board of
Directors shall constitute a quorum for the transaction of business. Except in
cases in which the Certificate of Incorporation or these Bylaws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
2.7 ORGANIZATION
------------
Meetings of the Board of Directors shall be presided over by the Chairman
of the Board, if any, or in his or her absence by the Vice Chairman of the
Board, if any, or in his or her absence by the President, or in his or her
absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his or her absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.
2.8 INFORMAL ACTION BY DIRECTORS
----------------------------
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or such committee.
-5-
<PAGE>
ARTICLE 3
COMMITTEES
----------
3.1 COMMITTEES
----------
The Board of Directors may, by resolution passed by a majority of the whole
Board of Directors, designate one (1) or more committees, each committee to
consist of one (1) or more of the directors of the corporation. The Board of
Directors may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in place
of any such absent or disqualified member. Any such committee, to the extent
permitted by law and to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers which
may require it.
3.2 COMMITTEE RULES
---------------
Unless the Board of Directors otherwise provides, each committee designated
by the Board of Directors may make, alter and repeal rules for the conduct of
its business. In the absence of such rules each committee shall conduct its
business in the same manner as the Board of Directors conducts its business
pursuant to Article 3 of these Bylaws.
ARTICLE 4
OFFICERS
--------
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE;
-------------------------------------------------------------
RESIGNATION; REMOVAL; VACANCIES
-------------------------------
The Board of Directors shall elect a President and Secretary, and it may,
if it so determines, choose a Chairman of the Board and a Vice Chairman of the
Board from among its members. The Board of Directors may also choose one or
more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or
more Assistant Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next
succeeding his or her election, and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any officer may
resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the corporation. Any number
-6-
<PAGE>
of offices may be held by the same person. Any vacancy occurring in any office
of the corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS
---------------------------------------
The officers of the corporation shall have such powers and duties in the
management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his or her duties.
ARTICLE 5
STOCK
-----
5.1 CERTIFICATES
------------
Every holder of stock shall be entitled to have a certificate signed by or
in the name of the corporation by the Chairman or Vice Chairman of the Board of
Directors, if any, or the President or Vice President, and by the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
corporation, certifying the number of shares owned by him or her in the
corporation. Any of or all the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent, or registrar at the date of issue.
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
-------------------------------------------------------------
CERTIFICATES
------------
The corporation may issued a new certificate of stock in the place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his or her legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
-7-
<PAGE>
ARTICLE 6
INDEMNIFICATION
---------------
6.1 RIGHT TO INDEMNIFICATION
------------------------
The corporation shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as is presently exists or may hereafter be amended,
any person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding") by reason of the fact that he
or she, or a person for whom he or she is the legal representative, is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust, enterprise or
non-profit entity, including service with respect to employee benefit plans,
against all liability and loss suffered and expenses reasonably incurred by such
person. The corporation shall be required to indemnify a person in connection
with a Proceeding initiated by such person only if the Proceeding was authorized
by the Board of Directors of the corporation.
6.2 PREPAYMENT OF EXPENSES
----------------------
The corporation shall pay the expenses incurred in defending any Proceeding
in advance of its final disposition, provided, however, that the payment of
expenses incurred by a director or officer in advance of the final disposition
of the Proceeding shall be made only upon receipt of an undertaking by the
director or officer to repay all amounts advanced if it should be ultimately
determined that the director or officer is not entitled to be indemnified under
this Article or otherwise.
6.3 CLAIMS
------
If a claim for indemnification or payment of expenses under this Article is
not paid in full within sixty (60) days after a written claim therefor has been
received by the corporation, the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
6.4 NON-EXCLUSIVITY OF RIGHTS
-------------------------
The rights conferred on any person by this Article 6 shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, these Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise.
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<PAGE>
6.5 OTHER INDEMNIFICATION
---------------------
The corporation's obligation, if any, to indemnify any person who was or is
serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or non-profit entity
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or non-
profit enterprise.
6.6 AMENDMENT OR REPEAL
-------------------
Any repeal or modification of the foregoing provisions of this Article 6
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE 7
MISCELLANEOUS
-------------
7.1 FISCAL YEAR
-----------
The fiscal year of the corporation shall be determined by resolution of the
Board of Directors.
7.2 SEAL
----
The corporate seal shall have the name of the corporation inscribed thereon
and shall be in such form as may be approved from time to time by the Board of
Directors.
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES
----------------------------------------------------------------------
Any written waiver of notice, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of any regular or special meeting
of the stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice.
7.4 INTERESTED DIRECTORS; QUORUM
----------------------------
No contract or transaction between the corporation and one (1) or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other
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<PAGE>
organization in which one (1) or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or her or
their votes are counted for such purpose, if: (1) the material facts as to his
or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith, authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (2) the material
facts as to his or her relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (3) the contract or transaction is fair as to
the corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
7.5 FORM OF RECORDS
---------------
Any records maintained by the corporation in the regular course of its
business, including its stock ledger, books of account, and minute books, may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
7.6 AMENDMENT OF BYLAWS
-------------------
These Bylaws may be altered or repealed, and new Bylaws made, by the Board
of Directors, but the stockholders may make additional Bylaws and may alter and
repeal any Bylaws whether adopted by them or otherwise.
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<PAGE>
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of June 22
1998, by and among Replicase, Inc., a Delaware corporation (the "Company"), and
the parties listed on Schedule 1 attached hereto.
W I T N E S S E T H:
-------------------
WHEREAS, Mark Pincus, a resident of the State of California, Cadir Lee, a
resident of the State of California, Scott Dale, a resident of the State of
California and Sunil Paul, a resident of the State of California (collectively,
the "Series A Stockholders"), hold all of the outstanding Series A Convertible
Preferred Stock, par value $0.0001 per share (the "Series A Stock"), of the
Company;
WHEREAS, by entering into this Agreement, the Company wishes to provide to
the Series A Stockholders certain registration rights with respect to the Series
A Stock;
WHEREAS, the Company intends that such registration rights shall be
subordinate to the registration rights granted to Investors under that certain
Registration Rights Agreement, dated as of the date hereof, by and among the
Company and the Investors ("Investor Rights Agreement");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
"Common Shares" means the shares of the common stock, par value
$0.0001 per share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
"Holder" means a Series A Stockholder (to the extent that such
stockholder is a holder of Registrable Securities) or any assignee thereof in
accordance with Section 11.
<PAGE>
"Investors" means collectively Accel VI, L.P., Accel Internet Fund II,
L.P., Accel Keiretsu VI, L.P., Accel Investors '98 L.P., Softbank Technology
Advisors Fund, L.P., Softbank Technology Ventures IV, Flatiron Partners, WHP
Partners, and Ronald Conway.
"Investor Rights Agreement" shall have the meaning ascribed thereto in the
recitals hereof.
"Majority in interest of the Holders" means Holders holding a majority of
the Registrable Securities held by all Holders.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, association, trust or any other entity or
organization.
"Preferred Stock" means the Series A Stock.
"Qualifying Request" means a request from one or more Holders owning in the
aggregate at least ten percent (10%) of the Registrable Securities held by the
Holders.
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (i) any Common Shares issuable (without
regard to any restriction or conversion that may be applicable to any particular
holder of Preferred Stock) or issued upon conversion of the Preferred Stock, and
(ii) any Common Shares issued (or issuable upon conversion or exercise of any
warrant, right or other securities which is issued) as a dividend or other
distribution with respect to, or in exchange for or in replacement of, or upon
conversion of, such Preferred Stock, Common Shares, warrants, rights or other
securities; provided, however, that any shares of Preferred Stock or Common
Shares sold by a Person in a transaction in which such Person's rights under
this Agreement are not assigned pursuant to Section 11 below shall cease to be
Registrable Securities from and after the time of such sale.
The number of shares of "Registrable Securities then outstanding" shall be
determined by the number of Common Shares outstanding, and the number of Common
Shares issuable, which are Registrable Securities.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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<PAGE>
"Series A Stock" has the meaning ascribed thereto in the recitals
above.
"Series A Stockholder" has the meaning ascribed thereto in the
recitals above.
"Stockholders' Rights Agreement" means that certain Stockholders'
Rights Agreement, by and among the Company and each of the Series A
Stockholders, dated June 19, 1998.
"Violation" means any of the following statements, omissions or
violations: (i) any untrue statement or alleged untrue statement of a material
fact contained in a registration statement under this Agreement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto or any documents filed under state securities or "blue
sky" laws in connection therewith, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law.
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<PAGE>
2. Request for Registration.
(a) If at any time more than one hundred eighty (180) days after
the initial public offering of the Company's securities, the Company shall
receive a written Qualifying Request that the Company file a registration
statement under the Securities Act, then the Company shall, within ten (10) days
of the receipt thereof, give written notice of such request to all Holders and
shall, subject to the limitations of Section 2(b) below, effect as soon as
practicable, and in any event within sixty (60) days of the receipt of such
request, the registration under the Securities Act of all Registrable Securities
which the Holders request to be registered within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 19 below;
provided, however, that (i) Registrable Securities having at least a proposed
aggregate offering price of $3,000,000 are to be registered, and (ii) the
Company shall be obligated to effect only two (2) registrations pursuant to this
Section 2(b); provided, further, that such notice shall be provided to all
Investors holding registrable securities under the Investor Rights Agreement in
accordance with the notice provisions of the Investor Rights Agreement who shall
have participation rights in such registration under this section 2(a) equal to
the Holders; provided, further, that in the event that a written qualifying
request (as that term is defined in the Investor Rights Agreement) is made by
Investors prior to the Company filing a registration statement in accordance
with a Qualifying Request made under this Section 2(a), such Qualifying Request
will be deemed withdrawn and shall not be consummated. Expect as otherwise
provided in Section 6 hereof, registrations which are not consummated shall not
be counted for this purpose.
(b) If Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company and the Company shall include such information in the written notice
referred to in Section 2(a). In such event, the right of any Holder to include
such Holder's Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed between the Holders making the Qualifying Request and such Holder) to the
extent provided herein; provided, however, that each Investor holding registered
securities shall be eligible to participate in such underwriting and the
Holders' rights to participate in such underwriting will be subordinate in all
respects to Investor's rights to participate in such underwriting. A majority
in interest of the Holders and Investors participating in the underwriting
shall, after consultation with the Board of Directors of the Company, select the
managing underwriter or underwriters in such underwriting, such underwriter(s)
to be reasonably satisfactory to the Company. All Holders and Investors
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 4(f)) enter into an
underwriting agreement in customary form with the underwriter or underwriters so
selected or such underwriting; provided, however, that no such Holder or
Investor shall be required to make any representations or warranties except as
they relate to such Holder's or Investor's ownership of shares and
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<PAGE>
authority to enter into the underwriting agreement and to such Holder's or
Investor's intended method of distribution, and the liability of such Holder or
Investor shall be limited to an amount equal to the net proceeds from the
offering received by such Holder or Investor. Notwithstanding any other
provision of this Section 2, if the underwriter advises the Holders and
Investors in writing that marketing factors require a limitation of the number
of shares to be underwritten, then the Holders and Investors shall so advise the
Company and the Company shall so advise all Holders or Investors of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated (i) first to the Investors, (ii) then to the Holders making
the Qualifying Request, and (iii) thereafter among all other Holders thereof, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each such other Holder.
(c) In addition to any other rights to demand registration
pursuant to this Section 2, Holders shall have the right to demand on an
unlimited basis that the Company, at the Company's expense, include any or all
of their Registrable Securities, in a registration statement on Form S-3 under
the 1933 Act for the purpose of attempting to effect the public sale of such
shares; provided, however, that (i) such Holders making such a demand under this
Section 2(c) own in the aggregate at least five percent (5%) of the Registrable
Securities; (ii) Registrable Securities having at least a proposed aggregate
offering price of $1,000,000 are to be registered; (iii) Form S-3 is available
with respect to the Registrable Securities; and (iv) the Company shall not be
required to prepare and file a registration statement on Form S-3 for the
purpose of attempting to effect the public sale of shares as provided for in
this Section 2(c) more than once in any six (6) month period. The other terms
and conditions relating to a demand registration referred to in this Section 2,
including, without limitation, any subordination to the rights of Investors
shall be applicable to a demand registration referred to in this Section 2(c),
as the same may be applicable.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed by reason of a material pending transaction and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than ninety (90)
days after receipt of the request of such Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period.
3. Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for holders of the Company's equity securities other
than the Holders) any of its securities under the Securities Act in connection
with the public offering of such securities solely for cash (other than a
registration on Form S-8 relating solely to the sale of securities to
participants in a Company stock plan or to other compensatory arrangements to
the extent
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<PAGE>
includable on Form S-8, or a registration on Form S-4), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 19, the Company shall,
subject to the provisions of Section 8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered. The Company shall have no obligation under this
Section 3 to make any offering of its securities, or to complete an offering of
its securities that it proposes to make, and shall incur no liability to any
Holder for its failure to do so.
4. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities being registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days or
until the Holders have completed the distribution referred to in such
registration statement, whichever occurs first (but in any event for at least
any period required under the Securities Act); provided, however, that before
filing such registration statement or any amendments thereto, the Company will
furnish to the Holders copies of all such documents proposed to be filed.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of such
registration statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents as Holders may reasonably request in order to facilitate
the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "blue sky"
laws of such states or jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto (i) to qualify to do business in any state or
jurisdiction where it would not otherwise be required to qualify but for the
requirements of this clause (d), or (ii) to file a general consent to service of
process in any such state or jurisdiction.
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<PAGE>
(e) Use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
Company's business or operations to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(f) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(h) Notify each Holder of Registrable Securities covered by such
registration statement and such Holder's underwriters, if any, and confirm such
advice in writing: (i) when the registration statement has become effective,
(ii) when any post-effective amendment to the registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement to
the registration statement or prospectus or for additional information.
(i) Notify each Holder of Registrable Securities if at any time
the SEC should institute or threaten to institute any proceedings for the
purpose of issuing, or should issue, a stop order suspending the effectiveness
of the registration statement. Upon the occurrence of any of the events
mentioned in the preceding sentence, the Company will use its best efforts to
prevent the issuance of any such stop order or to obtain the withdrawal thereof
as soon as possible. The Company will advise each Holder of Registrable
Securities promptly of any order or communication of any public board or body
addressed to the Company suspending or threatening to suspend the qualification
of any Registrable Securities for sale in any jurisdiction.
(j) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, (i) on the
date that such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Agreement, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and
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<PAGE>
(ii) on the date that the registration statement with respect to such securities
becomes effective, a "comfort" letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities, and, if such
securities are being sold through underwriters, a reaffirmation of such letter
on the date that such Registrable Securities are delivered to the underwriters
for sale.
(k) As soon as practicable after the effective date of the
registration statement, and in any event within sixteen (16) months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Securities Act) an earning statement (which need not be audited)
covering a period of at least twelve (12) months beginning after the effective
date of the registration statement and otherwise complying with Section 11(a) of
the Securities Act.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. If any registration statement or comparable statement under the
Securities Act refers to a Holder or any of its affiliates, by name or
otherwise, as the holder of any securities of the Company then, unless counsel
to the Company advises the Company that the Securities Act requires that such
reference be included in any such statement, each such Holder shall have the
right to require the deletion of such reference to itself and its affiliates.
6. Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions relating to Registrable Securities,
incurred in connection with registrations, filing or qualifications pursuant to
Section 2, including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel (selected by the Holders holding a majority of the Registrable
Securities being registered) for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay the
fees and disbursements of counsel for the Holders in connection with any
registration begun pursuant to Section 2 if the registration request
subsequently is withdrawn at the request of the Holders of Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses pro rata), unless the Holders holding a majority of Registrable
Securities then outstanding agree to forfeit one (1) demand registration
pursuant to Section 2; provided further, however, that if at the time of such
withdrawal, (a) the Holders have learned of a material adverse change in the
condition (financial or otherwise), business or prospects of the Company from
that known to the Holders at the time of their request or (b) there has occurred
a material adverse change in marketing factors related to the sale of
Registrable
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<PAGE>
Securities to the public from those existing at the time of the Holders'
request, then the Holders shall not forfeit any demand registration rights and
shall retain their rights pursuant to Section 2.
7. Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3 for each Holder, including without limitation all
registration, filing and qualification fees, printers' and accounting fees
relating or apportionable thereto and the fees and disbursements of one counsel
for the selling Holders (selected by the Holders of a majority of the
Registrable Securities being registered), but excluding underwriting discounts
and commissions relating to Registrable Securities.
8. Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 3 to include any of the Holders' securities
in such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it; provided, however,
that no Holder participating in such underwriting shall be required to make any
representations or warranties except as they relate to such Holder's ownership
of shares and authority to enter into the underwriting agreement and to such
Holder's intended method of distribution, and the liability of such Holder
shall be limited to an amount equal to the net proceeds from the offering
received by such Holder. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities to be sold (other than by the Company)
that the underwriters reasonably believe compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering; provided,
that, the number of remaining shares to be included in the underwriting shall
be allocated (i) first to the Investors participating in such underwriting, (ii)
then to Holders of Registrable Securities, and (ii) thereafter among all other
remaining selling shareholders.
9. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, its heirs, personal representatives and assigns,
each of such Holder's partners and members, and each of such Holder's partners'
and members' officers, directors, employees and affiliates, any underwriter (as
defined in the Securities Act) for such Holder and each Person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon a
Violation (provided,
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however, that the Company will not be required to indemnify any of the foregoing
Persons on account of any losses, claims, damages or liabilities arising from a
Violation if and to the extent that such Violation was made in a preliminary
prospectus and was corrected in a subsequent prospectus that was required by law
to be delivered to the Person making the claim with respect to which
indemnification is sought hereunder (and such subsequent prospectus was made
available by the Company to permit delivery of such prospectus in a timely
manner), and such subsequent prospectus was not so delivered to such Person);
and the Company will pay to each such indemnified party, as incurred, any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 9(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case to a particular indemnified party for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of such indemnified party.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each Person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling Person of any such underwriter or other Holder, against any losses,
claims damages or liabilities (joint or several) to which any of the foregoing
Persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by or on
behalf of such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any Person intended to be indemnified pursuant to this
Section 9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and provided further, that, in no event shall the
liability of any Holder under this Section 9(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under the Section 9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in,
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and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the indemnifying party
under this Section 9 except if, and only to the extent that, the indemnifying
party is actually prejudiced thereby; and such failure to deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 9.
(d) The obligations of the Company and Holders under this
Section 9 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Agreement and otherwise.
(e) Any indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party.
(f) If for any reason the foregoing indemnity is unavailable,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by or on behalf of the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. No Person guilty of fraudulent misrepresentation
(within the meaning of section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything to the contrary in this Section 9,
no Holder shall be required, pursuant to this Section 9, to contribute any
amount in excess of the net proceeds received by such indemnifying party from
the sale of Registrable Securities in the offering to which the losses, claims,
damages,
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liabilities or expenses of the indemnified party relate.
10. Reports Under the Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 under the Securities Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public.
(b) uses its commercially reasonable efforts to take such action
as is necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 under
the Securities Act (at any time after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time it so qualifies), (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such securities without registration or
pursuant to such form.
11. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned in whole or in part by a Holder, provided that such assignee delivers
to the Company a written instrument by which such assignee agrees to be bound by
the obligations imposed on Holders under (i) this Agreement to the same extent
as if such assignee was a party hereto, and (ii) the Stockholders Rights
Agreement to the same extent as if such transferee or assignee was a party
thereto.
12. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders owning in the aggregate at least a majority of the Registrable
Securities enter into any agreement with any holder or prospective holder of any
securities of the Company
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which would allow such holder or prospective holder (a) to include such
securities in any registration filed under this Agreement, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such Holder's securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to request a registration.
13. "Market Stand-Off" Agreement". Each Holder hereby agrees that,
during the period of ninety (90) days following the effective date of a
registration statement of the Company filed under the Securities Act in
connection with an underwritten offering, it shall not, to the extent requested
by the Company and such underwriter, sell or otherwise transfer or dispose of
(other than to donees or partners who agree to be similarly bound) any
Registrable Securities held by it except Registrable Securities included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to a registration
statement initiated by the Company which covers shares of Common Shares or other
securities of the Company to be sold on its behalf to the public in an
underwritten offering; and
(b) all officers and directors of the Company and all other
Persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
14. Amendment; Waiver. In connection with the granting of
registration rights to any other Person as contemplated under Section 12 hence,
any provision of this Agreement may be amended in connection therewith only with
the written consent of the Company and the Holders of a majority of the
Registrable Securities then outstanding. In all other instances, any provision
of this Agreement may be amended only with the written consent of the Holders
owning in the aggregate at least a majority of the Registrable Securities held
by all Holders. The observance of any provision of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the party to be charged. Any
amendment or waiver effected in accordance with this Section 14 shall be binding
upon each holder of Registrable Securities at the time outstanding, each future
holder of all such securities, and the Company.
15. Changes in Registrable Securities. If, and as often as, there are
any changes in the Registrable Securities by way of stock split, stock divided,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions of this Agreement, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the Registrable Securities as so changed. Without limiting the
generality of the foregoing, the Company will require any successor by merger or
consolidation to assume and agree to be bound by the terms of this Agreement, as
a condition to any such merger or
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consolidation.
16. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any Person, other than the parties hereto and their respective successors
and assign, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided herein.
17. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware, without regard to the conflicts of laws
provisions thereof.
18. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
19. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been delivered personally, or, if sent by an overnight
delivery service maintaining records of receipt or by telecopier or other
electronic means of written communication, on the first business day after it is
sent. Notices shall be addressed as follows or to such other address as the
parties shall specify by written notice:
If to the Company:
Replicase, Inc.
1779 Woodside Road
Suite 204
Redwood City, CA 94061
Attn: Mark Pincus
Telephone: (650) 369-5211
Facsimile: (650) 368-5221
with a copy to:
Michael E. Cutler, Esq.
Covington & Burling
P.O. Box 7566
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20044-7566
Telephone: (202) 662-5258
Facsimile: (202) 662-6291
If to a Holder, to the address set forth on Schedule 1 attached
hereto.
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20. Severability. Any invalidity, illegality or limitation on the
enforceability of this Agreement or any part thereof, by any party whether
arising by reason of the law of the respective party's domicile or otherwise,
shall in no way affect or impair the validity, legality or enforceability of
this Agreement with respect to other parties. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
21. Title and Subtitles. The titles of the Sections of this
Agreement are for convenience of reference only and are not be considered in
construing this Agreement.
22. Delays or Omissions; Remedies Cumulative. It is agreed that no
delay or omission to exercise any right, power or remedy accruing to the
parties, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach or default, or any acquiescence therein, or of any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. It is further agreed that any waiver, permit, consent
or approval of any kind or character by a party of any breach or default under
this Agreement, or any waiver by a party of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a party, shall be cumulative and
not alternative.
23. Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
REPLICASE, INC.
By: /s/ Mark Pincus
---------------------------------
Mark Pincus
President & CEO
PURCHASERS
-------------------------------------
Name
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EXHIBIT 4.3
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is made as of June 14, 1999, by and among TIOGA SYSTEMS, INC., a Delaware
------------------
corporation (the "Company"), and the parties listed on Schedule 1 attached
hereto.
W I T N E S S E T H:
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WHEREAS, certain of the Investors (as defined in Section 1 hereof) possess
certain registration rights and other rights pursuant to a Registration Rights
Agreement dated as of June 22, 1998, between the Company and such Investors (the
"1998 Agreement"), whereby such Investors received certain registration rights
in connection with the purchase of the Company's Series B Convertible Preferred
Stock, par value $0.0001 per share (the "Series B Stock"); and
WHEREAS, the 1998 Agreement provided that it could be amended, discharged
or terminated under certain circumstances; and
WHEREAS, the undersigned Investors who were a party to the 1998 Agreement
desire to terminate the 1998 Agreement and to accept the rights created pursuant
hereto in lieu of the rights granted to them under the 1998 Agreement; and
WHEREAS, the Company and certain of the Investors have entered into a
Series C Convertible Preferred Stock Purchase Agreement (the "Series C Purchase
Agreement") of even date herewith pursuant to which the Company desires to sell
to such Investors and the Investors desire to purchase from the Company
shares of the Company's Series C Convertible Preferred Stock, par value $0.0001
per share (the "Series C Stock"); and
WHEREAS, a condition to the Series C Investors' obligations under the
Series C Purchase Agreement is that the Company and the Investors enter into
this Agreement in order to provide the Investors with certain rights to register
shares of the Company's common stock issuable upon conversion of shares of the
Company's Series C Stock; and
WHEREAS, the Company and the prior Investors desire to induce the Series C
Investors to purchase shares of Series C Stock pursuant to the Series C Purchase
Agreement by agreeing to the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
"Common Shares" means the shares of common stock, par value $0.0001 per
share, of the Company.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
"Holder" means an Investor (to the extent that such Investor is a holder of
Registrable Securities) or any assignee thereof in accordance with Section 11.
"Investors" shall mean persons who purchased shares of Series C Stock
pursuant to the Series C Purchase Agreement or who possessed registration and
other rights pursuant to the 1998 Agreement immediately prior to its termination
hereby.
"Majority in interest of the Holders" means Holders holding a majority of
the Registrable Securities held by all Holders.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, association, trust or any other entity or
organization.
"Preferred Stock" means the Series B Stock and the Series C Stock.
"Qualified IPO" means a firm commitment underwritten public offering by the
Company of shares of Common Stock (i) pursuant to a registration statement on
Form S-1 under the Securities Act of 1933, as amended (or any successor form)
and (ii) with a pre-money valuation of the Company of at least $125 million and
resulting in gross proceeds to the Company of $15 million.
"Qualifying Request" means a request from one or more Holders owning in the
aggregate at least thirty percent (30%) of the Registrable Securities held by
the Holders.
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (i) any Common Shares issuable (without
regard to any restriction or conversion that may be applicable to any particular
holder of Preferred Stock) or issued upon conversion of the Preferred Stock, and
(ii) any Common Shares issued (or issuable upon conversion or exercise of any
warrant, right or other securities which is issued) as a dividend or other
distribution with respect to, or in exchange for or in replacement of, or upon
conversion of, such Preferred Stock, Common Shares, warrants, rights or other
securities; provided, however, that any shares of Preferred Stock or Common
Shares sold by a Person in a transaction in which such Person's rights under
this Agreement are not assigned pursuant to Section 11 below shall cease to be
Registrable Securities from and after the time of such sale.
The number of shares of "Registrable Securities then outstanding" shall be
determined by the number of Common Shares outstanding, and the number of Common
Shares issuable, which are Registrable Securities.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Stockholders" means Mark Pincus, a resident of the State of
California, Cadir Lee, a resident of the State of California, Scott Dale, a
resident of the State of California, and Sunil Paul, a resident of the State of
California.
"Series B Stock" has the meaning ascribed thereto in the recitals above.
"Series C Purchase Agreement" has the meaning ascribed thereto in the
recitals above.
"Series C Stock" has the meaning ascribed thereto in the recitals above.
"Stockholders' Rights Agreement" means that certain Amended and Restated
Stockholders' Rights Agreement, by and among the Company and each of the
Stockholders that are signatories thereto, of even date herewith.
"Violation" means any of the following statements, omissions or violations:
(i) any untrue statement or alleged untrue statement of a material fact
contained in a registration statement under this Agreement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto or any documents filed under state securities or "blue
sky" laws in connection therewith, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law.
2. Request for Registration.
(a) If at any time which is the earlier of (i) more than one hundred
eighty (180) days after the initial public offering of the Company's securities
and (ii) June ____, 2002, the Company shall receive a written Qualifying Request
that the Company file a registration statement under the Securities Act, then
the Company shall, within ten (10) days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations of
Section 2(b) below, effect as soon as practicable, and in any event within sixty
(60) days of the receipt of such request, the registration under the Securities
Act of all Registrable Securities which the Holders request to be registered
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 19 below; provided, however, that (i) Registrable
Securities having at least a proposed aggregate offering price of $3,000,000 are
to be registered, and (ii) the Company shall be obligated to effect only two (2)
registrations pursuant to this Section 2(a). Except as otherwise provided in
Section 6 hereof, registrations which are not consummated shall not be counted
for this purpose.
(b) If Holders intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the Company and
the Company shall include such information in the written notice referred to in
Section 2(a). In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned
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<PAGE>
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed between the Holders making the Qualifying Request and such Holder) to the
extent provided herein. A majority in interest of the Holders participating in
the underwriting shall, after consultation with the Board of Directors of the
Company, select the managing underwriter or underwriters in such underwriting,
such underwriter(s) to be reasonably satisfactory to the Company. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 4(f)) enter into an
underwriting agreement in customary form with the underwriter or underwriters so
selected for such underwriting: provided, however, that no such Holder shall be
required to make any representations or warranties except as they relate to such
Holder's ownership of shares and authority to enter into the underwriting
agreement and to such Holder's intended method of distribution, and the
liability of such Holder shall be limited to an amount equal to the net proceeds
from the offering received by such Holder. Notwithstanding any other provision
of this Section 2, if the underwriter advises the Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Holders shall so advise the Company and the Company shall
so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated (i) first to the
Holders making the Qualifying Request, and (ii) thereafter among all other
Holders thereof, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each such other Holder.
(c) In addition to any other rights to demand registration pursuant to
this Section 2, Holders shall have the right to demand on an unlimited basis
that the Company, at the Company's expense, include any or all of their
Registrable Securities, in a registration statement on Form S-3 under the 1933
Act for the purpose of attempting to effect the public sale of such shares;
provided, however, that (i) such Holders making such a demand under this Section
2(c) own in the aggregate at least five percent (5%) of the Registrable
Securities; (ii) Registrable Securities having at least a proposed aggregate
offering price of $1,000,000 are to be registered; (iii) Form S-3 is available
with respect to the Registrable Securities; and (iv) the Company shall not be
required to prepare and file a registration statement on Form S-3 for the
purpose of attempting to effect the public sale of shares as provided for in
this Section 2(c) more than once in any six (6) month period. The other terms
and conditions relating to a demand registration referred to in this Section 2
shall be applicable to a demand registration referred to in this Section 2 shall
be applicable to a demand registration referred to in this Section 2(c), as the
same may be applicable.
(d) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2, a certificate
signed by the President of the Company stating that in the good faith judgement
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such registration statement to be filed by
reason of a material pending transaction and it is therefore essential to defer
the filing of such registration statement, the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after receipt
of the request of such Holders; provided, however, that the Company may not
utilize this right more than once in any twelve (12) months period.
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3. Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for holders of the Company's equity securities other than the
Holders) any of its securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a registration on
Form S-8 relating solely to the sale of securities to participants in a Company
stock plan or to other compensatory arrangements to the extent includable on
Form S-8, or a registration on Form S-4), the Company shall, at such time,
promptly give each Holder written notice of such registration. Upon the written
request of each Holder given within twenty (20) days after mailing of such
notice by the Company in accordance with Section 19, the Company shall, subject
to the provisions of Section 8, cause to be registered under the Securities Act
all of the Registrable Securities that each such Holder has requested to be
registered. The Company shall have no obligation under this Section 3 to make
any offering of its securities, or to complete an offering of its securities
that it proposes to make, and shall incur no liability to any Holder for its
failure to do so.
4. Obligations of the Company. Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities being registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days or
until the Holders have completed the distribution referred to in such
registration statement, whichever occurs first (but in any event for at least
any period required under the Securities Act); provided that before filing such
registration statement or any amendments thereto, the Company will furnish to
the Holders copies of all such documents proposed to be filed.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents as Holders may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or "blue sky" laws of
such states or jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto (i) to qualify to do business in any state or jurisdiction
where it would not otherwise be required to qualify but for the
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requirements of this clause (d), or (ii) to file a general consent to service
of process in any such state or jurisdiction.
(e) Use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
Company's business or operations to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(h) Notify each Holder of Registrable Securities covered by such
registration statement and such Holder's underwriters, if any, and confirm such
advice in writing: (i) when the registration statement has become effective,
(ii) when any post-effective amendment to the registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement
to the registration statement or prospectus or for additional information.
(i) Notify each Holder of Registrable Securities if at any time the SEC
should institute or threaten to institute any proceedings for the purpose of
issuing, or should issue, a stop order suspending the effectiveness of the
registration statement. Upon the occurrence of any of the events mentioned in
the preceding sentence, the Company will use its best efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible. The Company will advise each Holder of Registrable Securities promptly
of any order or communication of any public board or body addressed to the
Company suspending or threatening to suspend the qualification of any
Registrable Securities for sale in any jurisdiction.
(j) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Agreement, (i) on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) on the date that the
registration statement with respect to such securities becomes effective, a
"comfort" letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration
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<PAGE>
of Registrable Securities, and, if such securities are being sold through
underwriters, a reaffirmation of such letter on the date that such Registrable
Securities are delivered to the underwriters for sale.
(k) As soon as practicable after the effective date of the registration
statement, and in any event within sixteen (16) months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Securities Act) an earning statement (which need not be audited)
covering a period of at least twelve (12) months beginning after the effective
date of the registration statement and otherwise complying with Section 11(a) of
the Securities Act.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. If any registration statement or comparable statement under the
Securities Act refers to an Investor or any of its affiliates, by name or
otherwise, as the holder of any securities of the Company then, unless counsel
to the Company advises the Company that the Securities Act requires that such
reference be included in any such statement, each such Holder shall have the
right to require the deletion of such reference to itself and its affiliates.
6. Expenses of Demand Registration. All expenses, other than underwriting
discounts and commissions relating to Registrable Securities, incurred in
connection with registrations, filing or qualifications pursuant to Section 2,
including, without limitation, all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel (selected by
the Holders holding a majority of the Registrable Securities being registered)
for the selling Holders shall be borne by the Company; provided, however, that
the Company shall not be required to pay the fees and disbursements of counsel
for the Holders in connection with any registration begun pursuant to Section 2
if the registration request subsequently is withdrawn at the request of the
Holders of Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses pro rata), unless the Holders
holding a majority of Registrable Securities then outstanding agree to forfeit
one (1) demand registration pursuant to Section 2; provided further, however,
that if at the time of such withdrawal, (a) the Holders have learned of a
material adverse change in the condition (financial or otherwise), business or
prospects of the Company from that known to the Holders at the time of their
request or (b) there has occurred a material adverse change in marketing factors
related to the sale of Registrable Securities to the public from those existing
at the time of the Holders' request, then the Holders shall not forfeit any
demand registration rights and shall retain their rights pursuant to Section 2.
7. Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
3 for each Holder, including without limitation all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling
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<PAGE>
Holders (selected by the Holders of a majority of the Registrable Securities
being registered), but excluding underwriting discounts and commissions relating
to Registrable Securities.
8. Underwriting Requirements. In connection with any offering involving an
underwriting of shares being issued by the Company, the Company shall not be
required under Section 3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it or by the persons
entitled to select the underwriters; provided, however, that no Holder
participating in such underwriting shall be required to make any representations
or warranties except as they relate to such Holder's ownership of shares and
authority to enter into the underwriting agreement and to such Holder's intended
method of distribution, and the liability of such Holder shall be limited to an
amount equal to the net proceeds from the offering received by such Holder. If
the total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities to
be sold (other than by the Company) that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering; provided, that, the number of remaining shares to be
included in the underwriting shall be allocated (i) first to the Holders of
Registrable Securities (excluding Holders of Registrable Securities who are also
Series A Stockholders, employees or directors of the Company), (ii) second to
the Holders of Registrable Securities who are also Series A Stockholders,
employees or directors of the Company, and (iii) thereafter among all other
remaining selling stockholders. Notwithstanding the forgoing, in no event shall
the amount of the securities of the selling Holders included in the offering be
reduced below twenty percent (20%) of the total amount of the securities to be
included in such offering, unless such offering is the initial public offering
of the Company's securities, in which case the selling Holders may be completely
excluded if the managing underwriter makes the determination described above and
no other stockholders' securities are included.
9. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, its heirs, personal representatives and assigns, each of
such Holder's partners and members, and each of such Holder's partners' and
members' officers, directors, employees and affiliates, any underwriter (as
defined in the Securities Act) for such Holder and each Person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon a
Violation (provided, however, that the Company will not be required to indemnify
any of the foregoing Persons on account of any losses, claims, damages or
liabilities arising from a Violation if and to the extent that such Violation
was made in a preliminary prospectus and was corrected in a subsequent
prospectus that was required by law to be delivered to the Person making the
claim with respect to which indemnification is sought hereunder (and such
subsequent prospectus was made available by the Company to permit delivery of
such prospectus in a timely manner), and such subsequent prospectus was not so
delivered to such
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<PAGE>
Person); and the Company will pay to each such indemnified party, as incurred,
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section 9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case to a particular indemnified party for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by or on behalf of such indemnified party.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each Person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
Person of any such underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing Persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by or on behalf of
such Holder expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any Person intended to be indemnified pursuant to this Section 9(b),
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld; and
provided further, that, in no event shall the liability of any Holder under this
Section 9(b) exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by any indemnified party under this Section 9
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 9, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party, would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 9 except if, and only to the extent that,
the indemnifying party is actually prejudiced thereby; and such failure to
deliver written notice to the
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<PAGE>
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 9.
(d) The obligations of the Company and Holders under this Section 9 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement and otherwise.
(e) Any indemnity agreements contained herein shall be in addition to any
other rights to indemnification or contribution which any indemnified party may
have pursuant to law or contract and shall remain operative and in full force
and effect regardless of any investigation made or omitted by or on behalf of
any indemnified party.
(f) If for any reason the foregoing indemnity is unavailable, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i)
In such proportion as is appropriate to reflect the relative benefits received
by the indemnifying party on the one hand and the indemnified party on the other
(taking into consideration the fact that the provision of the registration
rights and indemnification hereunder was a material inducement to the Investors
to purchase Registrable Securities) or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand (taking into consideration the fact that the
provision of the registration rights and indemnification hereunder was a
material inducement to the Investors to purchase Registrable Securities) and the
indemnified party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by or on behalf of the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything to the contrary in this Section 9, no Holder shall be
required, pursuant to this Section 9, to contribute any amount in excess of the
net proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages, liabilities or
expenses of the indemnified party relate.
10. Reports Under the Exchange Act. With a view to making available to the
Holders the benefits of Rule 144 under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
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<PAGE>
(b) uses its commercially reasonable efforts to take such action as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities;
(c) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
is has complied with the reporting requirements of Rule 144 under the Securities
Act (at any time after the effective date of the first registration statement
filed by the Company), the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (ii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
11. Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned in
whole or in part by a Holder to one or more of its partners or affiliates or to
one or more transferees or assignees of not less than five percent (5%) of all
Registrable Securities held by a Holder, provided that such transferee or
assignee delivers to the Company a written instrument by which such transferee
or assignee agrees to be bound by the obligations imposed on Holders under (i)
this Agreement to the same extent as if such transferee or assignee was a party
hereto, and (ii) the Stockholders' Rights Agreement to the same extent as if
such transferee or assignee was a party thereto. For the purposes of determining
the number of shares of Registrable Securities held by a transferee or assignee,
the holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Agreement.
12. Limitations on Subsequent Registration Rights; Existing Registrations
Rights; Termination of Registration Rights.
(a) From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders owning in the aggregate at
least a majority of the Registrable Securities enter into any agreement with any
holder or prospective holder of any securities of the Company which would allow
such holder or prospective holder (a) to include such securities in any
registration filed under this Agreement, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of such prospective
holder's securities will not reduce the amount of the Registrable Securities of
the Holders that there are no "registration rights" relating to securities of
the Company that exist on the date hereof other than those provided herein and
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<PAGE>
those provided under that certain Registration Rights Agreement, dated as of
June 22, 1998, by and among the Company and the Series A Stockholders.
(b) The right of any Holder to request registration or inclusion in any
registration pursuant to Section 2 or Section 3 hereof shall terminate after the
earlier of (i) seven (7) years following the closing of the initial public
offering of Common Stock of the Company, or (ii) such time as Rule 144 or
another similar exemption under the Securities Act is available for the sale of
all of such Holder's shares of Registrable Securities during any ninety (90) day
period.
13. "Market Stand-Off" Agreement". Each Holder hereby agrees that, during
the period of ninety (90) days following the effective date of a registration
statement of the Company filed under the Securities Act in connection with an
underwritten offering, it shall not, to the extent requested by the Company and
such underwriter, sell or otherwise transfer or dispose of (other than to donees
or partners who agree to be similarly bound) any Registrable Securities held by
it except Registrable Securities included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to a registration statement
initiated by the Company which covers shares of Common Shares or other
securities of the Company to be sold on its behalf to the public in an
underwritten offering; and
(b) all officers and directors of the Company and all other Persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
14. Amendment; Waiver. In connection with the granting of registration
rights to any other Person as contemplated under Section 12 hence, any provision
of this Agreement may be amended in connection therewith only with the written
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. In all other instances, any provision of this
Agreement may be amended only with the written consent of the Holders owning in
the aggregate at least a majority of the Registrable Securities held by all
Holders. The observance of any provision of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the party to be charged. Any amendment or
waiver effected in accordance with this Section 14 shall be binding upon each
holder of Registrable Securities at the time outstanding, each future holder of
all such securities, and the Company.
15. Changes in Registrable Securities. If, and as often as, there are any
changes in the Registrable Securities by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions of this Agreement, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the Registrable Securities as so changed. Without limiting the
generality of the foregoing, the Company will require any successor by merger or
consolidation to assume and agree to be bound by the terms of this Agreement, as
a condition to any such merger or consolidation.
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<PAGE>
16. Subsequent Closings. In the event that the Company shall conduct
subsequent sales of Series C Preferred Stock pursuant to and in accordance with
the terms of the Series C Purchase Agreement, any holder of such shares of
Series C Preferred Stock shall be deemed an Investor with all of the rights of
an Investor under this Agreement; provided that as a condition thereto such
Investor and the Company shall sign a counterpart signature page to this
Agreement.
17. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any Person, other than the parties hereto and their respective successors
and assign, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided herein.
18. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware, without regard to the conflicts of laws
provisions thereof.
19. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
20. Notices. All notices under this Agreement shall be in writing and
shall be deemed to have been delivered personally, or, if sent by an overnight
delivery service maintaining records of receipt or by telecopier or other
electronic means of written communication, on the first business day after it is
sent. Notices shall be addressed as follows or to such other address as the
parties shall specify by written notice:
If to the Company:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA 94303
Attn: Mark Pincus
Telephone: (650) 565-8600
Facsimile: (650) 565-8300
with a copy to:
Allison Leopold Tilley, Esq.
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
Telephone: (650) 233-4518
Facsimile: (650) 233-4545
If to an Investor, to the address set forth on Schedule 1 attached hereto.
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with a copy to:
Jon E. Gavenman
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 233-8539
Facsimile: (650) 233-8386
21. Severability. Any invalidity, illegality or limitation on the
enforceability of this Agreement or any part thereof, by any party whether
arising by reason of the law of the respective party's domicile or otherwise,
shall in no way affect or impair the validity, legality or enforceability of
this Agreement with respect to other parties. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
22. Title and Subtitles. The titles of the Sections of this Agreement are
for convenience of reference only and are not be considered in construing this
Agreement.
23. Delays or Omissions; Remedies Cumulative. It is agreed that no delay
or omission to exercise any right, power or remedy accruing to the parties, upon
any breach or default of the Company under this Agreement, shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach or default, or any acquiescence therein, or of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character by a party of any breach or default under this
Agreement, or any waiver by a party of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a party, shall be cumulative and
not alternative.
24. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
25. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
26. Aggregation of Stock. All shares of Preferred Stock held or acquired
by affiliated entities or persons shall be aggregated for the purpose of
determining the availability of any rights under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
THE COMPANY:
-----------
TIOGA SYSTEMS, INC.
By _______________________________
Mark Pincus
President & CEO
INVESTORS:
---------
By _______________________________
Its ______________________________
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EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Convertible Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of July 12, 1999 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company"), has
entered into a Master Lease Agreement dated as of October 27, 1998, Equipment
Schedule No. VL-3 and VL-4 dated as of July 12, 1999, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder");
WHEREAS, the Company has granted the Warrantholder a Warrant dated as of
October 27, 1998 in connection with the Leases; and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for the amendment to such Leases, the additional right to purchase shares of its
Series C Convertible Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 27,511 fully paid and non-
assessable shares of the Company's Series C Convertible Preferred Stock
("Preferred Stock") at a purchase price of $3.27148 per share (the "Exercise
Price"). The number and purchase price of such shares are subject to adjustment
as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of five (5) years after
the Effective Date, or (ii) three (3) years from the effective date of the
Company's initial public offering, whichever is earlier.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
---------
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
----------
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
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X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued
to the Warrantholder.
Y = the number of shares of Preferred Stock requested to
be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the closing
prices over a five (5) day period ending three days before the day the
current fair market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of Preferred Stock
is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system) over
the five (5) day period ending three days before the day the current fair
market value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the
product of (x) the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to which
the Company is not the surviving party, in which case the fair market value
of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to
such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any
-2-
<PAGE>
registration under the Securities Act of 1933, as amended ("1933 Act"), as then
in effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such conversion), or listing
on any domestic securities exchange, before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Certificate").
----------
The Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other
-3-
<PAGE>
rights; (iii) there shall be any Merger Event; (iv) there shall be an initial
public offering; or (v) there shall be any voluntary dissolution, liquidation or
winding up of the Company; then, in connection with each such event, the Company
shall send to the Warrantholder: (A) at least twenty (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, subscription rights (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying the date on
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event, dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least twenty (20) days
written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(f) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Company covenants that the
------------------------------
Preferred Stock (and shares of the Company's Common Stock for issuance on
conversion of such Preferred Stock) issuable upon exercise of the
Warrantholder's rights will be, upon the Effective Date, duly and validly
reserved and, from time to time the Company will take all steps necessary to
amend its Certificate of Incorporation (the "Certificate") to provide sufficient
reserves of shares of Preferred Stock issuable upon exercise of this Warrant.
The Company further covenants that all shares that may be issued in accordance
with the provisions of this Warrant Agreement, will be validly issued, fully
paid and non-assessable, and will be free of any taxes, liens, charges or
encumbrances of any nature whatsoever; provided, however, that the Preferred
Stock issuable pursuant to this Warrant Agreement may be subject to restrictions
on transfer under state and/or Federal securities laws. The Company has made
available to the Warrantholder true, correct and complete copies of its
Certificate and Bylaws, as amended. The issuance of certificates for shares of
Preferred Stock upon exercise of the Warrant Agreement shall be made without
charge to the Warrantholder for any issuance tax in respect thereof, or other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock. The Company shall not be required to pay
any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized in a meeting of the
Company's Board of Directors (the "Board") or by an action by unanimous written
consent of the Board, and approved by the Company's stockholders, provided that
a stockholders' consent is required to validate such corporate action, and all
necessary corporate action on the part of the Company, and the Leases and this
Warrant Agreement are not inconsistent with the Company's Certificate or Bylaws,
do not contravene any law or governmental rule, regulation or order applicable
to it, do not and will not contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument to which it is a
party or by which it is bound, and the Leases and this Warrant Agreement
constitute legal, valid and binding agreements of the Company, enforceable in
accordance with their respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable.
-4-
<PAGE>
All outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition as of the date hereof:
(i) the authorized capital of the Company consists of (A) 31,000,000 shares
of Common Stock, par value $0.0001 per share (the "Common Stock") of
which, 6,533,380 shares are currently issued and outstanding, and (B)
15,657,708 shares of Preferred Stock, par value $0.0001 per share (the
"Preferred Stock"), 3,571,600 shares of which have been designated Series
A Convertible Preferred Stock (the "Series A Preferred"), all of which
are currently issued and outstanding, 7,346,108 shares of which have been
designated Series B Convertible Preferred Stock (the "Series B
Preferred"), all of which are currently issued and outstanding, and
4,700,000 shares of which have been designated Series C Convertible
Preferred Stock (the "Series C Preferred"), of which 4,638,619 shares are
currently issued and outstanding. The Series A Preferred, the Series B
Preferred and the Series C Preferred are convertible, at the option of
the holders thereof, into Common Stock according to the terms of the
Certificate, as amended.
(ii) The Company has reserved 5,624,434 shares of Common Stock for issuance
under its 1998 Stock Option Plan. Other than as described in this
subsection (d), there are no options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the Company's capital stock or other
securities of the Company
(iii) In accordance with the terms of the Amended and Restated Stockholders'
Rights Agreement dated as of June 14, 1999 between the Company' and the
stockholders of the Company named therein, the holders of the Series B
Preferred and Series C Preferred shall, subject to certain limited
exceptions, have preemptive rights to purchase their pro rata share of
any new issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of the Amended and
Restated Registration Rights Agreement dated as of June 14, 1999 between the
Company and the stockholders of the Company named therein, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933 1
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
-5-
<PAGE>
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "l 934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor' within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
------------
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
-6-
<PAGE>
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if
by facsimile, (847) 5185465 and (847)518-5088) and (ii) to the Company at 1816
Embarcadero Road, Palo Alto, CA 94303, Attention: Chief Financial Officer
(and/or if by facsimile, (650) 565-8300 or at such other address as any such
party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Market Stand-Off Agreement. The Warrantholder hereby agrees that,
--------------------------
during the period of ninety (90) days following the effective date of a
registration statement of the Company filed under the Securities Act of 1933, as
amended, in connection with an underwritten offering, it shall not, to the
extent requested by the Company and such underwriter, sell or otherwise transfer
or dispose of (other than to donees or partners who agree to be similarly bound)
and Registrable Securities held by it except Registrable Securities included in
such registration; provided, however, that:
(a) such agreement shall be applicable only to a registration statement
initiated by the Company which covers shares of Common Shares or other
securities of the Company to be sold on its behalf to the public in an
underwritten offering; and
(b) all officers and directors of the Company and all other Persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
(l) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: TIOGA SYSTEMS, INC.
By /s/
-----------------------------------------
Title July 26, 1999
--------------------------------------
Warrantholder: COMDISCO, INC.
By /s/ James Labe
------------------------------------------
Title President, Comdisco Ventures Division
--------------------------------------
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: _____________________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series C Convertible Preferred Stock of Tioga Systems, Inc., pursuant
to the terms of the Warrant Agreement dated the 12th day of July, 1999,
(the 'Warrant Agreement') between Tioga Systems, Inc. and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series C Convertible Preferred
Stock of Tioga Systems, Inc., the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series C Convertible Preferred Stock in the name of the undersigned or in
such other name as is specified below.
______________________________
(Name)
______________________________
(Address)
Warrantholder: COMDISCO, INC.
By____________________________
Title_________________________
Date__________________________
-9-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _______________________________, hereby acknowledge receipt
of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares of the
Series C Convertible Preferred Stock of Tioga Systems, Inc., pursuant to the
terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
COMPANY: TIOGA SYSTEMS, INC.
By________________________________________
Title_____________________________________
Date______________________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_____________________________________________________
(Please Print)
whose address is_____________________________________
_____________________________________________________
Dated___________________________________________
Holder's Signature______________________________
Holder's Address________________________________
________________________________________________
Signature Guaranteed:________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 4.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of October 27, 1998 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company")
has entered into a Master Lease Agreement dated as of October 27, 1998,
Equipment Schedule No. VL-1 and VL-2 dated as of October 27, 1998, and related
Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Series C
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, that number of fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") equal to $500,000 multiplied by 3% divided by a purchase price equal to
the average of $0.68747 and the price per share of the next round of financing
which shall be defined as an initial public offering, acquisition or merger of
the Company (the "Next Round") (the "Exercise Price").
In the event that the Next Round has not occurred within 24 months
from the date hereof, the price to be used for the price per share of the Next
Round shall be based on a fairness opinion of valuation of the Company by an
investment banking firm to be mutually agreed upon by the Company and
Warrantholder and the Company shall pay for such opinion. In the event the
Company and Warrantholder can not mutually agree on an investment banking firm
to provide such fairness opinion of valuation, then each party shall select an
investment bank of their choice (and at their own expense) and the valuation
shall be the numeric average of the valuations received from the investment
banking firms.
The number and purchase price of such shares are subject to adjustment
as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence upon the close of the Next Round and shall be exercisable for a period
of (i) seven (7) years or (ii) three (3) years from the effective date of the
Company's initial public offering, whichever is longer.
Notwithstanding the term of this Warrant Agreement as set forth above,
the right to purchase Preferred Stock as granted shall expire, if not previously
exercised, immediately upon the closing of the issuance and sale of shares of
Common Stock of the Company in the Company's first public offering of securities
for its own account pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Initial Public Offering"), provided
that the Preferred stock issuable to Warrantholder upon exercise hereof shall be
included in such registration statement, and provided further that the
underwriters so request that the Warrantholder exercise at that time.
-1-
<PAGE>
The Company shall notify the Warrantholder if the Initial Public
Offering is proposed within a reasonable period of time prior to the filing of a
registration statement and if the Company fails to deliver such written notice
within a reasonable period of time, anything to the contrary in this Warrant
Agreement notwithstanding, the rights to purchase will not expire until ten (10)
business days after the Company delivers such notice to the Warrantholder. Such
notice shall also contain such details of the proposed Initial Public Offering
as are reasonable in the circumstances and notice that this Warrant Agreement is
expected to expire upon closing thereof. If such closing does not take place,
the Company shall promptly notify the Warrantholder that such proposed
transaction has been terminated. Anything to the contrary in this Warrant
Agreement notwithstanding, the Warrantholder may rescind any exercise of its
purchase rights promptly after such notice of termination of the proposed
transaction if the exercise of warrants occurred after the Company notified the
Warrantholder that the Initial Public Offering was proposed or if the exercise
were otherwise precipitated by such proposed Initial Public Offering. In the
event of such rescission, the Warrants will continue to be exercisable on the
same terms and conditions.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2 above, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed. Promptly upon receipt of the Notice of Exercise and the payment of
the purchase price in accordance with the terms set forth below, and in no event
later than twenty-one (21) days thereafter, the Company shall issue to the
Warrantholder a certificate for the number of shares of Preferred Stock
purchased and shall execute the acknowledgment of exercise in the form attached
hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of
shares which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock requested
to be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of
Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in
connection with the Company's initial public offering,and:
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21 ) day period ending three days
before the day the current fair market value of the securities is
being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair
market value shall be deemed to be the product of (x) the average of
the closing bid and asked prices quoted on the NASDAQ system
-2-
<PAGE>
(or similar system) over the twenty-one (21) day period ending three
days before the day the current fair market value of the securities is
being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
----------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
------------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
-------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
-----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
------------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision
-3-
<PAGE>
shall be made so that the Warrantholder shall thereafter be entitled to receive,
upon exercise of the Warrant, the number of shares of preferred stock or other
securities of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been issuable if Warrantholder had
exercised this Warrant immediately prior to the Merger Event. In any such case,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
Agreement with respect to the rights and interest of the Warrantholder after the
Merger Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares of Preferred Stock
purchasable) shall be applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's total cost
----------------------------------
of equipment leased pursuant to the Leases exceeds $500,000, Warrantholder shall
have the right to purchase from the Company, at the Exercise Price (adjusted as
set forth herein), an additional number of shares, which number shall be
determined by (i) multiplying the amount by which the Warrantholder's total
equipment cost exceeds $500,000 by 3%, and (ii) dividing the product thereof by
the Exercise Price per share referenced above.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit __ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
cespect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or
-4-
<PAGE>
winding up); and (C) in the case of a public offering, the Company
shall give the Warrantholder at least twenty (20) days written notice prior to
the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(i) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the fit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
---------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights will be, upon the Effective Date, duly
and validly reserved and, when issued in accordance with the provisions of this
Warrant Agreement, will be validly issued, fully paid and non-assessable, and
will be free of any taxes, liens, charges or encumbrances of any nature
whatsoever; provided, however, that the Preferred Stock issuable pursuant to
this Warrant Agreement may be subject to restrictions on transfer under state
and/or Federal securities laws. The Company has made available to the
Warrantholder true, correct and complete copies of its Charter and Bylaws, as
amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be Made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice to,
----------------------
registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. in addition:
(i) the authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, par value $0.0001 per share (the "Common Stock") of
which, 6,428,880 shares are currently issued and outstanding, and (B)
15,000,000 shares of Preferred Stock, par value $0.0001 per share (the
"Preferred Stock"), 3,571,600 shares of which have been designated Series A
Convertible Preferred Stock (the "Series A Preferred"), all of which are
currently issued and outstanding and 7,346,108 shares of which have been
designated Series B Convertible Preferred Stock (the "Series B Preferred"),
all of which are currently issued and outstanding. The Series A Preferred
and the Series B Preferred are convertible, at the option of the holders
thereof, into Common Stock at a current conversion ratio of 1:1.
(ii) The Company has reserved 2,929,434 shares of Common Stock for
issuance under its 1998 Stock Option Plan. In addition, the Company has
reserved 25,000 shares of Common Stock for issuance under an option
agreement with Jacob Avital. Other than as described in this subsection
(d), there are no options, warrants, conversion privileges or other rights
presently outstanding to
-5-
<PAGE>
purchase or otherwise acquire any authorized but unissued shares of
the Company's capital stock or other securities of the Company.
(iii) In accordance with the terms of the Stockholders' Rights
Agreement dated as of June 22, 1998 between the Company and the
stockholders of the Company named therein, the holders of the Series B
Preferred shall, subject to certain limited exceptions, have preemptive
rights to purchase their pro rata share of any new issuances of the
Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance policies,
---------
with extended coverage, insuring the Company and its property and business
against such losses and risks, and in such amounts, as are customary for
corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
---------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is prediated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed
-6-
<PAGE>
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "l 934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
----------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
--------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if
by facsimile, (847) 5185465 and (847) 518-5088) and (ii) to the Company at 1816
Embarcadero Road, Palo Alto, CA 94303, Attention: Chief Financial Officer
(and/or if by facsimile, (650) 565-8300 or at such other address as any such
party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled
-7-
<PAGE>
to the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by a
----------
written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: TIOGA SYSTEMS, INC.
By /s/ Mark Pincus
-----------------------------------------
Title CEO
---------------------------------------
WARRANTHOLDER: COMDISCO, INC.
By /s/ JAMES P. LABE
------------------------------------------
Title PRESIDENT, COMDISCO VENTURES DIVISION
---------------------------------------
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________________
1. The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ___ Preferred Stock of ____________, pursuant to the terms of
the Warrant Agreement dated the ___ day of ____________, 20__ (the "Warrant
Agreement") between ____________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
2. In exercising its rights to purchase the Series __ Preferred Stock of
____________, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the Warrant
Agreement.
3. Please issue a certificate or certificates representing said shares of
Series __ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By_______________________________
Title____________________________
Date_____________________________
-9-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________, hereby acknowledge receipt of the "Notice of
Exercise" from Comdisco, Inc., to purchase _____ shares of the Series __
Preferred Stock of ___________ pursuant to the terms of the Warrant Agreement,
and further acknowledges that ____ shares remain subject to purchase under the
terms of the Warrant Agreement.
COMPANY:
By_______________________________
Title____________________________
Date_____________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________
(Please Print)
whose address is________________________________________
________________________________________________________
Dated______________________________________________
Holder's Signature_________________________________
Holder's Address___________________________________
___________________________________________________
Signature Guaranteed:___________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 4.6
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of October 27, 1998 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") has
entered into a Subordinated Loan And Security Agreement dated as of October 27,
1998, and related Subordinated Promissory Note(s) (collectively, the "Loans")
with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, that number of fully paid and non-
assessable shares of the Company's Series C Preferred Stock ("Preferred Stock")
equal to $1,000,000 multiplied by 13.5% divided by a purchase price equal to the
average of $0.68747 and the price per share of the next round of financing which
shall be defined as an initial public offering, acquisition or merger of the
Company (the "Next Round") (the "Exercise Price").
In the event that the Next Round has not occurred within 24 months from
the date hereof, the price to be used for the price per share of the Next Round
shall be based on a fairness opinion of valuation of the Company by an
investment banking firm to be mutually agreed upon by the Company and
Warrantholder and the Company shall pay for such opinion. In the event the
Company and Warrantholder can not mutually agree on an investment banking firm
to provide such fairness opinion of valuation, then each party shall select an
investment bank of their choice (and at their own expense) and the valuation
shall be the numeric average of the valuations received from the investment
banking firms.
The number and purchase price of such shares are subject to adjustment
as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the earlier of (a) the close of the Next Round or (b) October 27, 2000 and shall
be exercisable for a period of (i) seven (7) years or (ii) three (3) years from
the effective date of the Company's initial public offering, whichever is
longer.
Notwithstanding the term of this Warrant Agreement as set forth above,
the right to purchase Preferred Stock as granted shall expire, if not previously
exercised, immediately upon the closing of the issuance and sale of shares of
Common Stock of the Company in the Company's first public offering of securities
for its own account pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Initial Public Offering"), provided
that
-1-
<PAGE>
the Preferred stock issuable to Warrantholder upon exercise hereof shall be
included in such registration statement, and provided further that the
underwriters so request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering
is proposed within a reasonable period of time prior to the filing of a
registration statement and if the Company fails to deliver such written notice
within a reasonable period of time, anything to the contrary in this Warrant
Agreement notwithstanding, the rights to purchase will not expire until ten (10)
business days after the Company delivers such notice to the Warrantholder. Such
notice shall also contain such details of the proposed Initial Public Offering
as are reasonable in the circumstances and notice that this Warrant Agreement is
expected to expire upon closing thereof. If such closing does not take place,
the Company shall promptly notify the Warrantholder that such proposed
transaction has been terminated. Anything to the contrary in this Warrant
Agreement notwithstanding, the Warrantholder may rescind any exercise of its
purchase rights promptly after such notice of termination of the proposed
transaction if the exercise of warrants occurred after the Company notified the
Warrantholder that the Initial Public Offering was proposed or if the exercise
were otherwise precipitated by such proposed Initial Public Offering. In the
event of such rescission, the Warrants will continue to be exercisable on the
same terms and conditions.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the acknowledgment of exercise in the form attached hereto as Exhibit 11
(the "Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
Y(A-B)
X = ------------
A
Where: X = the number of shares of Preferred Stock to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock requested
to be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise; or
-2-
<PAGE>
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar
system) over the twenty-one (21) day period ending three days before
the day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
-3-
<PAGE>
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid any
----------------------------------
Subordinated Promissory Note(s) entered into pursuant to the Loan(s) in its
entirety by the Maturity Date (as defined in the applicable Subordinated
Promissory Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Warrantholder shall have
the right to purchase from the Company, at the Exercise Price (adjusted as set
forth herein), an additional number of shares of Preferred Stock which number
shall be determined by (1) multiplying the outstanding principal amount which
due but unpaid by 1% and (ii) dividing the product thereof by the Exercise
Price.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit _ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the
-4-
<PAGE>
Company shall send to the Warrantholder: (A) at least twenty (20) days' prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be entitled
thereto) or for determining rights to vote in respect of such Merger Event,
dissolution, liquidation or winding up; (B) in the case of any such Merger
Event, dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place (and specifying the
date on which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event, dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least twenty (20) days
written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. During the term of this Warrant
------------------------------
Agreement, the Preferred Stock issuable upon exercise of the Warrantholder's
rights will be duly and validly reserved and, when issued in accordance with the
provisions of this Warrant Agreement, will be validly issued, fully paid and
non-assessable, and will be free of any taxes, liens, charges or encumbrances of
any nature whatsoever; provided, however, that the Preferred Stock issuable
pursuant to this Warrant Agreement may be subject to restrictions on transfer
under state and/or Federal securities laws. The Company has made available to
the Warrantholder true, correct and complete copies of its Charter and Bylaws,
as amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) the authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, par value $0.0001 per share (the "Common Stock") of
which, 6,428,880 shares are currently issued and outstanding, and (B)
15,000,000 shares of Preferred Stock, par value $0.0001 per share (the
"Preferred Stock"), 3,571,600 shares of which have been designated
-5-
<PAGE>
Series A Convertible Preferred Stock (the "Series A Preferred"), all of
which are currently issued and outstanding and 7,346,108 shares of which
have been designated Series 6 Convertible Preferred Stock (the "Series B
Preferred"), all of which are currently issued and outstanding. The Series
A Preferred and the Series B Preferred are convertible, at the option of
the holders thereof, into Common Stock at a current conversion ratio of
1:1.
(ii) The Company has reserved 2,929,434 shares of Common Stock for
issuance under its 1998 Stock Option Plan. In addition, the Company has
reserved 25,000 shares of Common Stock for issuance under an option
agreement with Jacob Avital. Other than as described in this subsection
(d), there are no options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company
(iii) In accordance with the terms of the Stockholders' Rights
Agreement dated as of June 22, 1998 between the Company' and the
stockholders of the Company named therein, the holders of the Series B
Preferred shall, subject to certain limited exceptions, have preemptive
rights to purchase their pro rata share of any new issuances of the
Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933
-6-
<PAGE>
Act is available. Notwithstanding the foregoing, the restrictions imposed upon
the transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act May be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or
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<PAGE>
certified mail, addressed (i) to the Warrantholder at 6111 North River Road,
Rosemont, Illinois 60018, attention: Venture Lease Administration, cc: Legal
Department, attn.: General Counsel, (and/or, if by facsimile, (847) 518-5465 and
(847) 518-5088 and (ii) to the Company at 1816 Embarcadero Road, Palo Alto, CA
94303, attention: Chief Financial Officer (and/or if by facsimile, (650)
565-8300 or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
COMPANY: TIOGA SYSTEMS, INC.
By /s/ Mark Pincus
---------------------------------------------
Title CEO
------------------------------------------
WARRANTHOLDER: COMDISCO, INC.
By /s/ James P. Labe
---------------------------------------------
Title PRESIDENT, COMDISCO VENTURES DIVISION
-----------------------------------------
-9-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: _______________________________
(1) The undersigned Warrantholder hereby elects to purchase ________ shares of
the Series __ Preferred Stock of_______________ pursuant to the terms of
the Warrant Agreement dated the __ day of _________ 2000 (the `Warrant
Agreement') between _________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series __ Preferred Stock of
_________________, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the
Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series __ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
__________________________________
(Name)
__________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _______________________
Title: _______________________
Date: _______________________
-10-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase __________
shares of the Series __ Preferred Stock of ___________________ pursuant to the
terms of the Warrant Agreement, and further acknowledges that _____________
shares remain subject to purchase under the terms of the Warrant Agreement.
Company:
By: _____________________________________
Title: __________________________________
Date: ___________________________________
-11-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________________
(Please Print)
whose address is__________________________________________
__________________________________________________________
Dated:__________________________
Holders Signature:______________
Holder's Address:_______________
________________________________
Signature Guaranteed: ____________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-12-
<PAGE>
EXHIBIT 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
TIOGA SYSTEMS, INC.
Dated as of October 27, 1998 (the "Effective Date")
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") has
entered into a Loan And Security Agreement dated as of October 27, 1998, and
related Promissory Note(s) (collectively, the "Loans") with Comdisco, Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series C Preferred Stock:
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, that number of fully paid and non-
assessable shares of the Company's Series C Preferred Stock ("Preferred Stock")
equal to $1,500,000 multiplied by 3% divided by a purchase price equal to the
average of $0.68747 and the price per share of the next round of financing which
shall be defined as an initial public offering, acquisition or merger of the
Company (the "Next Round") (the "Exercise Price").
In the event that the Next Round has not occurred within 24 months from the
date hereof, the price to be used for the price per share of the Next Round
shall be based on a fairness opinion of valuation of the Company by an
investment banking firm to be mutually agreed upon by the Company and
Warrantholder, and the Company shall pay for such opinion. In the event the
Company and Warrantholder cannot mutually agree on an investment banking firm to
provide such fairness opinion of valuation, then each party shall select an
investment bank of its choice (and at its own expense), and the valuation shall
be the numeric average of the valuations received from the investment banking
firms.
The number and purchase price of such shares are subject to adjustment as
provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the earlier of (a) the close of the Next Round or (b) October 27, 2000 and shall
be exercisable for a period of (i) seven (7) years or (ii) three (3) years from
the effective date of the Company's initial public offering, whichever is
longer.
Notwithstanding the term of this Warrant Agreement as set forth above, the
right to purchase Preferred Stock as granted shall expire, if not previously
exercised, immediately upon the closing of the issuance and sale of shares of
Common Stock of the Company in the Company's first public offering of securities
for its own account pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Initial Public Offering"), provided
that
-1-
<PAGE>
the Preferred Stock issuable to Warrantholder upon exercise hereof shall be
included in such registration statement, and provided further that the
underwriters so request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering
is proposed within a reasonable period of time prior to the filing of a
registration statement and if the Company fails to deliver such written notice
within a reasonable period of time, anything to the contrary in this Warrant
Agreement notwithstanding, the rights to purchase will not expire until ten (10)
business days after the Company delivers such notice to the Warrantholder. Such
notice shall also contain such details of the proposed Initial Public Offering
as are reasonable in the circumstances and notice that this Warrant Agreement is
expected to expire upon closing thereof. If such closing does not take place,
the Company shall promptly notify the Warrantholder that such proposed
transaction has been terminated. Anything to the contrary in this Warrant
Agreement notwithstanding, the Warrantholder may rescind any exercise of its
purchase rights promptly after such notice of termination of the proposed
transaction if the exercise of warrants occurred after the Company notified the
Warrantholder that the Initial Public Offering was proposed or if the exercise
were otherwise precipitated by such proposed Initial Public Offering. In the
event of such rescission, the Warrants will continue to be exercisable on the
same terms and conditions.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
Y(A-B)
X = ------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with,
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before
the day the current fair market value of the securities is being
determined and (y) the
-2-
<PAGE>
number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to, the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any federal or state law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
-3-
<PAGE>
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid any
----------------------------------
Secured Promissory Note(s) entered into pursuant to the Loan(s) in its entirety
by the Maturity Date (as defined in the applicable Secured Promissory Note(s)),
then for each additional month, or portion thereof, thereafter that the
outstanding principal is not paid, Warrantholder shall have the right to
purchase from the Company, at the Exercise Price (adjusted as set forth herein),
an additional number of shares of Preferred Stock which number shall be
determined by (i) multiplying the outstanding principal amount which is due but
unpaid by 1% and (ii) dividing the product thereof by the Exercise Price.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit __ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (i) the price at which such stock or security is to be sold, (ii)
the number of shares to be issued, and (iii) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription pro rata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
-4-
<PAGE>
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. During the term of this Warrant
------------------------------
Agreement, the Preferred Stock issuable upon exercise of the Warrantholder's
rights will be duly and validly reserved and, when issued in accordance with the
provisions of this Warrant Agreement, will be validly issued, fully paid and
non-assessable, and will be free of any taxes, liens, charges or encumbrances of
any nature whatsoever; provided, however, that the Preferred Stock issuable
pursuant to this Warrant Agreement may be subject to restrictions on transfer
under state and/or federal securities laws. The Company has made available to
the Warrantholder true, correct and complete copies of its Charter and Bylaws,
as amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all federal and state securities laws. In addition:
-5-
<PAGE>
(e) the authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, par value $0.0001 per share (the "Common Stock") of
which, 6,428,880 shares are currently issued and outstanding, and (B) 15,000,000
shares of Preferred Stock, par value $0.0001 per share (the "Preferred Stock"),
3,571,600 shares of which have been designated Series A Convertible Preferred
Stock (the "Series A Preferred"), all of which are currently issued and
outstanding and 7,346,108 shares of which have been designated Series B
Convertible Preferred Stock (the "Series B Preferred"), all of which are
currently issued and outstanding. The Series A Preferred and the Series B
Preferred are convertible, at the option of the holders thereof, into Common
Stock at a current conversion ratio of 1:1.
(i) The Company has reserved 2,929,434 shares of Common Stock for
issuance under its 1998 Stock Option Plan. In addition, the Company has
reserved 25,000 shares of Common Stock for issuance under an option
agreement with Jacob Avital. Other than as described in this subsection
(d), there are no options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(ii) In accordance with the terms of the Stockholders' Rights
Agreement dated as of June 22, 1998 between the Company and the
stockholders of the Company named therein, the holders of the Series B
Preferred shall, subject to certain limited exceptions, have preemptive
rights to purchase their pro rata share of any new issuances of the
Company's capital stock.
(f) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(g) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(h) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(i) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until
-6-
<PAGE>
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-7-
<PAGE>
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed to the Warrantholder: at 6111
North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn.: General Counsel, (and/or if by
facsimile (847) 518-5465 and (847) 518-5088 and (ii) to the Company at 1816
Embarcadero Road, Palo Alto, CA 94303, attn: Chief Financial Officer (and/or if
by facsimile (650) 565-8300 or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to, an action for damages as
a result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: TIOGA SYSTEMS, INC.
By /s/ Mark Pincus
-------------------------------------------
Title CEO
----------------------------------------
WARRANTHOLDER: COMDISCO, INC.
By /s/ JAMES P. LABE
-------------------------------------------
Title PRESIDENT, COMDISCO VENTURES DIVISION
----------------------------------------
-9-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________
(1) The undersigned Warrantholder hereby elects to purchase __________ shares
of the Series __ Preferred Stock of __________________________ pursuant to
the terms of the Warrant Agreement dated the ____ day of __________, 200_
(the "Warrant Agreement') between ________________ and the Warrantholder,
and tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series __ Preferred Stock of
_________________, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series __ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_____________________________________
(Name)
_____________________________________
(Address)
Warrantholder: COMDISCO, INC.
By __________________________________
Title _______________________________
Date ________________________________
-10-
<PAGE>
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________, hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase __________ shares of the
Series __ Preferred Stock of ___________________________ pursuant to the terms
of the Warrant Agreement, and further acknowledges that __________ shares remain
subject to purchase under the terms of the Warrant Agreement.
COMPANY
-------
TIOGA SYSTEMS, INC.
By _____________________________________
Title __________________________________
Date ___________________________________
-11-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________
(Please Print)
whose address is _______________________________________
Dated ______________________________
Holder's Signature _________________
Holder's Address ___________________
____________________________________
Signature Guaranteed: __________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
-12-
<PAGE>
Exhibit 4.8
[Letterhead of COMDISCO]
FEDERAL EXPRESS
June 7, 1999
Mr. Mark Vranesh
Director of Finance
1816 Embarcadero Road
Palo Alto, CA 94303
Re: (3) Warrant Agreements Dated as of October 27, 1998 between Comdisco, Inc.
("Warrantholder") and Tioga Systems, Inc., ("Company") collectively the
("Warrants")
Dear Mark:
This letter is to confirm that the above referenced parties agree that the
Series C Preferred Stock financing shall be considered the Next Round, as
referenced in the Warrants and the resulting number of shares issuable to
Warrantholder shall be as follows:
Equipment Lease Warrant Shares issuable 7,578
Secured Debt Warrant Shares issuable 22,733
Subordinated Debt Warrant Shares issuable 68,200
------
Grand Total 98,511
Please indicate your acceptance of the above agreement by signing in the space
provided below and returning these letters to me. We send you a fully executed
copy in the next few days. If you have any questions or comments please do not
hesitate to call me at (650) 234-1627.
Sincerely,
/s/ Vika Tonga
- -----------------
Vika Tonga
Information Document Specialist
ACCEPTED AND AGREED TO:
TIOGA SYSTEMS, INC. COMDISCO, INC.
By: Mark Vranesh By: James Labe
------------------ ---------------
Signature: /s/ Mark Vranesh Signature: /s/ James Labe
------------------- ----------------
Title: Dir. Fin./Gen. Sec. Title: President Comdisco
---------------------- Ventures Division
---------------------------
June 14, 1999
<PAGE>
Exhibit 4.9
THIS WARRANT IS NOT TRANSFERABLE. THIS WARRANT IS NOT TRANSFERABLE. ANY SHARES
ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
TIOGA SYSTEMS, INC.
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
WHEREAS, TIOGA SYSTEMS, INC., a Delaware corporation (the "Company") is
entering into a Sublease Agreement of even date herewith (the "Lease") with
EXCITE, INC., (the "Warrantholder") under the Master Lease (the "Master Lease")
dated March 14, 1997, between Martin/Campus Associates L.P. and Warrantholder;
and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Lease, the right to purchase shares of its Series C Convertible
Preferred Stock (the "Preferred Stock");
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such a Lease and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. Grant of the Right To Purchase Preferred Stock.
----------------------------------------------
(a) This certifies that, for good and valuable consideration the Company,
hereby grants to the Warrantholder, the right to subscribe for and purchase from
the Company, 38,461 shares of fully paid and nonassessable shares (the "Warrant
Shares") of the Company's Series C Preferred Stock at an exercise price of $6.50
per share (the "Exercise Price").
(b) This Warrant shall be exercisable at any time and from time to time
during the period (the "Exercise Period") commencing on the date hereof and
ending on November 5, 2001, or three (3) years from the effective date of the
Company's initial public offering, whichever is earlier.
2. Duration and Exercise of Warrant; Limitation on Exercise; Payment
-----------------------------------------------------------------
of Taxes.
- --------
2.1 Duration and Exercise of Warrant.
--------------------------------
(a) Cash Exercise. This Warrant may be exercised by the Warrantholder,
-------------
in whole or in part, by (i) the surrender of this Warrant to the Company, with a
duly executed Exercise Form specifying the number of Warrant Shares to be
purchased, during normal business hours on any Business Day during the Exercise
Period and (ii) the delivery of payment to the Company, for the account of the
Company, by cash, wire transfer of immediately available funds to a bank account
specified by the Company, or by certified or bank cashier's check, of the
Exercise Price for the number of Warrant Shares specified in the Exercise Form
in lawful money of the United States of America. The Company agrees that such
Warrant Shares shall be deemed to be issued to the Warrantholder as the record
holder of such Warrant Shares as of the close of business on the date
<PAGE>
on which this Warrant shall have been surrendered and payment made for the
Warrant Shares as aforesaid. A stock certificate or certificates for the Warrant
Shares specified in the Exercise Form shall be delivered to the Warrantholder as
promptly as practicable, and in any event within 10 days, thereafter. The stock
certificate or certificates so delivered shall be in denominations of 100 shares
each or such lesser or greater denominations as may be reasonably specified by
the Warrantholder in the Exercise Form. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the stock
certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which new
Warrant shall in all other respects be identical with this Warrant. No
adjustments shall be made on Warrant Shares issuable on the exercise of this
Warrant for any cash dividends paid or payable to holders of record of Preferred
Stock prior to the date as of which the Warrantholder shall be deemed to be the
record holder of such Warrant Shares.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant
------------------
to Section 2.1(a), this Warrant may be exercised by the Warrantholder by the
surrender of this Warrant to the Company, with a duly executed Exercise Form
marked to reflect net issue exercise and specifying the number of Warrant Shares
to be purchased, during normal business hours on any Business Day during the
Exercise Period. The Company agrees that such Warrant Shares shall be deemed to
be issued to the Warrantholder as the record holder of such Warrant Shares as of
the close of business on the date on which this Warrant shall have been
surrendered as aforesaid. Upon such exercise, the Warrantholder shall be
entitled to receive shares equal to the value of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant to the Company together
with notice of such election in which event the Company shall issue to
Warrantholder a number of shares of the Company's Preferred Stock computed as of
the date of surrender of this Warrant to the Company using the following
formula:
X = Y(A-B)
------
A
Where X = the number of shares of Preferred Stock to be issued to
Warrantholder under this Section 2.1(b);
Y = the number of shares of Preferred Stock otherwise purchasable
under this Warrant (at the date of such calculation);
A = the fair market value of one share of the Company's Preferred
Stock (at the date of such calculation);
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. The fair market value of one share of Preferred
-----------------
Stock ("Fair Market Value") shall be reasonably determined by the Company's
Board of Directors.
2.2 Payment of Taxes. The issuance of certificates for Warrant Shares
----------------
shall be made without charge to the Warrantholder for any stock transfer or
other issuance tax in respect thereto; provided, however, that the Warrantholder
-----------------
shall be required to pay any and all taxes which may be payable in respect of
any transfer involved in the issuance and delivery of any
<PAGE>
certificate in a name other than that of the then Warrantholder as reflected
upon the books of the Company.
2.3 Information. Upon receipt of a written request from a Warrantholder,
-----------
the Company agrees to deliver promptly to such Warrantholder a copy of its
current publicly available financial statements and to provide such other
publicly available information concerning the business and operations of the
Company as such Warrantholder may reasonably request in order to assist the
Warrantholder in evaluating the merits and risks of exercising the Warrant and
to make an informed investment decision in connection with such exercise.
3. Restrictions on Transfer; Restrictive Legends.
---------------------------------------------
3.1 Restrictions on Transfer; Compliance with Securities Laws. The
---------------------------------------------------------
Warrant Shares issued upon the exercise of the Warrant may not be transferred or
assigned in whole or in part without compliance with all applicable federal and
state securities laws by the transferor and transferee (including the delivery
of investment representation letters and legal opinions reasonably satisfactory
to the Company, if such are requested by the Company). The Warrantholder, by
acceptance hereof, acknowledges that this Warrant and the Warrant Shares to be
issued upon exercise hereof are being acquired solely for the Warrantholder's
own account and not as a nominee for any other party, and for investment, and
that the Warrantholder will not offer, sell or otherwise dispose of any Warrant
Shares to be issued upon exercise hereof except under circumstances that will
not result in a violation of the Securities Act or any state securities laws.
Upon exercise of this Warrant, the Warrantholder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the Warrantholder's
own account and not as a nominee for any other party, for investment, and not
with a view toward distribution or resale.
3.2 Restrictive Legends. This Warrant shall (and each Warrant issued in
-------------------
substitution for this Warrant issued pursuant to Section 4 shall) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THIS WARRANT IS NOT TRANSFERABLE. ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
Except as otherwise permitted by this Section 3, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED
<PAGE>
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT."
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a stock certificate for Warrant Shares without a legend if (i) such
Warrant Shares, as the case may be, have been registered for resale under the
Securities Act or sold pursuant to Rule 144 under the Securities Act (or a
successor rule thereto) or (ii) the Warrantholder has received an opinion of
counsel reasonably satisfactory to the Company that such registration is not
required with respect to such Warrant Shares.
4. Reservation and Registration of Shares, Etc.
--------------------------------------------
The Company covenants and agrees that all Warrant Shares which are issued
upon the exercise of this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens, security interests,
charges and other encumbrances with respect to the issue thereof, other than
taxes in respect of any transfer occurring contemporaneously with such issue.
The Company further covenants and agrees that, during the Exercise Period, the
Company will at all times have authorized and reserved, a sufficient number of
shares of Preferred Stock and Common Stock issuable upon conversion thereof, to
provide for the exercise of the rights represented by this Warrant.
With regard to the Warrant Shares, the Company shall grant the
Warrantholder "piggyback" and such other registration rights as the Company
shall grant to the investors in the Company's Series C Preferred Stock
financing.
5. Representations and Covenants of Warrantholder.
----------------------------------------------
This Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Warrantholder.
5.1 Investment Purpose. The right to acquire the Warrant Shares will be
------------------
acquired for investment and not with a view to the sale or distribution of any
part thereof, and the Warrantholder has no present intention of selling or
engaging in any public distribution of the same except pursuant to a
registration or exemption.
5.2 Private Issue. The Warrantholder understands (i) that the Warrant
-------------
Shares issuable upon exercise of this Warrant are not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this Section 4.
5.3 Financial Risk. The Warrantholder has such knowledge and experience
--------------
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
5.4 Holding Period. The Warrantholder understands that it may be required
--------------
to hold the Warrant Shares for no longer than a period of two years and three
months starting from the date
<PAGE>
hereof or until the effective date of the Company's initial public offering,
whichever is earlier. The Warrantholder also understands that any sale of its
rights as the Warrantholder to purchase the Warrant Shares which might be made
by it in reliance upon Rule 144 under the Securities Act may be made only in
accordance with the terms and conditions of that Rule.
5.5 Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of Rule 501 of Regulation D promulgated under The Securities Act, as
presently in effect.
5.6 Market Stand-off Agreement. The Warrantholder hereby agrees that,
--------------------------
during the period of ninety (90) days following the effective date of a
registration statement of the Company filed under the Securities Act, in
connection with an underwritten offering, it shall not, to the extent requested
by the Company and such underwriter, sell or otherwise transfer or dispose of
(other than to donees or partners who agree to be similarly bound) any
Registrable Securities held by it except Registrable Securities included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to a registration statement
initiated by the Company which covers shares of Common Stock Shares or other
securities of the Company to be sold on its behalf to the public in an
underwritten offering; and
(b) all officers and directors of the Company and all other individuals
and entities registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
6. Exchange, Loss or Destruction of Warrant.
----------------------------------------
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant and, in the case of loss, theft
or destruction, of such bond or indemnification as the Company may require, and,
in the case of such mutilation, upon surrender and cancellation of this Warrant,
the Company will execute and deliver a new Warrant of like tenor. The term
"Warrant" as used in this Agreement shall be deemed to include any Warrants
issued in substitution or exchange for this Warrant.
7. Ownership of Warrant.
--------------------
The Company may deem and treat the person in whose name this Warrant is
registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary.
8. Certain Adjustments.
-------------------
8.1 The number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment as follows:
(a) Stock Dividends. If at any time prior to the exercise of this Warrant
---------------
in full (i) the Company shall fix a record date for the issuance of any stock
dividend payable in Securities of the Company, or (ii) the number of shares of
Preferred Stock shall have been increased by a subdivision or split-up of shares
of Preferred Stock, then, on the record date fixed for the determination of
holders of Preferred Stock entitled to receive such dividend or
<PAGE>
immediately after the effective date of subdivision or split-up, as the case may
be, the number of shares of Common Stock to be delivered upon exercise of this
Warrant will be increased so that the Warrantholder will be entitled to receive
the number of shares of Preferred Stock that such Warrantholder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be adjusted as provided below in
paragraph (f).
(b) Combination of Stock. If at any time prior to the exercise of this
--------------------
Warrant in full the number of shares of Preferred Stock outstanding shall have
been decreased by a combination of the outstanding shares of Preferred Stock,
then, immediately after the effective date of such combination, the number of
shares of Preferred Stock to be delivered upon exercise of this Warrant will be
decreased so that the Warrantholder thereafter will be entitled to receive the
number of shares of Preferred Stock that such Warrantholder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto, and the Exercise Price will be adjusted as provided below in
paragraph (f).
(c) Reorganization, etc. If at any time prior to the exercise of this
--------------------
Warrant in full any capital reorganization of the Company, or any
reclassification of the capital stock, or any consolidation of the Company
with or merger of the Company with or into any other person or any sale, lease
or other transfer of all or substantially all of the assets of the Company to
any other person, shall be effected in such a way that the holders of Preferred
Stock shall be entitled to receive stock, other securities or assets (whether
such stock, other securities or assets are issued or distributed by the Company
or another person) with respect to or in exchange for Preferred Stock, then,
upon exercise of this Warrant the Warrantholder shall have the right to receive
the kind and amount of stock, other securities or assets receivable upon such
reorganization, reclassification, consolidation, merger, change in control or
sale, lease or other transfer by a holder of the number of shares of capital
stock that such Warrantholder would have been entitled to receive upon exercise
of this Warrant had this Warrant been exercised immediately before such
reorganization, reclassification, consolidation, merger, change in control or
sale, lease or other transfer, subject to adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
8.
(d) Fractional Shares. No fractional shares or scrip shall be issued to
-----------------
any Warrantholder in connection with the exercise of this Warrant. Instead of
any fractional shares that would otherwise be issuable to such Warrantholder,
the Company will pay to such Warrantholder a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest of the then
current Fair Market Value per share of Preferred Stock.
(e) Carryover. Notwithstanding any other provision of this Section 8, no
---------
adjustment shall be made to the number of shares of Preferred Stock to be
delivered to the Warrantholder (or to the Exercise Price) if such adjustment
represents less than 1% of the number of shares to be so delivered, but any
lesser adjustment shall be carried forward and shall be made at the earlier
to occur of (i) the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to 1% or more of
the number of shares to be so delivered, or (ii) the exercise of the Warrant.
<PAGE>
(f) Exercise Price Adjustment. Whenever the number of Warrant Shares
-------------------------
purchasable upon the exercise of the Warrant is adjusted, as herein provided,
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
purchasable immediately thereafter.
(g) No Duplicate Adjustments. Notwithstanding anything else to the
------------------------
contrary contained herein, in no event will an adjustment be made under the
provisions of this Section 8 to the number of Warrant Shares issuable upon
exercise of this Warrant or the Exercise Price for any event if an adjustment
having substantially the same effect to the Warrantholder as any adjustment that
otherwise would be made under the provisions of this Section 8 is made by the
Company.
8.2 No Adjustment for Dividends. Except as provided in Section 7.1, no
---------------------------
adjustment in respect of any dividends shall be made during the term of the
Warrant or upon the exercise of this Warrant.
8.3 Notice of Adjustment. Whenever the number of Warrant Shares or the
--------------------
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of the
chief financial officer of the Company setting forth the number of Warrant
Shares and the Exercise Price of such Warrant Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made.
9. Notices of Corporate Action.
---------------------------
In the event of
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any Change of Control,
or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right and the amount and character of any such
dividend, distribution or right and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, Change of Control,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for the securities or other property
<PAGE>
deliverable upon such reorganization, reclassification, recapitalization, Change
of Control, dissolution, liquidation or winding-up. Such notice shall be mailed
at least 20 days prior to the date therein specified, in the case of any date
referred to in the foregoing subdivision (i), and at least 20 days prior to the
date therein specified, in the case of the date referred to in the foregoing
subdivision (ii).
10. Definitions.
-----------
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
Business Day: any day other than a Saturday, Sunday or a day on which
------------
national banks are authorized by law to close.
Change of Control: shall mean (i) the acquisition of the Company pursuant
-----------------
to a consolidation of the Company with or merger of the Company with or into any
other person in which the Company is not the surviving corporation (other than a
reincorporation), (ii) the sale of all or substantially all of the assets of the
Company to any other person or (iii) any sale or transfer of any capital stock
of the Company after the date of this Agreement, following which fifty percent
(50%) or more of the Company's outstanding voting stock is transferred to
holders different than those who held the stock immediately prior to such
merger. For purposes of this definition, "group" shall have the meaning as such
term is used in Section 13(d)(1) under the Exchange Act.
Company: Tioga Systems, Inc., a Delaware corporation.
-------
Exchange Act: the Securities Exchange Act of 1934, as amended, or any
------------
successor federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934, as amended, shall include a
reference to a comparable section, if any, of any successor federal statute.
Exercise Form: an Exercise Form in the form annexed hereto as Exhibit A.
-------------
Exercise Price: the meaning specified on the cover of this Warrant, as
--------------
such price may be adjusted pursuant to Section 6 hereof.
SEC: the Securities and Exchange Commission or any other federal agency at
---
the time administering the Securities Act or the Exchange Act, whichever is the
relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, or any successor
--------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section
of the Securities Act of 1933, as amended, shall include a reference to the
comparable section, if any, of any successor federal statute.
Warrantholder: the meaning specified on the cover of this Warrant.
-------------
<PAGE>
Warrant Shares: the meaning specified on the cover of this Warrant,
--------------
subject to the provisions of Section 8.
11. Miscellaneous.
-------------
11.1 Entire Agreement. This Warrant constitutes the entire agreement
----------------
between the Company and the Warrantholder with respect to this Warrant.
11.2 Binding Effects; Benefits. This Warrant shall inure to the benefit
-------------------------
of and shall be binding upon the Company and the Warrantholder and their
respective successors. Nothing in this Warrant, expressed or implied, is
intended to or shall confer on any person other than the Company and the
Warrantholder, or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Warrant.
11.3 Amendments and Waivers. This Warrant may not be modified or amended
----------------------
except by an instrument or instruments in writing signed by the Company and the
Warrantholder. Either the Company or the Warrantholder may, by an instrument in
writing, waive compliance by the other party with any term or provision of this
Warrant on the part of such other party hereto to be performed or complied with.
The waiver by any such party of a breach of any term or provision of this
Warrant shall not be construed as a waiver of any subsequent breach.
11.4 Section and Other Headings. The section and other headings
--------------------------
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
11.5 Further Assurances. Each of the Company and the Warrantholder shall
------------------
do and perform all such further acts and things and execute and deliver all such
other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
11.6 Notices. All notices and other communications required or permitted
-------
to be given under this Warrant shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by United States mail, postage
prepaid, to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
(a) if to the Company, addressed to:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA 94301
Attention: Mark Vranesh
Telecopier: (650) 565-8300
With a copy to:
Pillsbury Madison & Sutro LLP
<PAGE>
2550 Hanover Street
Palo Alto, CA 94304
Attention: Jorge del Calvo
Telecopier: (650) 233-4545
(b) if to the Warrantholder, addressed to:
Excite@Home Corporation
425 Broadway
Redwood City, California 94063
Attn: General Counsel
with copies to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Jeffrey R. Vetter, Esq.
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
11.7 Counterparts. This Warrant may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Separability. Any term or provision of this Warrant which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
11.9 Governing Law. This Warrant shall be deemed to be a contract made
-------------
under the laws of the State of California.
11.10 No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Warrant shall be deemed to confer upon the Warrantholder any rights as a
stockholder of the Company or to impose any liabilities on the Warrantholder to
purchase any securities whether such liabilities are asserted by the Company or
by creditors or stockholders of the Company or otherwise.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated: August __, 1999.
EXCITE HOME CORPORATION TIOGA SYSTEMS, INC.
By [ILLEGIBLE] By /s/ Mark Vranesh
----------------
Title VP, FINANCE Title Corp. Sec./Dir. Fin.
<PAGE>
Exhibit A
---------
EXERCISE FORM
-------------
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
[_] herewith tenders payment for _______ of the Warrant Shares to the order
of Tioga Systems, Inc. in the amount of $_________ in accordance with
the terms of this Warrant; or
[_] herewith tenders this Warrant for _______ Warrant Shares pursuant to
the Net Issue Exercise provisions of Section 2.1(b) of this Warrant
The undersigned requests that a certificate (or certificates) for such Warrant
Shares be registered in the name of the undersigned and that such certificate
(or certificates) be delivered to the undersigned's address below.
In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the Warrant Shares are being acquired solely for the account
of the undersigned and not as a nominee for any other party, or for investment,
and that the undersigned will not offer, sell or otherwise dispose of any such
Warrant Shares except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended, or any state securities laws.
Dated: ___________________.
(Signature)
(Print Name)
(Street Address)
(City) (State) (Zip Code)
If said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder.
<PAGE>
EXHIBIT 10.1
REPLICASE, INC.
1998 STOCK OPTION PLAN
1. Purposes of the Plan. This 1998 Stock Option Plan is designed to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant of an Option
and subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options are, or will be, granted under the
Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board of Directors
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Replicase, Inc., a Delaware corporation.
(h) "Consultant" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not. If the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant shall
thereafter not include Directors who are not compensated for their services or
are paid only a Director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the
<PAGE>
Company. For purposes of Incentive Stock Options, no such leave may exceed 90
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract, including Company policies. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 91st day
of such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(j) "Director" means a member of the Board of Directors of the
Company.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation The
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
2
<PAGE>
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Optioned Stock" means the Common Stock subject to an Option.
(s) "Optionee" means an Employee or Consultant who receives an
Option.
(t) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1998 Stock Option Plan.
(v) "Section 16(b)" means Section 16(b) of the Securities Exchange
Act of 1934, as amended.
(w) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(x) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be subject to option
and sold under the Plan is Two Million Nine Hundred Twenty-Nine Thousand Four
Hundred Thirty-Four (2,929,434) Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares that were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, upon exercise of an Option, shall
not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which
----------------------
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a Committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon which the Company
-------------------------------------------------------------
Becomes Subject to the Exchange Act.
- -----------------------------------
3
<PAGE>
(i) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers and Employees who are neither Directors nor Officers.
(ii) Administration with Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options to Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board
if the Board may administer the Plan in compliance with the rules under
Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and
awards of equity securities are to be made, or (B) a Committee designated
by the Board to administer the Plan, which Committee shall be constituted
to comply with the rules under Rule l6b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the rules under Rule l6b-3 relating to the
disinterested administration of employee benefit plans under which Section
16(b) exempt discretionary grants and awards of equity securities are to be
made.
(iii) Administration with Respect to Other Employees and
--------------------------------------------------
Consultants. With respect to grants of Options and to Employees or
-----------
Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which committee shall be constituted in such a manner as to satisfy
Applicable Laws. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time
to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
4
<PAGE>
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of Shares to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common
Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options for the
purchase of unvested shares subject to such terms and conditions as the
Administrator may determine; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Elipibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The
5
<PAGE>
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(c) Neither the Plan nor any Option shall confer upon any Optionee
any right with respect to continuation of his or her employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:
(i) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described
in Section 11.
(ii) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 11), the cancelled Option shall be counted
against the limit set forth in subsection (i) above. For this purpose, if
the exercise price of an Option is reduced, such reduction will be treated
as a cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the
voting power
6
<PAGE>
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the
date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the
7
<PAGE>
Administrator, consist of any consideration and method of payment allowable
under Section 8(b) hereof. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote,
receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 hereof.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such termination.
If such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the day three months and one day following such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of termination,
or if the Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest
8
<PAGE>
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option on the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after the Optionee's death, the Optionee's estate or a person who
acquires the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merge.
---------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Option has yet been
granted or that has been returned to the Plan upon cancellation or expiration of
an Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company.
The conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously
9
<PAGE>
exercised, the Option shall terminate immediately prior to the consummation of
such proposed action.
(c) Merge. In the event of a merger of the Company with or into
-----
another corporation, each outstanding Option may be assumed or an equivalent
option or right may be substituted by such successor corporation or a parent or
subsidiary of such successor corporation. If, in such event, an Option is not
assumed or substituted, the Option shall terminate as of the date of the closing
of the merger. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger, the Option confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger, the consideration (whether stock, cash, or
other securities or property) received in the merger by holders of Common Stock
for each Share held on the effective date of the transaction (and if the holders
are offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares). If such consideration
received in the merger is not solely common stock of the successor corporation
or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain stockholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and the Company.
14. Conditions upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without
10
<PAGE>
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
17. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws and the rules of any
stock exchange upon which the Common Stock is listed.
18. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options outstanding, and, in the case of an individual who
acquires Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of annual financial statements. The Company shall not be
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.
11
<PAGE>
REPLICASE, INC.
1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
((F1))
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Stock Option Agreement.
The Terms of your grant are set forth below:
Date of Grant ((F2))
Vesting Commencement Date ((F3))
Exercise Price per Share $0. 10 per share
Total Number of Shares Granted ((F4))
Total Exercise Price $((F5))
Type of Option: X Incentive Stock Option
------
------ Nonstatutory Stock Option
Term/Expiration Date: ((F61))
Exercise and Vesting Schedule:
-----------------------------
The Shares subject to this Option shall vest according to the following
schedule:
No Shares are currently vested 25% of the Shares subject to the Option
(rounded down to the next whole number of shares) shall vest one year after the
Vesting Commencement Date, and 1/48th of the Shares subject to the Option
(rounded down to the next whole number of shares) shall vest on the first day of
each month thereafter, so that all of the Shares shall be vested on the first
day of the 48th month after the Vesting Commencement Date.
<PAGE>
Termination Period:
- -------------------
This Option may be exercised, to the extent vested, for thirty days after
termination of Optionee's employment or consulting relationship. A longer
period may be applicable, however, upon death or disability of Optionee as
provided in the Plan, but in no event later than the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
1. Grant of Option. The Company hereby grants to the Optionee an Option
---------------
to purchase the Common Stock (the "Shares") set forth in the Notice of Grant, at
the exercise price per share set forth in the Notice of Grant (the "Exercise
Price"). Notwithstanding anything to the contrary anywhere else in this Option
Agreement, this grant of an Option is subject to the terms, definitions and
provisions of the 1998 Stock Option Plan (the "Plan") adopted by the Company,
which is incorporated herein by reference.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an ISO as defined in Section 422
of the Code.
2. Exercise of Option. This Option is exercisable as follows:
------------------
(i) Right to Exercise.
-----------------
(a) Subject to subsections 2(i)(b) through 2(i)(d) below, this
Option shall be exercisable cumulatively according to the vesting schedule set
out in the Notice of Grant. Shares subject to this Option shall vest based on
continued employment of or consulting services by Optionee with the Company.
(b) This Option may not be exercised for a fraction of a Share.
(c) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability of
the Option is governed by Sections 7, 8 and 9 below.
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
------------------
Notice (in the form attached as Exhibit A). The Notice must state the number of
---------
Shares for which the Option is being exercised, and such other representations
and agreements with respect to such shares of Common Stock as may be required by
the Company pursuant to the provisions of the Plan. The Notice must be signed
by the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Notice must be accompanied by payment of the
Exercise Price. This Option shall be deemed to be exercised upon receipt by the
Company of such written Notice accompanied by the Exercise Price.
<PAGE>
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. If the Shares purchasable pursuant to the
--------------------------
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B.
---------
4. Lock-Up Period. Optionee hereby agrees that if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to the
first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) to the extent permitted by the Administrator, delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the Exercise Price.
6. Restrictions on Exercise. This Option may not be exercised until the
------------------------
Plan has been approved by the stockholders of the Company. If the issuance of
Shares upon such exercise
<PAGE>
or if the method of payment for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, then the
Option may also not be exercised. The Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation before allowing the Option to be exercised.
7. Termination of Relationship. If an Optionee's Continuous Status as an
---------------------------
Employee or Consultant terminates, Optionee may exercise this Option during the
Termination Period set out in the Notice of Grant, to the extent the Option was
vested at the date of such termination (the "Termination Date"). To the extent
that Optionee was not vested in this Option at the date of such termination, or
if Optionee does not exercise this Option within the time specified herein, the
Option shall terminate.
8. Disability of Optionee. Despite Section 6 above, if an Optionee's
----------------------
Continuous Status as an Employee or Consultant terminates as a result of his or
her disability, Optionee may exercise the Option to the extent the Option was
vested at the date of such termination, but only within twelve (12) months from
the date of such termination (and in no event later than the expiration date of
the term of such Option as set forth in the Stock Option Agreement). To the
extent that Optionee is not vested in the Option at the date of termination, or
if Optionee does not exercise such Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
9. Death of Optionee. If Optionee's Continuous Status as an Employee or
-----------------
Consultant terminates as a result of the death of Optionee, the vested portion
of the Option may be exercised at any time within twelve (12) months following
the date of death (but in no event later than the date of expiration of the term
of this Option as set forth in Section 10 below) by Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance.
To the extent that Optionee is not vested in the Option at the date of death, or
if the Option is not exercised within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
10. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner except by will or by the laws of descent or distribution. It may be
exercised during the lifetime of Optionee only by Optionee. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
11. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant.
12. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
<PAGE>
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability or state income tax liability upon
the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO to
be qualified as an ISO.
(iii) Exercise of NSO. There may be a regular federal income tax
---------------
liability and state income tax liability upon the exercise of an NSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an Employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise. If the Optionee is subject to Section 16 of the Securities
Act of 1934, as amended, the date of income recognition may be deferred for up
to six months.
(iv) Disposition of Shares. In the case of an NSO, if Shares are
---------------------
held for the minimum long-term capital gain holding period in effect at the time
of disposition, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal and state income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for the minimum
long-term capital gain holding period in effect at the time of disposition (and
provided such holding period comprises at least one year after exercise of the
Option) and are disposed of at least two years after the Date of Grant, any gain
realized on disposition of the Shares will also be treated as long-term capital
gain for federal and state income tax purposes. If Shares purchased under an ISO
are disposed of after such one-year period following exercise, but before the
expiration of the minimum long-term capital gain holding period in effect at the
time of disposition, then gain realized on such disposition may be taxed as a
short-term capital gain, which may or may not be equivalent to taxation as
compensation income (taxable at ordinary income rates). If Shares purchased
under an ISO are disposed of within such one-year period or within two years
after the Date of Grant, any gain realized on such disposition will be treated
as compensation income to the extent of the difference between the Exercise
Price and the lesser of (1) the Fair Market Value of the Shares on the date of
exercise, or (2) the sale price of the Shares.
(v) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to
<PAGE>
income tax withholding by the Company on the compensation income recognized by
the Optionee.
REPLICASE, INC.
By:____________________________
Title:_________________________
<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1998 STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
is familiar with the terms and provisions thereof. Optionee hereby accepts this
Option subject to all of the terms and provisions hereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
Dated: _____________________ _________________________________
((F1))
Residence Address:
__________________________________
__________________________________
<PAGE>
EXHIBIT A
1998 STOCK OPTION PLAN
EXERCISE NOTICE
Replicase, Inc.
Attn: President
1816 Embarcadero Road
Palo Alto, CA 94303
1. Exercise of Option. Effective as of today, ____________, 19_, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
______________ shares of the Common Stock (the "Shares") of Replicase, Inc., a
Delaware corporation (the "Company"), under and pursuant to the 1998 Stock
Option Plan (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated _____________, 19__ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement. Optionee agrees
to abide by and be bound by their terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a stockholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or
<PAGE>
otherwise transfer such Shares; (ii) the name of each proposed purchaser or
other transferee ("Proposed Transferee"); (iii) the number of Shares to be
transferred to each Proposed Transferee; and (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Shares (the
"Offered Price"), and the Holder shall offer the Shares at the Offered Price to
the Company or its assignee(s).
(b) Exercise of Right of First Refusal. Within thirty (30) days after
----------------------------------
receipt of the Notice, the Company and/or its assignee(s) may elect in writing
to purchase all, but not less than all, of the Shares proposed to be transferred
to any one or more of the Proposed Transferees. The purchase price will be
determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares repurchased under this Section shall be the Offered Price. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal as provided herein before any Shares held by
the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister or stepchild (whether or not
adopted). In such case, the transferee or other recipient shall receive and hold
the Shares so transferred subject to the provisions of this Section, and there
shall be no further transfer of such Shares except in accordance with the terms
of this Section.
<PAGE>
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares 90 days after the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
5. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR,
IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH
IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL
HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
<PAGE>
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
8. Intermetation. Any dispute regarding the interpretation of this
-------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
9. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
11. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
12. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
13. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede
<PAGE>
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof.
Submitted by: Accepted by:
OPTIONEE: REPLICASE, INC.
_______________________________ By:____________________________
Its:___________________________
Address:
- -------
_______________________________
_______________________________
_______________________________
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : REPLICASE, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
<PAGE>
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
______________________________________
Dated: __________________, 19__
<PAGE>
EXHIBIT 10.2
SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
(Adopted by the Board on February 15, 2000)
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
SECTION 1. ESTABLISHMENT AND PURPOSE............................................................................. 1
SECTION 2. DEFINITIONS........................................................................................... 1
(a) "Affiliate"............................................................................................. 1
(b) "Award"................................................................................................. 1
(c) "Board of Directors".................................................................................... 1
(d) "Change in Control"..................................................................................... 1
(e) "Code".................................................................................................. 2
(f) "Committee"............................................................................................. 2
(g) "Company"............................................................................................... 2
(h) "Consultant"............................................................................................ 2
(i) "Employee".............................................................................................. 2
(j) "Exchange Act".......................................................................................... 2
(k) "Exercise Price"........................................................................................ 2
(l) "Fair Market Value"..................................................................................... 2
(m) "ISO"................................................................................................... 3
(n) "Nonstatutory Option"................................................................................... 3
(o) "Offeree"............................................................................................... 3
(p) "Option"................................................................................................ 3
(q) "Optionee".............................................................................................. 3
(r) "Outside Director"...................................................................................... 3
(s) "Parent"................................................................................................ 3
(t) "Participant"........................................................................................... 3
(u) "Plan".................................................................................................. 3
(v) "Purchase Price"........................................................................................ 3
(w) "Restricted Share"...................................................................................... 3
(x) "Restricted Share Agreement "........................................................................... 3
(y) "SAR"................................................................................................... 3
(z) "SAR Agreement"......................................................................................... 3
(aa) "Service"............................................................................................... 3
(bb) "Share"................................................................................................. 4
(cc) "Stock"................................................................................................. 4
(dd) "Stock Option Agreement"................................................................................ 4
(ee) "Stock Purchase Agreement".............................................................................. 4
(ff) "Stock Unit"............................................................................................ 4
(gg) "Stock Unit Agreement".................................................................................. 4
(hh) "Subsidiary"............................................................................................ 4
(ii) "Total and Permanent Disability"........................................................................ 4
SECTION 3. ADMINISTRATION........................................................................................ 4
(a) Committee Procedures.................................................................................... 4
(b) Committee Responsibilities.............................................................................. 4
</TABLE>
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SECTION 4. ELIGIBILITY.......................................................................................... 6
(a) General Rule........................................................................................... 6
(b) Outside Directors...................................................................................... 6
(c) Limitation On Grants................................................................................... 6
(d) Ten-Percent Stockholders............................................................................... 6
(e) Attribution Rules...................................................................................... 7
(f) Outstanding Stock...................................................................................... 7
SECTION 5. STOCK SUBJECT TO PLAN................................................................................ 7
(a) Basic Limitation....................................................................................... 7
(b) Annual Increase in Shares.............................................................................. 7
(c) Additional Shares...................................................................................... 7
(d) Dividend Equivalents................................................................................... 7
SECTION 6. RESTRICTED SHARES.................................................................................... 8
(a) Restricted Stock Agreement............................................................................. 8
(b) Payment for Awards..................................................................................... 8
(c) Vesting................................................................................................ 8
(d) Voting and Dividend Rights............................................................................. 8
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES........................................................ 8
(a) Duration of Offers and Nontransferability of Rights.................................................... 8
(b) Purchase Price......................................................................................... 9
(c) Withholding Taxes...................................................................................... 9
(d) Restrictions on Transfer of Shares..................................................................... 9
SECTION 8. TERMS AND CONDITIONS OF OPTIONS...................................................................... 9
(a) Stock Option Agreement................................................................................. 9
(b) Number of Shares....................................................................................... 9
(c) Exercise Price......................................................................................... 9
(d) Withholding Taxes...................................................................................... 9
(e) Exercisability and Term................................................................................ 9
(f) Nontransferability..................................................................................... 10
(g) Exercise of Options Upon Termination of Service........................................................ 10
(h) Effect of Change in Control............................................................................ 10
(i) Leaves of Absence...................................................................................... 10
(j) No Rights as a Stockholder............................................................................. 11
(k) Modification, Extension and Renewal of Options......................................................... 11
(l) Restrictions on Transfer of Shares..................................................................... 11
(m) Buyout Provisions...................................................................................... 11
SECTION 9. PAYMENT FOR SHARES................................................................................... 11
(a) General Rule........................................................................................... 11
(b) Surrender of Stock..................................................................................... 11
(c) Services Rendered...................................................................................... 11
(d) Cashless Exercise...................................................................................... 12
(e) Exercise/Pledge........................................................................................ 12
</TABLE>
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<S> <C>
(f) Promissory Note.........................................................................................12
(g) Other Forms of Payment................................................................................. 12
SECTION 10. STOCK APPRECIATION RIGHTS........................................................................... 12
(a) SAR Agreement.......................................................................................... 12
(b) Number of Shares....................................................................................... 12
(c) Exercise Price......................................................................................... 12
(d) Exercisability and Term................................................................................ 12
(e) Effect of Change in Control............................................................................ 13
(f) Exercise of SARs....................................................................................... 13
(g) Modification or Assumption of SARs..................................................................... 13
SECTION 11. STOCK UNITS......................................................................................... 13
(a) Stock Unit Agreement................................................................................... 13
(b) Payment for Awards..................................................................................... 13
(c) Vesting Conditions..................................................................................... 13
(d) Voting and Dividend Rights............................................................................. 14
(e) Form and Time of Settlement of Stock Units............................................................. 14
(f) Death of Recipient..................................................................................... 14
(g) Creditors' Rights...................................................................................... 14
SECTION 12. PROTECTION AGAINST DILUTION......................................................................... 15
(a) Adjustments............................................................................................ 15
(b) Dissolution or Liquidation............................................................................. 15
(c) Reorganizations........................................................................................ 15
SECTION 13. DEFERRAL OF AWARDS.................................................................................. 16
SECTION 14. AWARDS UNDER OTHER PLANS............................................................................ 16
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES............................................................ 16
(a) Effective Date......................................................................................... 16
(b) Elections to Receive NSOs, Restricted Shares or Stock Units............................................ 16
(c) Number and Terms of NSOs, Restricted Shares or Stock Units............................................. 17
SECTION 16. ADJUSTMENT OF SHARES................................................................................ 17
(a) General................................................................................................ 17
(b) Reorganizations........................................................................................ 17
(c) Reservation of Rights.................................................................................. 17
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS................................................................... 18
SECTION 18. WITHHOLDING TAXES................................................................................... 18
(a) General................................................................................................ 18
(b) Share Withholding...................................................................................... 18
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.................................................................... 18
(a) Scope of Limitation.................................................................................... 18
</TABLE>
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<TABLE>
<S> <C>
(b) Supersedes Other Provisions............................................................................ 18
SECTION 20. NO EMPLOYMENT RIGHTS................................................................................ 18
SECTION 21. DURATION AND AMENDMENTS............................................................................. 19
(a) Term of the Plan....................................................................................... 19
(b) Right to Amend or Terminate the Plan................................................................... 19
(c) Effect of Amendment or Termination..................................................................... 19
SECTION 22. EXECUTION........................................................................................... 19
</TABLE>
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<PAGE>
SUPPORT.COM, INC.
------------------
2000 Omnibus Equity Incentive Plan
----------------------------------
(Adopted by the Board on February 15, 2000)
SECTION 1. ESTABLISHMENT AND PURPOSE.
- --------------------------------------
The Plan was adopted by the Board of Directors effective February 15, 2000.
The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.
SECTION 2. DEFINITIONS.
- ------------------------
(a) "Affiliate" shall mean any entity other than a Subsidiary, if the
---------
Company and/or one of more Subsidiaries own not less than fifty percent (50%) of
such entity.
(b) "Award" shall mean any award of an Option, a SAR, a Restricted Share
-----
or a Stock Unit under the Plan.
(c) "Board of Directors" shall mean the Board of Directors of the Company,
------------------
as constituted from time to time.
(d) "Change in Control" shall mean the occurrence of either of the
-----------------
following events:
(i) A change in the composition of the Board of Directors, as a
result of which fewer than one-half of the incumbent directors are
directors who either:
(A) Had been directors of the Company twenty-four (24) months
prior to such change; or
(B) Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the
directors who had been directors of the Company twenty-four (24)
months prior to such change and who were still in office at the time
of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) who, by the acquisition or aggregation of securities, is
or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities ordinarily (and
apart from rights accruing under special circumstances) having
-1-
<PAGE>
the right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. For purposes of this Subsection (ii), the term "person" shall not
include an employee benefit plan maintained by the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" shall mean the committee designated by the Board of
---------
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Options or
other rights granted under the Plan to qualify for exemption under Rule 16b-3
with respect to persons who are subject to Section 16 of the Exchange Act.
(g) "Company" shall mean Support.com, Inc., a Delaware corporation.
-------
(h) "Consultant" shall mean a consultant or advisor who provides bona fide
----------
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in the second sentence of
Section 4(a) and Section 4(b).
(i) "Employee" shall mean (i) any individual who is a common-law employee
--------
of the Company or of a Subsidiary, (ii) a member of the Board of Directors,
including (without limitation) an Outside Director, or an affiliate of member of
the Board of Directors and (iii) a member of the board of directors of a
Subsidiary; or (iv) an independent contractor or advisor who performs services
for the Company or a Subsidiary. Service as a member of the Board of Directors,
a member of the board of directors of a Subsidiary or as an independent
contractor or advisor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a) and Section 4(b).
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(k) "Exercise Price" shall mean, in the case of an Option, the amount for
--------------
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
(l) "Fair Market Value" shall mean (i) the closing price of a Share on the
-----------------
principal exchange which the Shares are trading, on the date on which the Fair
Market Value is determined (if Fair Market Value is determined on a date which
the principal exchange is closed, Fair Market Value shall be determined on the
last immediately preceding trading day), or (ii) if the Shares are not traded on
an exchange but are quoted on the Nasdaq National Market or a successor
quotation system, the closing price on the date on which the Fair Market Value
is determined, or (iii) if the Shares are not traded on an exchange or quoted on
the Nasdaq National
-2-
<PAGE>
Market or a successor quotation system, the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(m) "ISO" shall mean an employee incentive stock option described in Code
---
section 422.
(n) "Nonstatutory Option" shall mean an employee stock option that is not
-------------------
an ISO.
(o) "Offeree" shall mean an individual to whom the Committee has offered
-------
the right to acquire Shares under the Plan (other than upon exercise of an
Option).
(p) "Option" shall mean an ISO or Nonstatutory Option granted under the
------
Plan and entitling the holder to purchase Shares.
(q) "Optionee" shall mean an individual or estate who holds an Option or
--------
SAR.
(r) "Outside Director" shall mean a member of the Board of Directors who
----------------
is not a common-law employee of the Company or of a Subsidiary. Service as an
Outside Director shall be considered employment for all purposes of the Plan,
except as provided in the second sentence of Section 4(a).
(s) "Parent" shall mean any corporation (other than the Company) in an
------
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be a parent commencing as
of such date.
(t) "Participant" shall mean an individual or estate who holds an Award.
-----------
(u) "Plan" shall mean this 2000 Omnibus Equity Incentive Plan of
----
Support.com, Inc., as amended from time to time.
(v) "Purchase Price" shall mean the consideration for which one Share may
--------------
be acquired under the Plan (other than upon exercise of an Option), as specified
by the Committee.
(w) "Restricted Share" shall mean a Common Share awarded under the Plan.
----------------
(x) "Restricted Share Agreement" shall mean the agreement between the
--------------------------
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.
(y) "SAR" shall mean a stock appreciation right granted under the Plan.
---
(z) "SAR Agreement" shall mean the agreement between the Company and an
-------------
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
(aa) "Service" shall mean service as an Employee.
-------
-3-
<PAGE>
(bb) "Share" shall mean one share of Stock, as adjusted in accordance with
-----
Section 9 (if applicable).
(cc) "Stock" shall mean the Common Stock of the Company.
-----
(dd) "Stock Option Agreement" shall mean the agreement between the Company
----------------------
and an Optionee which contains the terms, conditions and restrictions pertaining
to his Option.
(ee) "Stock Purchase Agreement" shall mean the agreement between the
------------------------
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(ff) "Stock Unit" shall mean a bookkeeping entry representing the
----------
equivalent of one Common Share, as awarded under the Plan.
(gg) "Stock Unit Agreement" shall mean the agreement between the Company
--------------------
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
(hh) "Subsidiary" shall mean any corporation, if the Company and/or one or
----------
more other Subsidiaries own not less than fifty percent (50%) of the total
combined voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.
(ii) "Total and Permanent Disability" shall mean that the Optionee is
------------------------------
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than twelve (12) months.
SECTION 3. ADMINISTRATION.
- ---------------------------
(a) Committee Procedures. The Plan shall be administered by the Committee.
--------------------
The Committee shall consist exclusively of two or more directors of the Company,
who shall be appointed by the Board of Directors. The Board of Directors shall
designate one of the members of the Committee as chairman. The Committee may
hold meetings at such times and places as it shall determine. The acts of a
majority of the Committee members present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Committee members, shall be
valid acts of the Committee.
(b) Committee Responsibilities. Subject to the provisions of the Plan, the
--------------------------
Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating
to the Plan;
-4-
<PAGE>
(iii) To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for sale
and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each Offeree
or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or sale of
Shares, including (without limitation) the Purchase Price, the vesting of
the award (including accelerating the vesting of awards) and to specify the
provisions of the Stock Purchase Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, the vesting or duration of the
Option (including accelerating the vesting of the Option), to determine
whether such Option is to be classified as an ISO or as a Nonstatutory
Option, and to specify the provisions of the Stock Option Agreement
relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or Stock
Option Agreement, subject to applicable legal restrictions and to the
consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each Option or
other right under the Plan and to determine the sufficiency of such
consideration;
(xi) To determine the disposition of each Option or other right
under the Plan in the event of an Optionee's or Offeree's divorce or
dissolution of marriage;
(xii) To determine whether Options or other rights under the Plan
will be granted in replacement of other grants under an incentive or other
compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Stock Option Agreement or any Stock Purchase
Agreement; and
(xiv) To take any other actions deemed necessary or advisable for the
administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all
-5-
<PAGE>
Optionees, and all persons deriving their rights from an Offeree or Optionee. No
member of the Committee shall be liable for any action that he has taken or has
failed to take in good faith with respect to the Plan, any Option, or any right
to acquire Shares under the Plan.
SECTION 4. ELIGIBILITY.
- ------------------------
(a) General Rule. Only Employees shall be eligible for the grant of
------------
Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals who
are employed as common-law employees by the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs. In addition, an Employee who owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company or any of its Parents or Subsidiaries shall not
be eligible for the grant of an ISO unless the requirements set forth in section
422(c)(6) of the Code are satisfied.
(b) Outside Directors. Any other provision of the Plan notwithstanding,
-----------------
the participation of Outside Directors in the Plan shall be subject to the
following restrictions:
(i) Outside Directors shall only be eligible for the grant of
Restricted Shares, Stock Units, Nonstatutory Options and SARs.
(ii) As determined by the full Board, each Outside Director shall be
granted a Nonstatutory Option to purchase Shares upon the effectiveness of
the Company's initial public offering or, if later, upon their appointment
as an Outside Director. In addition, upon the conclusion of each regular
annual meeting of the Company's stockholders occurring after 2000 and
following the meeting at which they were appointed, each Outside Director
who will continue serving as a member of the Board thereafter shall receive
a Nonstatutory Option to purchase 8,000 Shares (subject to adjustment under
Section 16). All such Nonstatutory Options shall vest and become
exercisable at the date of grant;
(iii) The Exercise Price of all Nonstatutory Options granted to an
Outside Director under this Section 4(b) shall be equal to one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant,
payable in one of the forms described in Section 9(a), (b) and (d).
(iv) All Nonstatutory Options granted to an Outside Director under
this Section 4(b) shall terminate on the earliest of (A) the tenth (10th)
anniversary of the date of grant of such Options or (B) the date twelve
(12) months after the termination of such Outside Director's service for
any reason.
(c) Limitation On Grants. No Employee shall be granted Options to purchase
--------------------
more than one million (1,000,000) Shares in any fiscal year of the Company.
(d) Ten-Percent Stockholders. An Employee who owns more than ten percent
------------------------
(10%) of the total combined voting power of all classes of outstanding stock of
the Company or any of its Subsidiaries shall not be eligible for the grant of an
ISO unless such grant satisfies the requirements of Code section 422(c)(6).
-6-
<PAGE>
(e) Attribution Rules. For purposes of Subsection (d) above, in
-----------------
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.
(f) Outstanding Stock. For purposes of Subsection (d) above, "outstanding
-----------------
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
- ----------------------------------
(a) Basic Limitation. Shares offered under the Plan shall be authorized
----------------
but unissued Shares or treasury Shares. The maximum aggregate number of Options,
SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed
(a) four million (4,000,000 Shares, plus the additional Common Shares described
in Sections (b) and (c). The limitation of this Section 5(a) shall be subject to
adjustment pursuant to Section 12.
(b) Annual Increase in Shares. As of January 1 of each year, commencing
-------------------------
with the year 2001, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (i) 2,000,000 Shares, (ii) 5% of the
outstanding shares on such date or (iii) a lesser amount determined by the
Board. The aggregate number of Shares which may be issued under the Plan shall
at all times be subject to adjustment pursuant to Section 16. The number of
Shares which are subject to Options or other rights outstanding at any time
under the Plan shall not exceed the number of Shares which then remain available
for issuance under the Plan. The Company, during the term of the Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
(c) Additional Shares. If Restricted Shares or Common Shares issued upon
-----------------
the exercise of Options are forfeited, then such Common Shares shall again
become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 5(a) and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available in Section 5(a) and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.
(d) Dividend Equivalents. Any dividend equivalents paid or credited under
--------------------
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
-7-
<PAGE>
SECTION 6. RESTRICTED SHARES
- ------------------------------
(a) Restricted Stock Agreement. Each grant of Restricted Shares under the
--------------------------
Plan shall be evidenced by a Restricted Stock Agreement between the recipient
and the Company. Such Restricted Shares shall be subject to all applicable terms
of the Plan and may be subject to any other terms that are not inconsistent with
the Plan. The provisions of the various Restricted Stock Agreements entered into
under the Plan need not be identical.
(b) Payment for Awards. Subject to the following sentence, Restricted
------------------
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted Shares, the Award recipient
shall furnish consideration with a value not less than the par value of such
Restricted Shares in the form of cash, cash equivalents, or past services
rendered to the Company (or a Parent or Subsidiary), as the Committee may
determine.
(c) Vesting. Each Award of Restricted Shares may or may not be subject to
-------
vesting. Vesting shall occur, in full or in installments, upon satisfaction of
the conditions specified in the Restricted Stock Agreement. The Committee may
include among such conditions the requirement that the performance of the
Company or a business unit of the Company for a specified period of one or more
years equal or exceed a target determined in advance by the Committee. Such
performance shall be determined by the Company's independent auditors. Such
target shall be based on one or more of the criteria set forth in Appendix A.
The Committee shall determine such target not later than the 90/th/ day of such
period. In no event shall the number of Restricted Shares which are subject to
performance based vesting conditions exceed 1,000,000, subject to adjustment in
accordance with Section 16. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares of thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company.
(d) Voting and Dividend Rights. The holders of Restricted Shares awarded
--------------------------
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES.
- ----------------------------------------------------------
(a) Duration of Offers and Nontransferability of Rights. Any right to
---------------------------------------------------
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within thirty (30) days after the grant of such
right was communicated to him by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.
-8-
<PAGE>
(b) Purchase Price. The Purchase Price shall be payable in one of the
--------------
forms described in Sections 9(a), (b) or (c).
(c) Withholding Taxes. As a condition to the purchase of Shares, the
-----------------
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(d) Restrictions on Transfer of Shares. Any Shares awarded or sold under
----------------------------------
the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
- --------------------------------------------
(a) Stock Option Agreement. Each grant of an Option under the Plan shall
----------------------
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall specify whether the Option is
an ISO or an NSO. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical. Options may be granted in
consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that a new Option will be granted automatically to
the Optionee when he or she exercises a prior Option and pays the Exercise Price
in a form described in Section 9.
(b) Number of Shares. Each Stock Option Agreement shall specify the number
----------------
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 16. Options granted to an Optionee in a
single fiscal year of the Company shall not cover more than 1,000,000 Shares.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise
--------------
Price. The Exercise Price of an ISO shall not be less than 100 percent (100%) of
the Fair Market Value of a Share on the date of grant, except as otherwise
provided in Section 4(d). Subject to the foregoing in this Section 8(c), the
Exercise Price under any Option shall be determined by the Committee at its sole
discretion. The Exercise Price shall be payable in one of the forms described in
Section 9.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
-----------------
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
(e) Exercisability and Term. Each Stock Option Agreement shall specify the
-----------------------
date when all or any installment of the Option is to become exercisable. The
Stock Option
-9-
<PAGE>
Agreement shall also specify the term of the Option; provided that the term of
an ISO shall in no event exceed ten (10) years from the date of grant (five (5)
years for Employees described in Section 4(d)). A Stock Option Agreement may
provide for accelerated exercisability in the event of the Optionee's death,
disability, or retirement or other events and may provide for expiration prior
to the end of its term in the event of the termination of the Optionee's
service. Options may be awarded in combination with SARs, and such an Award may
provide that the Options will not be exercisable unless the related SARs are
forfeited. Subject to the foregoing in this Section 8(e), the Committee at its
sole discretion shall determine when all or any installment of an Option is to
become exercisable and when an Option is to expire.
(f) Nontransferability. During an Optionee's lifetime, his Option(s) shall
------------------
be exercisable only by him and shall not be transferable. In the event of an
Optionee's death, his Option(s) shall not be transferable other than by will or
by the laws of descent and distribution.
(g) Exercise of Options Upon Termination of Service. Each Stock Option
-----------------------------------------------
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.
(h) Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting an Option or thereafter, that such Option shall become exercisable
as to all or part of the Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company, subject to the following
limitations:
(i) In the case of an ISO, the acceleration of exercisability shall
not occur without the Optionee's written consent.
(ii) If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be
treated as a :pooling of interests" for financial reporting purposes, and
if such transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the Company's independent
accountants and such other party's independent accountants separately
determine in good faith that such acceleration would preclude the use of
"pooling of interests" accounting.
(i) Leaves of Absence. An Employee's Service shall cease when such
-----------------
Employee ceases to be actively employed by, or a consultant or adviser to, the
Company (or any subsidiary) as determined in the sole discretion of the Board of
Directors. For purposes of Options, Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued service crediting, or
when continued service crediting is required by applicable law. However, for
purposes of determining whether an Option is entitled to ISO status, an
Employee's Service will be treated as terminating ninety (90) days after such
Employee went on leave, unless such Employee's right to
-10-
<PAGE>
return to active work is guaranteed by law or by a contract. Service terminates
in any event when the approved leave ends, unless such Employee immediately
returns to active work. The Company determines which leaves count toward
Service, and when Service terminates for all purposes under the Plan.
(j) No Rights as a Stockholder. An Optionee, or a transferee of an
--------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 9.
(k) Modification, Extension and Renewal of Options. Within the limitations
----------------------------------------------
of the Plan, the Committee may modify, extend or renew outstanding options or
may accept the cancellation of outstanding options (to the extent not previously
exercised), whether or not granted hereunder, in return for the grant of new
Options for the same or a different number of Shares and at the same or a
different exercise price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair his rights or increase
his obligations under such Option.
(l) Restrictions on Transfer of Shares. Any Shares issued upon exercise of
----------------------------------
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
(m) Buyout Provisions. The Committee may at any time (a) offer to buy out
-----------------
for a payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
SECTION 9. PAYMENT FOR SHARES.
- ------------------------------
(a) General Rule. The entire Exercise Price of Shares issued under the
------------
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b)
through (g) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement so
------------------
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative for more than twelve (12) months. Such Shares shall be valued at
their Fair Market Value on the date when the new Shares are purchased under the
Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in
payment of the Exercise Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect
to the Option for financial reporting purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may be
-----------------
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary prior to the award. If Shares are awarded without the payment of a
Purchase Price in cash, the Committee
-11-
<PAGE>
shall make a determination (at the time of the award) of the value of the
services rendered by the Offeree and the sufficiency of the consideration to
meet the requirements of Section 6(c).
(d) Cashless Exercise. To the extent that a Stock Option Agreement so
-----------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.
(e) Exercise/Pledge. To the extent that a Stock Option Agreement so
---------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.
(f) Promissory Note. To the extent that a Stock Option Agreement so
---------------
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note. However, the par value of the
Common Shares being purchased under the Plan, if newly issued, shall be paid in
cash or cash equivalents.
(g) Other Forms of Payment. To the extent that a Stock Option Agreement so
----------------------
provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
SECTION 10. STOCK APPRECIATION RIGHTS.
- --------------------------------------
(a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
-------------
by a SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.
(b) Number of Shares. Each SAR Agreement shall specify the number of
----------------
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Section 12. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than 1,000,000 Common
Shares. The limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Section 12.
(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. A
--------------
SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
(d) Exercisability and Term. Each SAR Agreement shall specify the date
-----------------------
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not
-12-
<PAGE>
be exercisable unless the related Options are forfeited. A SAR may be included
in an ISO only at the time of grant but may be included in an NSO at the time of
grant or thereafter. A SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.
(e) Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting a SAR or thereafter, that such SAR shall become fully exercisable as
to all Common Shares subject to such SAR in the event that a Change in Control
occurs with respect to the Company, subject to the following sentence. If the
Company and the other party to the transaction constituting a Change in Control
agree that such transaction is to be treated as a "pooling of interests" for
financial reporting purposes, and if such transaction in fact is so treated,
then the acceleration of exercisability shall not occur to the extent that the
Company's independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would preclude the use
of "pooling of interests" accounting.
(f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person
----------------
having the right to exercise the SAR after his or her death) shall receive from
the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares
and cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Common Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date of
surrender) of the Common Shares subject to the SARs exceeds the Exercise Price.
If, on the date when a SAR expires, the Exercise Price under such SAR is less
than the Fair Market Value on such date but any portion of such SAR has not been
exercised or surrendered, then such SAR shall automatically be deemed to be
exercised as of such date with respect to such portion.
(g) Modification or Assumption of SARs. Within the limitations of the
----------------------------------
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR shall, without the consent of the
Optionee, may alter or impair his or her rights or obligations under such SAR.
SECTION 11. STOCK UNITS.
- ------------------------
(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall
--------------------
be evidenced by a Stock Unit Agreement between the recipient and the Company.
Such Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical. Stock Units may be granted in consideration of a reduction in
the recipient's other compensation.
(b) Payment for Awards. To the extent that an Award is granted in the form
------------------
of Stock Units, no cash consideration shall be required of the Award recipients.
(c) Vesting Conditions. Each Award of Stock Units may or may not be
------------------
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions
-13-
<PAGE>
specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of granting
Stock Units or thereafter, that all or part of such Stock Units shall become
vested in the event that a Change in Control occurs with respect to the Company,
except as provided in the next following sentence. If the Company and the other
party to the transaction constituting a Change in Control agree that such
transaction is to be treated as a "pooling of interests" for financial reporting
purposes, and if such transaction in fact is so treated, then the acceleration
of vesting shall not occur to the extent that the Company's independent
accountants and such other party's independent accountants separately determine
in good faith that such acceleration would preclude the use of "pooling of
interests" accounting.
(d) Voting and Dividend Rights. The holders of Stock Units shall have no
--------------------------
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Common Shares, or in a combination of both. Prior to distribution, any
dividend equivalents which are not paid shall be subject to the same conditions
and restrictions as the Stock Units to which they attach.
(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock
------------------------------------------
Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Section 12.
(f) Death of Recipient. Any Stock Units Award that becomes payable after
------------------
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
(g) Creditors' Rights. A holder of Stock Units shall have no rights other
-----------------
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
-14-
<PAGE>
SECTION 12. PROTECTION AGAINST DILUTION.
- ---------------------------------------
(a) Adjustments. In the event of a subdivision of the outstanding Common
-----------
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of:
(i) The number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Section 5;
(ii) The limitations set forth in Sections 8(b) and 10(b);
(iii) The number of NSOs to be granted to Outside Directors under
Section 4(b);
(iv) The number of Common Shares covered by each outstanding Option
and SAR;
(v) The Exercise Price under each outstanding Option and SAR; or
(vi) The number of Stock Units included in any prior Award which has
not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
(b) Dissolution or Liquidation. To the extent not previously exercised or
--------------------------
settled, Options, SARs and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Company.
(c) Reorganizations. In the event that the Company is a party to a merger
---------------
or other reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Such agreement shall provide for:
(i) The continuation of the outstanding Awards by the Company, if
the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the surviving
corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its parent or
subsidiary of its own awards for the outstanding Awards;
-15-
<PAGE>
(iv) Full exercisability or vesting and accelerated expiration of the
outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards in cash or
cash equivalents followed by cancellation of such Awards.
SECTION 13. DEFERRAL OF AWARDS.
- -------------------------------
The Committee (in its sole discretion) may permit or require a Participant
to:
(a) Have cash that otherwise would be paid to such Participant as a result
of the exercise of a SAR or the settlement of Stock Units credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company's books;
(b) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted into an
equal number of Stock Units; or
(c) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or the settlement of
Stock Units converted into amounts credited to a deferred compensation account
established for such Participant by the Committee as an entry on the Company's
books. Such amounts shall be determined by reference to the Fair Market Value of
such Common Shares as of the date when they otherwise would have been delivered
to such Participant.
A deferred compensation account established under this Section 13 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 13.
SECTION 14. AWARDS UNDER OTHER PLANS.
- -------------------------------------
The Company may grant awards under other plans or programs. Such awards may
be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Section 5.
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
- -----------------------------------------------------
(a) Effective Date. No provision of this Section 15 shall be effective
--------------
unless and until the Board has determined to implement such provision.
(b) Elections to Receive NSOs, Restricted Shares or Stock Units . An
-----------------------------------------------------------
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the
-16-
<PAGE>
Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a
combination thereof, as determined by the Board. Such NSOs, Restricted Shares
and Stock Units shall be issued under the Plan. An election under this Section
15 shall be filed with the Company on the prescribed form.
(c) Number and Terms of NSOs, Restricted Shares or Stock Units. The number
----------------------------------------------------------
of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in
lieu of annual retainers and meeting fees that would otherwise be paid in cash
shall be calculated in a manner determined by the Board. The terms of such NSOs,
Restricted Shares or Stock Units shall also be determined by the Board.
SECTION 16. ADJUSTMENT OF SHARES.
- ---------------------------------
(a) General. In the event of a subdivision of the outstanding Stock, a
-------
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares available for grants under
Section 4(c), (iii) the number of Shares covered by each outstanding Option,
(iv) the Exercise Price under each outstanding Option, (v) the number of shares
covered by each outstanding award or (vi) the Purchase Price of each outstanding
award.
(b) Reorganizations. In the event that the Company is a party to a merger
---------------
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide for the assumption of
outstanding Options by the surviving corporation or its parent or for their
continuation by the Company (if the Company is a surviving corporation);
provided, however, that if assumption or continuation of the outstanding Options
is not provided by such agreement then the Committee shall have the option of
offering the payment of a cash settlement equal to the difference between the
amount to be paid for one Share under such agreement and the Exercise Price, in
all cases without the Optionees' consent.
(c) Reservation of Rights. Except as provided in this Section 16, an
---------------------
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
-17-
<PAGE>
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS.
- ----------------------------------------------
Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations and the regulations of any stock exchange on which the Company's
securities may then be listed, and the Company has obtained the approval or
favorable ruling from any governmental agency which the Company determines is
necessary or advisable.
SECTION 18. WITHHOLDING TAXES.
- ------------------------------
(a) General. To the extent required by applicable federal, state, local or
-------
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
(b) Share Withholding. The Committee may permit a Participant to satisfy
-----------------
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.
- ---------------------------------------------
(a) Scope of Limitation. This Section 19 shall apply to an Award only if:
-------------------
(i) The independent auditors most recently selected by the Board (the
"Auditors") determine that the after-tax value of such Award to the
Participant, taking into account the effect of all federal, state and local
income taxes, employment taxes and excise taxes applicable to the
Participant (including the excise tax under section 4999 of the Code), will
be greater after the application of this Section 19 than it was before the
application of this Section 19; or
(ii) The Committee, at the time of making an Award under the Plan or
at any time thereafter, specifies in writing that such Award shall be
subject to this Section 19 (regardless of the after-tax value of such Award
to the Participant).
(b) Supersedes Other Provisions. If this Section 19 applies to an Award,
---------------------------
it shall supersede any contrary provision of the Plan or of any Award granted
under the Plan.
SECTION 20. NO EMPLOYMENT RIGHTS.
- ---------------------------------
No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee.
-18-
<PAGE>
The Company and its Subsidiaries reserve the right to terminate any person's
Service at any time and for any reason, with or without notice.
SECTION 21. DURATION AND AMENDMENTS.
- -----------------------------------
(a) Term of the Plan. The amended and restated Plan, as set forth
----------------
herein, shall terminate automatically on ten years after its adoption and may be
terminated on any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the plan. The Board of Directors may
------------------------------------
amend the Plan at any time and from time to time. Rights and obligations under
any Option granted before amendment of the Plan shall not be materially impaired
by such amendment, except with consent of the person to whom the Option was
granted. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or
----------------------------------
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The terminations of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 22. EXECUTION.
- ----------------------
To record the adoption of the amended and restated Plan by the Board of
Directors effective as of February ___, 2000, the Company has caused its
authorized officer to execute the same.
SUPPORT.COM, INC.
By
---------------------------
Radha R. Basu
Chief Executive Officer
-19-
<PAGE>
NOTICE OF STOCK OPTION GRANT
THE SUPPORT.COM, INC. 2000 OMNIBUS EQUITY INCENTIVE PLAN
You have been granted the following option to purchase Common Stock of
Support.com, Inc. (the "Company") under the Support.com, Inc. 2000 Omnibus
Equity Incentive Plan (the "Plan"):
Name of Optionee:______________________
Total Number of Option Shares Granted:_______________
Type of Option: ___ Incentive Stock Option ___ Nonstatutory Stock Option
Exercise Price Per Share: $________________
Grant Date: ______________________
Vesting Commencement Date: __________________
Vesting Schedule: [Check only one box]
__ Full vesting: This option is fully vested and exercisable as of the
the date of grant.
__ Two-Year Vesting: This option becomes exercisable with respect to 50%
of the total number of Option Shares, on and after the first
anniversary of the Grant Date and with respect to the remaining
Option Shares, on and after the second anniversary of the Grant Date.
__ Three-Year Vesting: This option becomes exercisable (i) with respect
to 33-1/3 % of the total number of Option Shares, on and after the
first anniversary of the Grant Date, (ii) with respect to an
additional 33-1/3% of the total number of Option Shares, on or after
the second anniversary of the Grant Date, and (iii) with respect to
the remaining Option Shares, on and after the third anniversary of
the Grant Date.
__ Four-Year Vesting: This option becomes exercisable (i) with respect
to 1/4 of the total number of Option Shares, on and after the first
anniversary of the Grant Date, (ii) with respect to an additional 1/4
of the total number of Option Shares, on or after the second
anniversary of the Grant Date, (iii) with respect to an additional
1/4 of the total number of Option Shares, on and after the third
anniversary of the Grant Date, and (iv) with respect to the remaining
Option Shares, on and after the fourth anniversary of the Grant Date.
20
<PAGE>
Accelerated Vesting: [Check only one box]
__ Your option is not subject to accelerated vesting.
Your option will become fully vested and exercisable if:
__ The Company is subject to a Change in Control (as defined in
Section 2(b) of the Plan) prior to the date your service
terminates.
__ The Company involuntarily terminates your employment without
good cause.
__ You experience a Total and Permanent Disability (as defined in
Section 2(ii) of the Plan).
Post-Termination Exercise Period: [Check only one box]
If your service with the Company terminates for any reason other than Total and
Permanent Disability or death, then your option expires on:
__ the date of your termination.
__ the date 90 days after your termination date.
__ the date 6 months after your termination date.
__ the date 12 months after your termination date.
__ the date 24 months after your termination date.
__ the Expiration Date of your option.
Form of Payment: [Check one or more boxes]
Payment may be made in the following form(s):
__ Your personal check, a cashier's check or a money order.
__ In shares of Company stock which have been owned by you or your
representative for more than 12 months and which are surrendered to
the Company in good form for transfer.
__ By delivering on a form approved by the Committee of an irrevocable
direction to a securities broker approved by the Company to sell all
or part of your option shares and to deliver to the Company from the
sale proceeds in an amount
21
<PAGE>
sufficient to pay the option exercise price and any withholding
taxes. The balance of the sale proceeds, if any, will be delivered to
you.
Expiration Date: _____________________
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
term and conditions of the Plan and this Stock Option Agreement, both of which
are attached to and made a part of this document.
<TABLE>
<S> <C>
OPTIONEE: SUPPORT.COM, INC.
_______________________________________ By:_________________________________________
_______________________________________ Title:______________________________________
Please Print Name
</TABLE>
22
<PAGE>
STOCK OPTION AGREEMENT
FOR THE SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
<TABLE>
<S> <C>
Tax Treatment This option is intended to be an incentive stock option under
Section 422 of the Internal Revenue Code or a nonstatutory
option, as provided in the Notice of Stock Option Grant.
Vesting This option becomes exercisable in accordance with the vesting schedule set forth in the Notice of Stock
Option Grant
Term This option expires on the date shown in the Notice of Stock Option Grant, but in no event later than the
10th anniversary of the Grant Date.
Regular Termination If your service as an employee, consultant or director of the Company or a subsidiary of the Company
terminates for any reason excluding death or total and permanent disability, then this option will expire on
the date specified in the Notice of Stock Option Grant under the heading "Post-Termination Exercise
Period.".
Death or Disability If you become Totally and Permanently Disabled (as defined in Section 2(ii) of the Plan) or die as an
employee, consultant or director of the Company or a subsidiary of the Company, then this option will expire
at the close of business at Company headquarters on the date 12 months after the date of your termination of
employment.
Leaves of Absence For purposes of this option, your service does not terminate when you go on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued
crediting of service is required by the terms of the leave or by applicable law. But your service terminates
when the approved leave ends, unless you immediately return to active work.
Restrictions The Company will not permit you to exercise this option if the issuance of shares at that time would violate
on Exercise any law or regulation.
Notice of Exercise When you wish to exercise this option you must notify the Company by completing the attached "Notice of
Exercise of Stock Option" form and filing it with the Human Resources Department of the Company. The notice
will be effective when it is received by the Company. If someone else wants to exercise this option after
your death, that person must prove to the Company's satisfaction that he or she is entitled to do so.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
Form of Payment When you submit your notice of exercise, you must include payment of the option exercise price for the
shares you are purchasing. Payment may be made in the form specified on your Notice of Stock Option Grant.
Withholding Taxes You will not be allowed to exercise this option unless you make arrangements acceptable to the Company to
and Stock pay any withholding taxes that may be due as a result of the option exercise. These arrangements may include
Withholding withholding shares of Company stock that otherwise would be issued to you when you exercise this option. The
value of these shares, determined as of the effective date of the option exercise, will be applied to the
withholding taxes.
Restrictions on By signing this Agreement, you agree not to sell any option shares at a time when applicable laws, Company
Resale policies or an agreement between the Company and its underwriters prohibit a sale (e.g., a lock-up period
after the Company goes public). This restriction will apply as long as you are an employee, consultant or
director of the Company or a subsidiary of the Company.
Transfer of Option Prior to your death, only you can exercise this option. You cannot transfer or assign this option. For
instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these
things, this option will immediately become invalid. You may in any event dispose of this option in your
will.
Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of
exercise from your former spouse, nor is the Company obligated to recognize your former spouse's interest in
your option in any other way.
Retention Rights Neither your option nor this Agreement give you the right to be retained by the Company or a subsidiary of
the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your service at
any time, with or without cause.
Stockholder Rights You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this
option by giving the required notice to the Company and paying the exercise price. No adjustments are made
for dividends or other rights if the applicable record date occurs before you exercise this option, except
as described in the Plan.
Adjustments In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares
covered by this option and the exercise price per share may be adjusted pursuant to the Plan.
Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Nevada (without regard to
their choice-of-law provisions).
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
The Plan and Other The text of the Plan is incorporated in this Agreement by reference. This Agreement and the Plan constitute
Other Agreements the entire understanding between you and the Company regarding this option. Any prior agreements, commitments
or negotiations concerning this option are superseded. This Agreement may be amended only by another written
agreement, signed by both parties.
</TABLE>
BY SIGNING THE COVER SHEET OF THIS AGREEMENT,
YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
25
<PAGE>
NOTICE OF EXERCISE
(exercise by check)
Support.com, Inc.
______________________________
______________________________
Attn: Chief Financial Officer
Re: Exercise of Stock Option
Dear Sir or Madam:
Pursuant to the Stock Option Agreement dated __________, 200____ (the "Stock
Option Agreement") and the Company's 2000 Omnibus Equity Incentive Plan (the
"Plan"), I hereby elect to purchase _____________ shares of the Common Stock of
the Company at aggregate exercise price of $__________. I enclose payment and
other documents (check all that are applicable):
[ ] My check in the amount of $___________;
The Common Stock is to be issued and registered in the name(s) of:
__________________________
__________________________
I understand that there may be tax consequences as a result of the purchase or
disposition of the Common Stock, and I have consulted with any tax consultants I
wished to consult and I am not relying on the Company for any tax advice. I
understand that my exercise is governed by my Stock Option Agreement and the
Plan and agree to abide by and be bound by their terms and conditions. I
represent that the Common Stock is being acquired solely for my own account and
not as a nominee for any other party, or for investment, and that I will not
offer, sell or otherwise dispose of any such Common Stock except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
Dated: __________, _____.
___________________________________
(Signature)
___________________________________
(Please Print Name)
___________________________________
___________________________________
(Address)
26
<PAGE>
SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
You have been granted restricted shares of Common Stock of Support.com,
Inc. (the "Company") on the following terms:
<TABLE>
<CAPTION>
Name of Recipient: _________________________
- ------------------------------------------------------------------------
<S> <C>
Total Number of Shares Granted: _________________________
- ------------------------------------------------------------------------
Fair Market Value per Share: $_________________________
- ------------------------------------------------------------------------
Total Fair Market Value of Award: $_________________________
- ------------------------------------------------------------------------
Date of Grant: _______ __, ____
- ------------------------------------------------------------------------
Vesting Commencement Date: _______ __, ____
- ------------------------------------------------------------------------
Vesting Schedule: The first __% of the total number
of shares granted vest when you
complete __ months of continuous
service from the Vesting
Commencement Date. An additional
__% of the shares vest when you
complete each month of continuous
service thereafter.
- ------------------------------------------------------------------------
</TABLE>
27
<PAGE>
By your signature and the signature of the Company's representative below, you
and the Company agree that these shares are granted under and governed by the
terms and conditions of the 2000 Omnibus Equity Incentive Plan (the "Plan") and
the Restricted Stock Agreement, both of which are attached to and made a part of
this document.
<TABLE>
<S> <C>
Recipient: Support.com, Inc.
- ------------------------------------------------------------------------
_________________________ By:_______________________
- ------------------------------------------------------------------------
_________________________ Title:______________________
Print Name
- ------------------------------------------------------------------------
</TABLE>
28
<PAGE>
SUPPORT.COM, INC.
2000 OMNIBUS EQUITY INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
This Restricted Stock Purchase Agreement (the "Agreement") is made as of
---------
_______, 2000 by and between Support.com, Inc., a Nevada corporation (the
"Company"), and _______ ("Purchaser") pursuant to the Company's 2000 Omnibus
- -------- ---------
Equity Incentive Plan. To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the
2000 Omnibus Equity Incentive Plan.
1. Sale of Stock. Subject to the terms and conditions of this Agreement,
-------------
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, _______ shares of
the Company's Common Stock (the "Shares") at a purchase price of $____ per Share
------
for a total purchase price of $______. The per share purchase price of the
Shares shall be not less than 100% of the Fair Market Value of the Shares as of
the date of the offer of such Shares to the Purchaser, or, in the case of any
person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any affiliated
company), the per share purchase price shall be not less than 110% of the Fair
Market Value of the Shares as of such date. The term "Shares" refers to the
------
purchased Shares and all securities received in replacement of or in connection
with the Shares pursuant to stock dividends or splits, all securities received
in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "Purchase Date"). On the Purchase
-------------
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by (a) check made
payable to the Company, (b) cancellation of indebtedness of the Company to
Purchaser, or (c) by a combination of the foregoing.
3. Restrictions on Resale. By signing this Agreement, you agree not to
----------------------
sell any Shares acquired pursuant to the Plan, the Restricted Stock Agreement
and this Agreement at a time when applicable laws, regulations or Company or
underwriter trading policies prohibit exercise or sale. This restriction will
apply as long as you are an Employee, director or Consultant of the Company or a
Subsidiary of the Company.
29
<PAGE>
4. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legend (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
5. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
6. Market Standoff Agreement. Upon request of the Company or the
-------------------------
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
7. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
30
<PAGE>
(b) The Plan and Other Agreements; Enforcement of Rights. The text of
----------------------------------------------------
the Plan and the Restricted Stock Agreement are incorporated into this Agreement
by reference. This Agreement, the Plan and the Restricted Stock Agreement
constitute the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. Any prior
agreements, commitments or negotiations concerning the purchasse of the
Restricted Shares hereunder are superseded. No modification of or amendment to
this Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the parties to this Agreement. The failure
by either party to enforce any rights under this Agreement shall not be
construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice to be given under the terms of the Plan
-------
shall be addressed to the Company in care or its principal office, and any
notice to be given to the Purchaser shall be addressed to such Purchaser at the
address maintained by the Company for such person or at such other address as
the Purchaser may specify in writing to the Company.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
31
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
FECHTOR DETWILER & MITCHELL CO.
By:___________________________
Title:________________________
Address:
______________
______________
PURCHASER:
_______________________________
(Signature)
Address:
_______________________________
_______________________________
I, ________________________________, spouse of ___________, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall be similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to
any amendment or exercise of any rights under the Agreement.
_______________________________
Spouse of ___________
32
<PAGE>
RECEIPT
-------
Fechtor Detwiler & Mitchell Co. hereby acknowledges receipt of (check as
applicable):
_____ A check in the amount of $__________
_____ The cancellation of indebtedness in the amount of $__________
given by ________________ as consideration for Certificate No. CS-____ for
_______ shares of Common Stock of Fechtor Detwiler & Mitchell Co.
Dated: ________________
Fechtor Detwiler & Mitchell Co.
By:________________________________
Title:_____________________________
33
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. CS-____ for _________ shares of Common Stock of Fechtor Detwiler & Mitchell
Co. (the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
______________________________
Name
34
<PAGE>
EXHIBIT 10.3
SUPPORT.COM, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board on _______ __, 2000)
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 Purpose Of The Plan................................................................................. 1
SECTION 2 Definitions......................................................................................... 1
(a) "Accumulation Period............................................................................ 1
(b) "Board"......................................................................................... 1
(c) "Code".......................................................................................... 1
(d) "Committee"..................................................................................... 1
(e) "Company"....................................................................................... 1
(f) "Compensation".................................................................................. 1
(g) "Corporate Reorganization"...................................................................... 1
(h) "Eligible Employee"............................................................................. 2
(i) "Exchange Act".................................................................................. 2
(j) "Fair Market Value"............................................................................. 2
(k) "IPO"........................................................................................... 2
(l) "Offering Period"............................................................................... 2
(m) "Participant"................................................................................... 2
(n) "Participating Company"......................................................................... 2
(o) "Plan".......................................................................................... 2
(p) "Plan Account".................................................................................. 2
(q) "Purchase Price"................................................................................ 3
(r) "Stock"......................................................................................... 3
(s) "Subsidiary".................................................................................... 3
SECTION 3 Administration Of The Plan.......................................................................... 3
(a) Committee Composition........................................................................... 3
(b) Committee Responsibilities...................................................................... 3
SECTION 4 Enrollment And Participation........................................................................ 3
(a) Offering Periods................................................................................ 3
(b) Accumulation Periods............................................................................ 3
(c) Enrollment...................................................................................... 3
(d) Duration of Participation....................................................................... 3
(e) Applicable Offering Period...................................................................... 4
SECTION 5 Employee Contributions.............................................................................. 4
(a) Frequency of Payroll Deductions................................................................. 4
(b) Amount of Payroll Deductions.................................................................... 4
(c) Changing Withholding Rate....................................................................... 4
(d) Discontinuing Payroll Deductions................................................................ 4
(e) Limit on Number of Elections.................................................................... 5
SECTION 6 Withdrawal From The Plan............................................................................ 5
(a) Withdrawal...................................................................................... 5
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
(b) Re-enrollment After Withdrawal.................................................................. 5
SECTION 7 Change In Employment Status......................................................................... 5
(a) Termination of Employment....................................................................... 5
(b) Leave of Absence................................................................................ 5
(c) Death........................................................................................... 5
SECTION 8 Plan Accounts And Purchase Of Shares................................................................ 5
(a) Plan Accounts................................................................................... 5
(b) Purchase Price.................................................................................. 5
(c) Number of Shares Purchased...................................................................... 6
(d) Available Shares Insufficient................................................................... 6
(e) Issuance of Stock............................................................................... 6
(f) Unused Cash Balances............................................................................ 6
(g) Stockholder Approval............................................................................ 6
SECTION 9 Limitations On Stock Ownership...................................................................... 7
(a) Five Percent Limit.............................................................................. 7
(b) Dollar Limit.................................................................................... 7
SECTION 10 Rights Not Transferable............................................................................. 7
SECTION 11 No Rights As An Employee............................................................................ 7
SECTION 12 No Rights As A Stockholder.......................................................................... 8
SECTION 13 Securities Law Requirements......................................................................... 8
SECTION 14 Stock Offered Under The Plan........................................................................ 8
(a) Authorized Shares............................................................................... 8
(b) Antidilution Adjustments........................................................................ 8
(c) Reorganizations................................................................................. 8
SECTION 15 Amendment Or Discontinuance......................................................................... 8
SECTION 16 Execution........................................................................................... 9
</TABLE>
-ii-
<PAGE>
SUPPORT.COM, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1 Purpose Of The Plan.
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The Plan was adopted by the Board on _______ __, 2000, effective as of the
date of the IPO. The purpose of the Plan is to provide Eligible Employees with
an opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify
under section 423 of the Code.
SECTION 2 Definitions.
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(a) "Accumulation Period" means a six-month period during which
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contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).
(b) "Board" means the Board of Directors of the Company, as constituted
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from time to time.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
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(d) "Committee" means a committee of the Board, as described in Section 3.
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(e) "Company" means Support.com, Inc., a Delaware Corporation.
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(f) "Compensation" means (i) the total compensation paid in cash to a
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Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or 125 of
the Code. "Compensation" shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee shall determine whether a particular item is included in
Compensation.
(g) "Corporate Reorganization" means:
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(i) The consummation of a merger or consolidation of the Company with
or into another entity, or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or substantially
all of the Company's assets or the complete liquidation or dissolution of
the Company.
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(h) "Eligible Employee" means any employee of a Participating Company
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customary employment is for more than five months per calendar year and for
more than 20 hours per week.
The foregoing notwithstanding, an individual shall not be considered an
Eligible Employee if his or her participation in the Plan is prohibited by the
law of any country which has jurisdiction over him or her or if he or she is
subject to a collective bargaining agreement that does not provide for
participation in the Plan.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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(j) "Fair Market Value" means the market price of Stock, determined by the
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Committee as follows:
(i) If Stock was traded on The Nasdaq National Market on the date
in question, then the Fair Market Value shall be equal to the last-
transaction price quoted for such date by The Nasdaq National Market;
(ii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; or
(iii) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the Wall Street Journal or as reported
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directly to the Company by Nasdaq or a stock exchange. Such determination shall
be conclusive and binding on all persons.
(k) "IPO" means the initial offering of Stock to the public pursuant to a
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registration statement filed by the Company with the Securities and Exchange
Commission.
(l) "Offering Period" means a 24-month period with respect to which the
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right to purchase Stock may be granted under the Plan, as determined pursuant to
Section 4(a).
(m) "Participant" means an Eligible Employee who elects to participate in
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the Plan, as provided in Section 4(c).
(n) "Participating Company" means (i) the Company and (ii) each present or
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future Subsidiary designated by the Committee as a Participating Company.
(o) "Plan" means this Support.com, Inc. 2000 Employee Stock Purchase Plan,
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as it may be amended from time to time.
(p) "Plan Account" means the account established for each Participant
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pursuant to Section 8(a).
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(q) "Purchase Price" means the price at which Participants may purchase
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Stock under the Plan, as determined pursuant to Section 8(b).
(r) "Stock" means the Common Stock of the Company.
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(s) "Subsidiary" means any corporation (other than the Company) in an
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unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
SECTION 3 Administration Of The Plan.
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(a) Committee Composition. The Plan shall be administered by the
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Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.
(b) Committee Responsibilities. The Committee shall interpret the Plan
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and make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.
SECTION 4 Enrollment And Participation.
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(a) Offering Periods. While the Plan is in effect, two Offering Periods
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shall commence in each calendar year. The Offering Periods shall consist of the
24-month periods commencing on each January 1 and July 1, except that the first
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Offering Period shall commence on the date of the IPO and end on December 31,
2001.
(b) Accumulation Periods. While the Plan is in effect, two Accumulation
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Periods shall commence in each calendar year. The Accumulation Periods shall
consist of the six month periods commencing on January 1 and July 1, except that
the first Accumulation Period shall commence on the date of the IPO and end on
June 30, 2000.
(c) Enrollment. Any individual who, on the day preceding the first day of
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an Offering Period, qualifies as an Eligible Employee may elect to become a
Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Company at the prescribed location not later than 15 days prior
to the commencement of such Offering Period.
(d) Duration of Participation. Once enrolled in the Plan, a Participant
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shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end
of the Offering Period in which his or her employee contributions were
discontinued under Section 5(d) or 9(b). A Participant who discontinued employee
contributions under Section 5(d) or 9(b) or withdrew from the Plan under Section
6(a) may again become a Participant, if he or she then is an Eligible Employee,
by following the procedure described in Subsection (c) above. A Participant
whose employee contributions were discontinued automatically under Section 9(b)
shall automatically resume participation at the
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beginning of the earliest Offering Period ending in the next calendar year, if
he or she then is an Eligible Employee.
(e) Applicable Offering Period. For purposes of calculating the purchase
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price under Section 8(b), the applicable Offering Period shall be determined as
follows:
(i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until
the earliest of: (A) the end of such Offering Period; (B) the end of his or
her participation under Subsection (d) above; or (C) re-enrollment in a
subsequent Offering Period under Paragraph (ii) below.
(ii) In the event that the Fair Market Value of Stock on the last
trading day before the commencement of the Offering Period in which the
Participant is enrolled is higher than on the last trading day before the
commencement of any subsequent Offering Period, the Participant shall
automatically be re-enrolled for such subsequent Offering Period.
(iii) When a Participant reaches the end of an Offering Period but
his or her participation is to continue, then such Participant shall
automatically be re-enrolled for the Offering Period that commences
immediately after the end of the prior Offering Period.
SECTION 5 Employee Contributions.
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(a) Frequency of Payroll Deductions. A Participant may purchase shares of
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Stock under the Plan solely by means of payroll deductions. Payroll deductions,
as designated by the Participant pursuant to Subsection (b) below, shall occur
on each payday during participation in the Plan.
(b) Amount of Payroll Deductions. An Eligible Employee shall designate on
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the enrollment form the portion of his or her Compensation that he or she elects
to have withheld for the purchase of Stock. Such portion shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 15%.
(c) Changing Withholding Rate. If a Participant wishes to change the
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rate of payroll withholding, he or she may do so by filing a new enrollment form
with the Company at the prescribed location at any time. The new withholding
rate shall be effective as soon as reasonably practicable after such form has
been received by the Company. The new withholding rate shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 15%.
(d) Discontinuing Payroll Deductions. If a Participant wishes to
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discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time. Payroll
withholding shall cease as soon as reasonably practicable after such form has
been received by the Company. (In addition, employee contributions may be
discontinued automatically pursuant to Section 9(b)). A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding
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shall resume as soon as reasonably practicable after such form has been received
by the Company.
(e) Limit on Number of Elections. No Participant shall make more than two
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elections under Subsection (c) or (d) above during any Offering Period.
SECTION 6 Withdrawal From The Plan.
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(a) Withdrawal. A Participant may elect to withdraw from the Plan by
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filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Accumulation Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.
(b) Re-enrollment After Withdrawal. A former Participant who has
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withdrawn from the Plan shall not be a Participant until he or she re-enrolls in
the Plan under Section 4(c). Re-enrollment may be effective only at the
commencement of an Offering Period.
SECTION 7 Change In Employment Status.
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(a) Termination of Employment. Termination of employment as an Eligible
-------------------------
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 6(a). (A transfer from one Participating
Company to another shall not be treated as a termination of employment.)
(b) Leave of Absence. For purposes of the Plan, employment shall not be
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deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company
in writing. Employment, however, shall be deemed to terminate ninety (90) days
after the Participant goes on a leave, unless a contract or statute guarantees
his or her right to return to work. Employment shall be deemed to terminate in
any event when the approved leave ends, unless the Participant immediately
returns to work.
(c) Death. In the event of the Participant's death, the amount credited
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to his or her Plan Account shall be paid to a beneficiary designated by him or
her for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company at the
prescribed location before the Participant's death.
SECTION 8 Plan Accounts And Purchase Of Shares.
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(a) Plan Accounts. The Company shall maintain a Plan Account on its books
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in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust
funds and may be commingled with the Company's general assets and applied to
general corporate purposes. No interest shall be credited to Plan Accounts.
(b) Purchase Price. The Purchase Price for each share of Stock purchased
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at the close of an Accumulation Period shall be the lower of:
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(i) 85% of the Fair Market Value of such share on the last trading
day in such Accumulation Period; or
(ii) 85% of the Fair Market Value of such share on the last trading
day before the commencement of the applicable Offering Period (as
determined under Section 4(e)) or, in the case of the first Offering Period
under the Plan, 85% of the price at which one share of Stock is offered to
the public in the IPO.
(c) Number of Shares Purchased. As of the last day of each Accumulation
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Period, each Participant shall be deemed to have elected to purchase the number
of shares of Stock calculated in accordance with this Subsection (c), unless the
Participant has previously elected to withdraw from the Plan in accordance with
Section 6(a). The amount then in the Participant's Plan Account shall be divided
by the Purchase Price, and the number of shares that results shall be purchased
from the Company with the funds in the Participant's Plan Account. The foregoing
notwithstanding, no Participant shall purchase more than 1,000 shares of Stock
with respect to any Accumulation Period nor more than the amounts of Stock set
forth in Sections 9(b) and 14(a). The Committee may determine with respect to
all Participants that any fractional share, as calculated under this Subsection
(c), shall be (i) rounded down to the next lower whole share or (ii) credited as
a fractional share.
(d) Available Shares Insufficient. In the event that the aggregate number
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of shares that all Participants elect to purchase during an Accumulation Period
exceeds the maximum number of shares remaining available for issuance under
Section 14(a), then the number of shares to which each Participant is entitled
shall be determined by multiplying the number of shares available for issuance
by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
(e) Issuance of Stock. Certificates representing the shares of Stock
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purchased by a Participant under the Plan shall be issued to him or her as soon
as reasonably practicable after the close of the applicable Accumulation Period,
except that the Committee may determine that such shares shall be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.
(f) Unused Cash Balances. An amount remaining in the Participant's Plan
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Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 9(b) or Section 14(a) shall be refunded to the
Participant in cash, without interest.
(g) Stockholder Approval. Any other provision of the Plan
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notwithstanding, no shares of Stock shall be purchased under the Plan unless and
until the Company's stockholders have approved the adoption of the Plan.
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SECTION 9 Limitations On Stock Ownership.
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(a) Five Percent Limit. Any other provision of the Plan
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notwithstanding, no Participant shall be granted a right to purchase Stock under
the Plan if such Participant, immediately after his or her election to purchase
such Stock, would own stock possessing more than 5% of the total combined voting
power or value of all classes of stock of the Company or any parent or
Subsidiary of the Company. For purposes of this Subsection (a), the following
rules shall apply:
(i) Ownership of stock shall be determined after applying the
attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he or
she has a right or option to purchase under this or any other plan; and
(iii) Each Participant shall be deemed to have the right to purchase
1,000 shares of Stock under this Plan with respect to each Accumulation
Period.
(b) Dollar Limit. Any other provision of the Plan notwithstanding, no
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Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:
Any other provision of the Plan notwithstanding, no Participant shall
purchase Stock with a Fair Market Value in excess of $25,000 per calendar year
(under this Plan and all other employee stock purchase plans of the Company or
any parent or Subsidiary of the Company).
For purposes of this Subsection (b), the Fair Market Value of Stock shall
be determined in each case as of the beginning of the Offering Period in which
such Stock is purchased. Employee stock purchase plans not described in section
423 of the Code shall be disregarded. If a Participant is precluded by this
Subsection (b) from purchasing additional Stock under the Plan, then his or her
employee contributions shall automatically be discontinued and shall resume at
the beginning of the earliest Accumulation Period ending in the next calendar
year (if he or she then is an Eligible Employee).
SECTION 10 Rights Not Transferable.
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The rights of any Participant under the Plan, or any Participant's interest
in any Stock or moneys to which he or she may be entitled under the Plan, shall
not be transferable by voluntary or involuntary assignment or by operation of
law, or in any other manner other than by beneficiary designation or the laws of
descent and distribution. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interest under the Plan, other
than by beneficiary designation or the laws of descent and distribution, then
such act shall be treated as an election by the Participant to withdraw from the
Plan under Section 6(a).
SECTION 11 No Rights As An Employee
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Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating
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Companies or of the Participant, which rights are hereby expressly reserved by
each, to terminate his or her employment at any time and for any reason, with or
without cause.
SECTION 12 No Rights As A Stockholder.
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A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.
SECTION 13 Securities Law Requirements.
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Shares of Stock shall not be issued under the Plan unless the issuance and
delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.
SECTION 14 Stock Offered Under The Plan.
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(a) Authorized Shares. The maximum aggregate number of shares of Stock
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available for purchase under the Plan is two million (2,000,000), plus an annual
increase to be added on the first day of the Company's fiscal year beginning in
2001 equal to the lesser of (i) ___________ (__________) shares, (ii) ___% of
the outstanding shares on such date or (iii) a lesser amount determined by the
Board. The aggregate number of Shares available for purchase under the Plan
shall at all times be subject to adjustment pursuant to Section 14.
(b) Antidilution Adjustments. The aggregate number of shares of Stock
------------------------
offered under the Plan, the 1,000 share limitation described in Section 8(c) and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.
(c) Reorganizations. Any other provision of the Plan notwithstanding,
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immediately prior to the effective time of a Corporate Reorganization, the
Offering Period then in progress shall terminate and shares shall be purchased
pursuant to Section 8, unless the Plan is assumed by the surviving corporation
or its parent corporation pursuant to the plan of merger or consolidation. The
Plan shall in no event be construed to restrict in any way the Company's right
to undertake a dissolution, liquidation, merger, consolidation or other
reorganization.
SECTION 15 Amendment Or Discontinuance.
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The Board shall have the right to amend, suspend or terminate the Plan at
any time and without notice. Except as provided in Section 14, any increase in
the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a
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vote of the stockholders of the Company to the extent required by an applicable
law or regulation.
SECTION 16 Execution.
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To record the adoption of the Plan by the Board on ________ __, 2000, the
Company has caused its authorized officer to execute the same.
Support.com, Inc.
By: _____________________________
Title: __________________________
Title: __________________________
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EXHIBIT 10.4
SUPPORT.COM, INC.
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INDEMNIFICATION AGREEMENT
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THIS INDEMNIFICATION AGREEMENT (the "Agreement"), effective as of _____ __,
2000, by and between, SUPPORT.COM, INC., a Delaware corporation (the "Company"),
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and _____________________ (the "Indemnitee").
1. Indemnification. The Company shall indemnify Indemnitee to the
---------------
fullest extent permitted by section 145 of the Delaware General Corporation Law,
as amended (the "Delaware Law"), the Certificate of Incorporation (the
"Certificate") and the Bylaws of the Company (the "Bylaws") in effect on the
date hereof or as such Law, Certificate, and Bylaws may from time to time be
amended (but, in the case of any such amendment, only to the extent such
amendment permits the Company to provide broader indemnification rights than the
Law, Certificate or Bylaws permitted the Company to provide before such
amendment), if and whenever he is or was a party or is threatened to be made a
party to any Proceeding, against Expenses and Liabilities actually and
reasonably incurred by Indemnitee or on his behalf in connection with the
investigation, defense, settlement or appeal of such Proceeding. The right to
indemnification conferred herein shall be presumed to have been relied upon by
Indemnitee in serving or continuing to serve the Company as an officer or
director and shall be enforceable as a contract right. Without in any way
diminishing the scope of the indemnification provided by this Section 1, the
Company will indemnify Indemnitee if Indemnitee:
(a) was or is a party or is threatened to be made a party to any
Proceeding (other than an action by or in the right of the Company to procure a
judgment in its favor) by reason of the fact Indemnitee is or was an Agent,
against Expenses and Liabilities actually and reasonably incurred in connection
with such Proceeding if Indemnitee acted in good faith and in a manner
reasonably believed to be in the best interests of the Company and, in the case
of a criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that Indemnitee did not act in good faith and in a
manner which Indemnitee reasonably believed to be in the best interests of the
Company or that Indemnitee had reasonable cause to believe that Indemnitee's
conduct was unlawful, or
(b) was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or was
an agent of the Company, against Expenses and Liabilities actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action if Indemnitee acted in good faith, in a manner Indemnitee
believed to be in the best interests of the Company and its stockholders.
(c) to the extent that Indemnitee has been successful on the merits in
defense of any Proceeding referred to in clause (a) or (b) above or in defense
of any action, claim, issue or matter therein, Indemnitee shall be indemnified
against Expenses actually and reasonably incurred by Indemnitee in connection
therewith.
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In addition to, and not as a limitation of, the foregoing, the rights of
indemnification of Indemnitee provided under this Agreement shall include those
rights set forth below.
2. Advancement of Expenses and Costs. All reasonable Expenses incurred
---------------------------------
by or on behalf of Indemnitee shall be advanced by the Company to Indemnitee
within thirty (30) calendar days after the receipt by the Company of a statement
or statements from Indemnitee requiring an advance or advances of Expenses from
time to time, whether prior to or after final disposition of such Proceeding.
The statement or statements shall reasonably evidence the Expenses incurred or
to be incurred by him in connection therewith. If required by law at the time of
such advance, Indemnitee hereby undertakes to repay the amounts advanced if it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
pursuant to the terms of this Agreement.
3. Other Rights to Indemnification. Indemnitee's rights of
-------------------------------
indemnification and advancement of expenses provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may now or in the
future be entitled under applicable law, the Certificate, Bylaws, agreement,
vote of stockholders, resolution of directors, or otherwise.
4. Limitations on Indemnity. Any provision herein to the contrary
------------------------
notwithstanding, the Company shall not be obligated pursuant to this Agreement:
(a) Insured Claims. To make any payment to Indemnitee to the extent
--------------
that Indemnitee is indemnified other than pursuant to this Agreement or to the
extent that Indemnitee is reimbursed pursuant to any director and officer
insurance or other insurance the Company may maintain for Indemnitee's benefit;
provided, however, that notwithstanding the availability of such insurance,
Indemnitee may claim indemnification pursuant to this Agreement by assigning to
the Company, at its request, any claims under such insurance to the extent
Indemnitee is paid by the Company.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Delaware Law, but such indemnification or advancement of Expenses may be
provided by the Company in specific cases if the Board of Directors has approved
the initiation or bringing of such suit.
(c) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
--------------------------
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
5. Duration of Agreement. This Agreement shall continue so long as
---------------------
Indemnitee shall be subject to any possible Proceeding by reason of the fact
that he is or was an Agent. This Agreement shall be binding upon the Company
and its successors and assigns and shall inure to the benefit of Indemnitee and
his spouse, assigns, heirs, devisees, executors, administrators or other legal
representatives.
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6. Miscellaneous.
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(a) Procedure. Any indemnification and advances provided for in Sections
---------
1 and 2 shall be made no later than thirty (30) calendar days, respectively,
after receipt of a written request therefor of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate or Bylaws providing for indemnification, is not paid in full by the
Company within such period, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 6(l) of this Agreement, Indemnitee shall also be
entitled to be paid for the Expenses (including attorney's fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for Expenses incurred in connection with any action
or proceeding in advance of its final disposition) that Indemnitee has not met
the standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Section 2 unless
and until such defense is finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the Company shall be
entitled to select the forum in which Indemnitee's entitlement to
indemnification will be heard. The Company shall notify the Indemnitee in
writing as to the forum selected, which selection shall be from among the
following:
(i) The stockholders of the Company;
(ii) A quorum of the Board consisting of Disinterested Directors;
(iii) Independent Counsel selected by Indemnitee, and reasonably
approved by the Board, which counsel shall make the determination in a
written opinion; or
(iv) A panel of three arbitrators, one of whom is selected by the
Company, another of whom is selected by Indemnitee and the last of whom is
selected by the first two arbitrators so selected; or if for any reason
three arbitrators are not selected within 30 days after the appointment of
the first arbitrator, then selection of additional arbitrators to complete
the three person panel shall be made by the American Arbitration
Association under its commercial arbitration rules now in effect.
Neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholder) to have made a determination that indemnification of Indemnitee
is proper in the circumstances because Indemnitee has met the applicable
standard of conduct required by applicable law, nor an actual determination by
the Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
-3-
<PAGE>
(b) Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, federal or state law or applicable public policy may
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
(c) Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever: (i)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (ii) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions of any
paragraph of this Agreement containing any provision held to be invalid, illegal
or unenforceable, that are not themselves invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
(d) Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
(e) Interpretation of Agreement. It is understood that the parties hereto
---------------------------
intend this Agreement to be interpreted and enforced so as to provide
indemnification to Indemnitee to the fullest extent now or hereafter permitted
by law.
(f) Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(g) Definitions. For purposes of this Agreement:
-----------
(i) "Agent" shall mean any person who is or was a director,
-----
officer, employee, agent, fiduciary or other official of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interests of the Company or a
subsidiary of the Company as a director, officer, foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; or was a director, officer, employee, agent, fiduciary or
other official of a foreign or domestic corporation which was a predecessor
corporation of the Company or a subsidiary of the Company, or was a
director, officer, employee, agent, fiduciary or other official of another
enterprise at the request of, for the convenience of, or to represent the
interests of such predecessor corporation.
-4-
<PAGE>
(ii) "Expenses" shall include all direct and indirect costs
--------
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery
service fees, all other disbursements or out-of-pocket expenses and
reasonable compensation for time spent by Indemnitee for which he is
otherwise not compensated by the Company or any third party) actually and
reasonably incurred in connection with either the investigation, defense,
settlement or appeal of a Proceeding or establishing or enforcing a right
to indemnification under this Agreement, applicable law or otherwise;
provided,however, that expenses shall not include any judgments, fines,
ERISA excise taxes or penalties or amounts paid in settlement of a
Proceeding.
(iii) "Liabilities" shall mean liabilities of any type whatsoever,
-----------
including, but not limited to, judgments, fines, ERISA excise taxes and
penalties and amounts paid in settlement of a Proceeding.
(iv) "Proceeding" shall mean any action, suit arbitration,
----------
alternate dispute resolution mechanism, investigation, administrative
hearing or any other proceeding whether civil, criminal, administrative or
investigative to which Indemnitee is or was a party or is threatened to be
a party by reason of the fact that he is or was an Agent or by reason of
anything done or not done by Indemnitee in such capacity.
(v) "Delaware Law" shall mean Title 8 of the Delaware Code as
------------
amended and in effect from time to time or any successor or other statutes
of Delaware having similar import and effect.
(h) Pronouns. Use of the masculine pronoun shall be deemed to include
--------
usage of the feminine pronoun where appropriate.
(i) Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties to this Agreement. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
(j) Notice by Indemnitee and Defense of Claims. Indemnitee agrees
------------------------------------------
promptly to notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter which may be subject to indemnification covered
hereunder, either civil, criminal or investigative; but the omission so to
notify the Company will not relieve it from any liability which it may have to
Indemnitee if such omission does not prejudice the Company's rights and if such
omission does prejudice the Company's rights, it will relieve the Company from
liability only to the extent of such prejudice; nor will such omission, in any
event, relieve the Company from any liability which it may have to Indemnitee
otherwise than under this Agreement. With respect to any Proceeding as to which
Indemnitee notifies the Company of the commencement thereof:
-5-
<PAGE>
(i) The Company will be entitled to participate therein at its own
expense; and
(ii) Except as otherwise provided below, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from the Company to
Indemnitee of its election so to assume the defense thereof, the Company
will not be liable to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof except as otherwise provided below. Indemnitee shall have
the right to employ his counsel in such action, suit or proceeding but the
fees and expenses of such counsel incurred after notice from the Company of
its assumption of the defense thereof shall be at the expense of Indemnitee
unless (A) the employment of counsel by Indemnitee has been authorized by
the Company, or (B) the Company shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and
expenses of counsel shall be at the expense of the Company, or (C)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such
defense.
(iii) The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's written consent. Neither the Company nor
Indemnitee will unreasonably withhold their consent to any proposed
settlement.
(k) Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or (ii) mailed by certified or registered
mail with postage prepaid, on the third business day after the date on which it
is so mailed:
If to Indemnitee: _____________________
_____________________
_____________________
If to Company: SUPPORT.COM, INC.
575 Broadway
Redwood City, CA 94063
Attention: President
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
(l) Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be
-6-
<PAGE>
paid all court costs and expenses, including reasonable attorneys' fees,
incurred by Indemnitee with respect to such action, unless as a part of such
action, the court of competent jurisdiction determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all court costs and
expenses, including attorneys' fees, incurred by Indemnitee in defense of such
action (including with respect to Indemnitee's counterclaims and cross-claims
made in such action), unless as a part of such action the court determines that
each of Indemnitee's material defenses to such action were made in bad faith or
were frivolous.
(m) Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
(n) Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any
Proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.
(o) Governing Law; Binding Effect. The parties agree that this Agreement
-----------------------------
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware, as applied to contracts between Delaware residents
entered into and to be performed entirely within Delaware. This Agreement shall
be binding upon Indemnitee and upon the Company, its successors and assigns, and
shall inure to the benefit of Indemnitee, his heirs, personal representatives
and assigns and to the benefit of the Company, its successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SUPPORT.COM, INC., a Delaware
corporation
By ________________________________
Its________________________________
___________________________________
Indemnitee
-7-
<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 Rodini
- ----------------------------
[employee name]
Enclosures: Duplicate Original Letter,
Employment Confidential Information,
Employment agreement amendment A, and
Invention Assignment Agreement (To be supplied)
<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 10.6
[LETTERHEAD OF TIOGA SYSTEMS, INC.]
Mr. Michael O'Rourke
1019 Spicewood Mesa
Austin, TX 78759
(512) 219-9405
Dear Mike,
I am pleased to offer you a position with Tioga Systems, Inc., a
Delaware corporation (the "Company") as Vice President of Operations, commencing
on July 15, 1999. You will have an annual salary of $160,000, which will be
paid semi-monthly in accordance with the Company's normal payroll procedures.
We will recommend to the Board at the next Board meeting that you be granted
350,000 stock options, which will carry vesting and exercise provisions in
accordance with the Company's standard policies. The options will be
exercisable at the fair market value of the common stock at the Board meeting
following the date of grant. (See Employee agreement amendment A for more
details.)
You will also be eligible to receive additional bonus option amounts
of 25,000 shares at the end of twelve months and 25,000 shares at the end of the
next twelve months. Fifty percent (50%) of these amounts (or 12,500 shares) in
each year will be based on the Company achieving revenue targets for these
periods that will be agreed to with you upon your arrival and fifty percent
(50%) in each year will be based upon you achieving MBO criteria, that will also
be agreed to with you upon your arrival.
Additionally, you will receive a sign-on bonus of $30,000 which will
be paid within five days of your employment commencement date. This amount will
"vest" at the rate of $5,000 per month for six months. To the extent your
employment terminates within this time, the unvested portion will be payable
back to Tioga.
As a Company employee, you will also be eligible to receive all
employee benefits, which will include health insurance. You should note that
the Company may modify salaries and benefits from time to time as it deems
necessary. (See Employee agreement amendment A for more details.)
You should be aware that your employment with the Company is for no
specified period and constitutes at will employment. As a result you are free
to resign at any time, for any reason or for no reason. Similarly, the Company
is free to conclude its employment relationship with you at any time, with or
without cause, and with or without notice.
For purposes of federal immigration law, you will be required to
provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
You agree that, during the term of your employment with the Company,
you will not actively engage in any other employment, occupation, consulting or
other business directly or indirectly related to the business in which the
Company is now involved or becomes involved during the term of your employment,
nor will you
<PAGE>
engage in any other activities that conflict with your obligations to the
Company. (See Employee agreement amendment A for more details.)
As a Company employee, you will be expected to abide by the Company's
rules and regulations. You will be expected to sign and comply with an
Employment, Confidential Information and Invention Assignment Agreement (the
"Employee NDA") which requires, among other provisions, the assignment of patent
rights to any invention made during your employment at the Company and non-
disclosure of proprietary information. Your employment will be contingent upon
and not be deemed effective until you have executed and returned the Employee
NDA to the Company.
As provided in the Employee NDA, in the event of any dispute or claim
relating to or arising out of our employment relationship, you and the Company
agree that all such disputes shall be fully and finally resolved by binding
arbitration conducted by the American Arbitration Association in San Mateo
County, California. However, as also provided in the Employee NDA, we agree
that this arbitration provision shall not apply to any disputes or claims
relating to or arising out of the misuse or misappropriation of the Company's
trade secrets or proprietary information.
To indicate your acceptance of the Company's offer, please sign and
date this letter in the space provided below and return it to me no later than 3
business days of receipt. A duplicate original is enclosed for your records.
This letter, along with the agreement relating to proprietary rights between you
and the Company, sets forth the terms of your employment with the Company and
supersedes any prior representations or agreements, whether written or oral.
This letter may not be modified or amended except by a written agreement, signed
by an officer of the Company and you.
We look forward to working with you.
Sincerely,
TIOGA SYSTEMS, INC.
/s/ Mark Pincus
Mark Pincus
CEO and President
ACCEPTED AND AGREED TO this
26/th/ day of May, 1999.
/s/ Michael O' Rourke
. Page 2
<PAGE>
May 24, 1999
Enclosures: Duplicate Original Letter
Employment agreement amendment A
Employment, Confidential Information and
Invention Assignment Agreement (To be supplied)
. Page 3
<PAGE>
Employment agreement amendment A
--------------------------------
Employee name: Michael O'Rourke
This agreement amendment provides clarifications and modifications to the
standard employee's agreement and supersedes the original subject as appears in
the employee agreement.
Employee benefit package and insurance:
- --------------------------------------
Tioga will provide an employee benefit package that will include the following
items:
. Health Insurance (e.g. Lifeguard HMO and PPO).
. Dental insurance (e.g. Principal)
. Life and Disability insurance
. Section 125
. 401K program (currently no company contribution)
Stocks options
- --------------
You will vest into 25% of your options at the end of one year and then vest into
the remaining 75% monthly over the following three years.
Revenue
- -------
Definition of revenue will be based on US Generally Accepted Accounting
Principles.
. Page 4
<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
----------------------------
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into this 16th day of August
1999, by and between Tioga Systems, Inc., a Delaware corporation ("the
Company"), and Scott Dale, a resident of the State of California (the
"Executive").
WITNESSETH:
----------
WHEREAS, the Company desires to employ Executive, and Executive
desires to be employed by the Company, in accordance with the terms and subject
to the conditions provided herein;
NOW THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Position and Duties. During the Term (as defined below), and
-------------------
subject to the terms and conditions hereof, the Company shall employ the
Executive as Chief Technical Officer of the Company, who shall be an executive
officer of the Company and shall have the responsibilities, duties, powers,
authority and obligations delegated to him by the President and Chief Executive
Officer of the Company (the "CEO"). The Executive accepts such employment, and
agrees to render such services and to devote his entire available business time,
effort, skill and attention to promote the best interests of the Company.
2. Employment Term. The Company shall employ Executive for a term
---------------
commencing as of the date hereof and, unless sooner terminated as provided
herein, expiring one (1) year subsequent to the date thereof (the "Term"). The
term shall automatically renew for three successive additional one (1) year
periods unless, on or before thirty (30) days prior to the last day of the Term
of employment or any extension thereof, the Company or Executive shall notify
the other in writing of its intention not to renew Executive's employment, in
which case Executive's employment shall terminate at the end of the Term or any
extension thereof. Any such renewal shall be upon the terms and conditions set
forth herein unless otherwise agreed between the Company and the Executive.
3. Compensation and Benefits.
-------------------------
(a) Commencing on the date of this Agreement and continuing
until the Expiration Date or the Executive's earlier termination for any reason
or no reason, the Company shall pay Executive a base annual salary (the "Base
Salary") of One-Hundred Fifty Thousand Dollars ($150,000), payable in accordance
with the Company's general business practice.
-1-
<PAGE>
(b) Subject to the approval of the Board of Directors of the
Company, you will be granted an option to purchase 250,000 shares of Common
Stock of the Company at an exercise price per share equivalent to the fair
market value as determined by the Board of Directors at the next Board meeting
and which will cliff vest 25% one year from the effective date hereof and
thereafter monthly at 1/48 per month. Your options will be granted under the
Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each
term of the Company's standard form of option agreement.
(c) In addition to the Base Salary, the Executive shall be
eligible during the Term to earn bonuses in amount and pursuant to criteria
established by the CEO and the Board of Directors from time to time.
(d) Executive shall be entitled to up to four (4) weeks leave
for vacation at full pay during each twelve (12) month period during the Term or
any extension thereof, provided, however, that at the end of each such twelve
(12) month period, Executive may accrue and carry over to the next succeeding
twelve (12) month period a maximum of two (2) weeks of unused vacation.
Executive shall also be entitled to all paid holidays and sickness days given to
the Company's senior executive officers, as determined by the Board in its sole
discretion.
(e) During the Term, Executive shall be eligible to participate
in all employee benefit plans and arrangements now in effect or which may
thereafter be established that are generally applicable to other senior
executives of the Company, including without limitation, pension and profit-
sharing plans, deferred compensation, supplemental retirement or excess-benefit
plans, incentive or other bonus plans, life, health, disability, accident, and
dental insurance programs, paid vacations and sabbatical leave plans, and
similar plans and programs, in accordance with the rules established for
individual participation in any such plan.
(f) During the Term, Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by him in connection
with his services hereunder in accordance with budgets approved by the Board.
Executive shall account to the Company for such expenses in accordance with
Company policy.
4. Termination.
-----------
(a) Executive's employment with the Company shall terminate upon
any one of the following:
(i) the effective date (after giving effect to any
applicable cure periods) of a written notice of termination sent to Executive
stating that the Company's determination made in good faith that it is
terminating Executive for "cause" as defined under Section 4(b) ("Termination
for Cause");
-2-
<PAGE>
(ii) the effective date of a written notice of termination
sent to the Executive stating that the Company's determination made in good
faith that, due to a mental or physical incapacity ("Disability"), Executive has
been unable and failed to substantially render the services to be provided by
Executive to the Company for a period of not less than six months ("Termination
for Disability");
(iii) death of the Executive ("Termination Upon Death");
(iv) the effective date (after giving effect to any
applicable cure periods) of a written notice of termination sent to the Company
by Executive stating Executive's determination made in good faith of
"constructive termination" by the Company as defined under Section 4(b)
("Constructive Termination"); or
(v) the effective date of a written notice sent to
Executive stating that the Company is terminating his employment, without cause,
which notice can be given by the Company at any time at the Company's sole
discretion, for any reason or for no reason ("Termination Without Cause").
(b) For purposes of this Agreement, "cause" for Executive's
termination will exist in any case in which the Board determines that:
(i) Executive has willfully refused or willfully failed
to perform his obligations under this Agreement or the duties properly assigned
to him in accordance with the terms of this Agreement and such refusal or
failure is detrimental to the interests of the Company; provided, however, that
Executive has failed to cure such breach within thirty (30) days following
notice from the Company;
(ii) Executive has been convicted or admitted the
commission of an indictable offense (whether or not in connection with the
performance by Executive of his duties under this Agreement) which would have a
material impact on the business of the Company; or
(iii) Executive has willfully breached his obligations
under this Agreement; provided, however, that Executive has failed to cure such
breach within thirty (30) days following notice from the Company.
(c) Constructive Termination shall mean:
(i) an involuntary material reduction in Base Salary and
employment benefits to which the Executive is entitled under this Agreement
unless such a reduction is a reduction of employment benefits, other than salary
and bonuses, of general applicability to each senior executive officer of the
Company;
-3-
<PAGE>
(ii) any requirement that the employee move his principal
work location to any location more than fifty (50) miles from the principal
offices of the Company;
(iii) a material change to function or title; or
(iv) a material reduction in the responsibilities and
duties;
provided, however, that in each case the Company has failed to cure
any of (i), (ii), (iii), or (iv) within thirty (30) days following notice from
the Executive.
5. Compensation Upon Termination and During Disability.
---------------------------------------------------
(a) In the event of any Termination for Cause, the Company shall
immediately pay to Executive only the Base Salary otherwise payable to Executive
through the date of termination, and the Company shall have no further
obligations to Executive under this Agreement. Executive's rights under the
Company's benefit plans of general application shall be determined under the
provisions of those plans.
(b) During any period that Executive fails to perform his duties
hereunder due to Disability, Executive shall continue to receive his Base Salary
during such period of Disability. In the event of Termination for Disability,
(i) the Company shall immediately pay to Executive the
compensation and benefits otherwise payable to Executive under Section 3 through
the date of termination;
(ii) for three (3) months after the termination of
Executive's employment, the Company shall continue to pay Executive (A) his Base
Salary at Executive's then-current salary, less applicable withholding taxes,
payable on the Company's normal payroll dates during that period, and (B) shall
continue his benefits under Section 3(e);
(iii) Executive shall be entitled to receive that portion
of the Bonus that Executive has earned as of the date of termination; and
(iv) Executive's rights under the Company's benefit plans
of general application shall be determined under the provisions of those plans.
(c) In the event of Termination Upon Death, all obligations of
the Company and Executive shall cease, except the Company shall immediately pay
to Executive (or to Executive's estate) the Base Salary payable to Executive
through the date of termination and Executive shall be entitled to receive that
portion of the Bonus that
-4-
<PAGE>
Executive has earned as of the date of termination. Executive's rights under
the Company's benefit plans of general application shall be determined under the
provisions of those plans.
(d) In the event of any Constructive Termination or Termination
Without Cause,
(i) the Company shall immediately pay to Executive the
compensation and benefits otherwise payable to Executive under Section 3 through
the date of termination;
(ii) for three (3) months after the termination of
Executive's employment, the Company shall continue to pay Executive (A) his
salary under Section 3 above at Executive's then-current salary, less applicable
withholding taxes, payable on the Company's normal payroll dates during that
period, and (B) shall continue his benefits under Section 3(e); and
(iii) Executive shall be entitled to receive that portion
of the Bonus that Executive has earned as of the date of termination.
6. Non-Competition. While Executive is employed by the Company
---------------
hereunder and (i) for one (1) year after the termination of his employment with
the Company as a result of Termination Without Cause (as hereinafter defined) or
(ii) for one (1) year after the termination of any payments of compensation
hereunder following the termination of Executive's employment with the Company
for any other reason (in either such case, the "Non-Compete Period"), Executive
shall not compete with any business then conducted by the Company or its
affiliates without the prior written consent of the Board. For purposes of this
Agreement, the term "compete" shall mean engaging in a business as a more than
five (5%) percent stockholder, an officer, a director, an employee, a partner,
an agent, a consultant, or in any other individual or representative capacity
(unless Executive's duties, responsibilities, and activities, including
supervisory activities, for or on behalf of such business are not related in any
way to such "competitive" activity) if it involves:
(a) engaging anywhere within the United States in the business
of software for application management and/or eSupport (the "Business");
(b) rendering services or advice pertaining to the Business to,
or on behalf of, any person, firm, or corporation which is in competition with
the Company or any of its affiliates during the Non-Compete Period; or
(c) engaging in, or entering into services or advice pertaining
to, any other line of business (i) that the Company or any of its affiliates
actively conducts or which Executive knows the Company or any of its affiliates
is contemplating conducting and (ii) that competes with the Company or its
affiliates in the same geographic area as such line of business is then
conducted or is contemplated to be conducted.
-5-
<PAGE>
7. Nondisclosure and Developments Agreement. In connection with his
----------------------------------------
employment by the Company pursuant to the terms of this Agreement, the Executive
shall have executed, prior to the execution hereof by the Company, an Employee
Confidential Information and Invention Assignment Agreement (the "Confidential
Information Agreement").
8. Representations and Warranties.
------------------------------
(a) Executive represents and warrants to the Company that
Executive is under no contractual or other restriction or obligation which would
prevent the performance of his duties hereunder, or interfere with the rights of
the Company hereunder.
(b) The Company represents and warrants to Executive that (i) it
has all requisite power and authority to execute, deliver, and perform this
Agreement, (ii) all necessary limited liability company proceedings of the
Company have been duly taken to authorize the execution, delivery, and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable against the Company in
accordance with its terms.
9. Successors; Binding Agreement. As used in this Agreement, "the
-----------------------------
Company" shall mean the Company as hereinbefore defined and any successor to
substantially all of the business and/or assets of the Company which executes
and delivers an agreement to assume and be bound by the terms hereof or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
10. Assignment. The Executive may not assign this Agreement or any
----------
part hereof without the prior written consent of the Company, which consent may
be withheld by the Company for any reason it deems appropriate.
11. Notice. For purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given (a) on the date of delivery when delivered by
hand, (b) on the date of transmission when sent by facsimile transmission during
normal business hours with telephone confirmation of receipt, (c) one day after
dispatch when sent by reputable overnight courier maintaining records of
receipt, or (d) three days after dispatch when sent by registered or certified
mail, postage prepaid, return receipt requested, all addressed as follows:
If to the Company:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA. 94303
-6-
<PAGE>
Telephone: (650) 565-8600
Facsimile: (650) 565-8300
If to Executive:
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and such officer or director as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
any similar or dissimilar provision or condition at the same or at any prior or
subsequent time. Except where the context otherwise requires, wherever used the
singular shall include the plural, the plural the singular, the use of any
gender shall be applicable to all genders and the word "or" is used in the
inclusive sense. Headings contained in this Agreement are inserted for
reference and convenience only and in no way define, limit, extend or describe
the scope of this Agreement or the meaning or construction of any of the
provisions hereof.
13. Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of California
without regard to the conflict of law provisions thereof.
14. Severability. If any covenant or provision hereof is determined
------------
to be void or unenforceable in whole or in part, it shall not be deemed to
affect or impair the invalidity of any other covenant or provision, each of
which is hereby declared to be separate and distinct. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable. If any provision of this
Agreement is declared invalid or unenforceable for any reason other than
overbreadth, the offending provision will be modified so as to maintain the
essential benefits of the bargain among the parties hereto to the maximum extent
possible, consistent with law and public policy.
15. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
16. Withholding. Anything in this Agreement to the contrary
-----------
notwithstanding, all payments required to be made by the Company hereunder to
Executive
-7-
<PAGE>
shall be subject to the withholding of such amounts relating to taxes as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provisions for payment of
taxes and withholdings as required by law, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold have been
satisfied.
17. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto with respect to the subject matter hereof,
and related transactions contemplated hereby and supersedes all prior oral or
written agreements, commitments or understandings with respect to the matters
provided for herein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
TIOGA SYSTEMS, INC.
By: /s/ Radha R. Basu
-----------------------
Radha Basu
SCOTT DALE
/s/ Scott Dale
---------------------------
-8-
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into this 16th day of August
1999, by and between Tioga Systems, Inc., a Delaware corporation ("the
Company"), and Cadir Lee, a resident of the State of California (the
"Executive").
WITNESSETH:
----------
WHEREAS, the Company desires to employ Executive, and Executive
desires to be employed by the Company, in accordance with the terms and subject
to the conditions provided herein;
NOW THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Position and Duties. During the Term (as defined below), and
-------------------
subject to the terms and conditions hereof, the Company shall employ the
Executive as Vice President of Engineering of the Company, who shall be an
executive officer of the Company and shall have the responsibilities, duties,
powers, authority and obligations delegated to him by the President and Chief
Executive Officer of the Company (the "CEO"). The Executive accepts such
employment, and agrees to render such services and to devote his entire
available business time, effort, skill and attention to promote the best
interests of the Company.
2. Employment Term. The Company shall employ Executive for a term
---------------
commencing as of the date hereof and, unless sooner terminated as provided
herein, expiring one (1) year subsequent to the date thereof (the "Term"). The
term shall automatically renew for three successive additional one (1) year
periods unless, on or before thirty (30) days prior to the last day of the Term
of employment or any extension thereof, the Company or Executive shall notify
the other in writing of its intention not to renew Executive's employment, in
which case Executive's employment shall terminate at the end of the Term or any
extension thereof. Any such renewal shall be upon the terms and conditions set
forth herein unless otherwise agreed between the Company and the Executive.
3. Compensation and Benefits.
-------------------------
(a) Commencing on the date of this Agreement and continuing
until the Expiration Date or the Executive's earlier termination for any reason
or no reason, the Company shall pay Executive a base annual salary (the "Base
Salary") of One-Hundred Fifty Thousand Dollars ($150,000), payable in accordance
with the Company's general business practice.
-1-
<PAGE>
(b) Subject to the approval of the Board of Directors of the
Company, you will be granted an option to purchase 250,000 shares of Common
Stock of the Company at an exercise price per share equivalent to the fair
market value as determined by the Board of Directors at the next Board meeting
and which will cliff vest 25% one year from the effective date hereof and
thereafter monthly at 1/48 per month. Your options will be granted under the
Tioga Systems, Inc. 1998 Option Plan, in accordance with and subject to each
term of the Company's standard form of option agreement.
(c) In addition to the Base Salary, the Executive shall be
eligible during the Term to earn bonuses in amount and pursuant to criteria
established by the Board from time to time.
(d) Executive shall be entitled to up to four (4) weeks leave
for vacation at full pay during each twelve (12) month period during the Term or
any extension thereof, provided, however, that at the end of each such twelve
(12) month period, Executive may accrue and carry over to the next succeeding
twelve (12) month period a maximum of two (2) weeks of unused vacation.
Executive shall also be entitled to all paid holidays and sickness days given to
the Company's senior executive officers, as determined by the Board in its sole
discretion.
(e) During the Term, Executive shall be eligible to participate
in all employee benefit plans and arrangements now in effect or which may
thereafter be established that are generally applicable to other senior
executives of the Company, including without limitation, pension and profit-
sharing plans, deferred compensation, supplemental retirement or excess-benefit
plans, incentive or other bonus plans, life, health, disability, accident, and
dental insurance programs, paid vacations and sabbatical leave plans, and
similar plans and programs, in accordance with the rules established for
individual participation in any such plan.
(f) During the Term, Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by him in connection
with his services hereunder in accordance with budgets approved by the Board.
Executive shall account to the Company for such expenses in accordance with
Company policy.
4. Termination.
-----------
(a) Executive's employment with the Company shall terminate upon
any one of the following:
(i) the effective date (after giving effect to any
applicable cure periods) of a written notice of termination sent to Executive
stating that the Company's determination made in good faith that it is
terminating Executive for "cause" as defined under Section 4(b) ("Termination
for Cause");
-2-
<PAGE>
(ii) the effective date of a written notice of termination
sent to the Executive stating that the Company's determination made in good
faith that, due to a mental or physical incapacity ("Disability"), Executive has
been unable and failed to substantially render the services to be provided by
Executive to the Company for a period of not less than six months ("Termination
for Disability");
(iii) death of the Executive ("Termination Upon Death");
(iv) the effective date (after giving effect to any
applicable cure periods) of a written notice of termination sent to the Company
by Executive stating Executive's determination made in good faith of
"constructive termination" by the Company as defined under Section 4(b)
("Constructive Termination"); or
(v) the effective date of a written notice sent to
Executive stating that the Company is terminating his employment, without cause,
which notice can be given by the Company at any time at the Company's sole
discretion, for any reason or for no reason ("Termination Without Cause").
(b) For purposes of this Agreement, "cause" for Executive's
termination will exist in any case in which the Board determines that:
(i) Executive has willfully refused or willfully failed to
perform his obligations under this Agreement or the duties properly assigned to
him in accordance with the terms of this Agreement and such refusal or failure
is detrimental to the interests of the Company; provided, however, that
Executive has failed to cure such breach within thirty (30) days following
notice from the Company;
(ii) Executive has been convicted or admitted the
commission of an indictable offense (whether or not in connection with the
performance by Executive of his duties under this Agreement) which would have a
material impact on the business of the Company; or
(iii) Executive has willfully breached his obligations under
this Agreement; provided, however, that Executive has failed to cure such breach
within thirty (30) days following notice from the Company.
(c) Constructive Termination shall mean:
(i) an involuntary material reduction in Base Salary and
employment benefits to which the Executive is entitled under this Agreement
unless such a reduction is a reduction of employment benefits, other than salary
and bonuses, of general applicability to each senior executive officer of the
Company;
-3-
<PAGE>
(ii) any requirement that the employee move his principal
work location to any location more than fifty (50) miles from the principal
offices of the Company;
(iii) a material change to function or title; or
(iv) a material reduction in responsibilities and duties;
provided, however, that in each case the Company has failed to cure
any of (i), (ii), (iii), or (iv) within thirty (30) days following notice from
the Executive.
5. Compensation Upon Termination and During Disability.
---------------------------------------------------
(a) In the event of any Termination for Cause, the Company shall
immediately pay to Executive only the Base Salary otherwise payable to Executive
through the date of termination, and the Company shall have no further
obligations to Executive under this Agreement. Executive's rights under the
Company's benefit plans of general application shall be determined under the
provisions of those plans.
(b) During any period that Executive fails to perform his duties
hereunder due to Disability, Executive shall continue to receive his Base Salary
during such period of Disability. In the event of Termination for Disability,
(i) the Company shall immediately pay to Executive the
compensation and benefits otherwise payable to Executive under Section 3 through
the date of termination;
(ii) for three (3) months after the termination of
Executive's employment, the Company shall continue to pay Executive (A) his Base
Salary at Executive's then-current salary, less applicable withholding taxes,
payable on the Company's normal payroll dates during that period, and (B) shall
continue his benefits under Section 3(d);
(iii) Executive shall be entitled to receive that portion of
the Bonus that Executive has earned as of the date of termination; and
(iv) Executive's rights under the Company's benefit plans
of general application shall be determined under the provisions of those plans.
(c) In the event of Termination Upon Death, all obligations of
the Company and Executive shall cease, except the Company shall immediately pay
to Executive (or to Executive's estate) the Base Salary payable to Executive
through the date of termination and Executive shall be entitled to receive that
portion of the Bonus that
-4-
<PAGE>
Executive has earned as of the date of termination. Executive's rights under
the Company's benefit plans of general application shall be determined under the
provisions of those plans.
(d) In the event of any Constructive Termination or Termination
Without Cause,
(i) the Company shall immediately pay to Executive the
compensation and benefits otherwise payable to Executive under Section 3 through
the date of termination;
(ii) for three (3) months after the termination of
Executive's employment, the Company shall continue to pay Executive (A) his
salary under Section 3 above at Executive's then-current salary, less applicable
withholding taxes, payable on the Company's normal payroll dates during that
period, and (B) shall continue his benefits under Section 3(d); and
(iii) Executive shall be entitled to receive that portion of
the Bonus that Executive has earned as of the date of termination.
6. Non-Competition. While Executive is employed by the Company
---------------
hereunder and (i) for one (1) year after the termination of his employment with
the Company as a result of Termination Without Cause (as hereinafter defined) or
(ii) for one (1) year after the termination of any payments of compensation
hereunder following the termination of Executive's employment with the Company
for any other reason (in either such case, the "Non-Compete Period"), Executive
shall not compete with any business then conducted by the Company or its
affiliates without the prior written consent of the Board. For purposes of this
Agreement, the term "compete" shall mean engaging in a business as a more than
five (5%) percent stockholder, an officer, a director, an employee, a partner,
an agent, a consultant, or in any other individual or representative capacity
(unless Executive's duties, responsibilities, and activities, including
supervisory activities, for or on behalf of such business are not related in any
way to such "competitive" activity) if it involves:
(a) engaging anywhere within the United States in the business
of software for application management and/or eSupport (the "Business");
(b) rendering services or advice pertaining to the Business to,
or on behalf of, any person, firm, or corporation which is in competition with
the Company or any of its affiliates during the Non-Compete Period; or
(c) engaging in, or entering into services or advice pertaining
to, any other line of business (i) that the Company or any of its affiliates
actively conducts or which Executive knows the Company or any of its affiliates
is contemplating conducting and (ii) that competes with the Company or its
affiliates in the same geographic area as such line of business is then
conducted or is contemplated to be conducted.
-5-
<PAGE>
7. Nondisclosure and Developments Agreement. In connection with
----------------------------------------
his employment by the Company pursuant to the terms of this Agreement, the
Executive shall have executed, prior to the execution hereof by the Company, an
Employee Confidential Information and Invention Assignment Agreement (the
"Confidential Information Agreement").
8. Representations and Warranties.
------------------------------
(a) Executive represents and warrants to the Company that
Executive is under no contractual or other restriction or obligation which would
prevent the performance of his duties hereunder, or interfere with the rights of
the Company hereunder.
(b) The Company represents and warrants to Executive that (i) it
has all requisite power and authority to execute, deliver, and perform this
Agreement, (ii) all necessary limited liability company proceedings of the
Company have been duly taken to authorize the execution, delivery, and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable against the Company in
accordance with its terms.
9. Successors; Binding Agreement. As used in this Agreement, "the
-----------------------------
Company" shall mean the Company as hereinbefore defined and any successor to
substantially all of the business and/or assets of the Company which executes
and delivers an agreement to assume and be bound by the terms hereof or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
10. Assignment. The Executive may not assign this Agreement or any
----------
part hereof without the prior written consent of the Company, which consent may
be withheld by the Company for any reason it deems appropriate.
11. Notice. For purposes of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given (a) on the date of delivery when delivered by
hand, (b) on the date of transmission when sent by facsimile transmission during
normal business hours with telephone confirmation of receipt, (c) one day after
dispatch when sent by reputable overnight courier maintaining records of
receipt, or (d) three days after dispatch when sent by registered or certified
mail, postage prepaid, return receipt requested, all addressed as follows:
If to the Company:
Tioga Systems, Inc.
1816 Embarcadero Road
Palo Alto, CA. 94303
-6-
<PAGE>
Telephone: (650) 565-8600
Facsimile: (650) 565-8300
If to Executive:
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and such officer or director as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
any similar or dissimilar provision or condition at the same or at any prior or
subsequent time. Except where the context otherwise requires, wherever used the
singular shall include the plural, the plural the singular, the use of any
gender shall be applicable to all genders and the word "or" is used in the
inclusive sense. Headings contained in this Agreement are inserted for
reference and convenience only and in no way define, limit, extend or describe
the scope of this Agreement or the meaning or construction of any of the
provisions hereof.
13. Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of California
without regard to the conflict of law provisions thereof.
14. Severability. If any covenant or provision hereof is determined
------------
to be void or unenforceable in whole or in part, it shall not be deemed to
affect or impair the invalidity of any other covenant or provision, each of
which is hereby declared to be separate and distinct. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable. If any provision of this
Agreement is declared invalid or unenforceable for any reason other than
overbreadth, the offending provision will be modified so as to maintain the
essential benefits of the bargain among the parties hereto to the maximum extent
possible, consistent with law and public policy.
15. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
16. Withholding. Anything in this Agreement to the contrary
-----------
notwithstanding, all payments required to be made by the Company hereunder to
Executive shall be subject to the withholding of such amounts relating to taxes
as the Company may
-7-
<PAGE>
reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provisions for payment of
taxes and withholdings as required by law, provided it is satisfied that all
requirements of law affecting its responsibilities to withhold have been
satisfied.
17. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto with respect to the subject matter hereof,
and related transactions contemplated hereby and supersedes all prior oral or
written agreements, commitments or understandings with respect to the matters
provided for herein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
TIOGA SYSTEMS, INC.
By: /s/ Radha R. Basu
-----------------
Radha Basu
CADIR LEE
/s/ Cadir Lee
---------------
-8-
<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:--------------------------------------------
<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
---------------------------------
<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
-----------------------------------
<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 10.15
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
BEAR STEARNS & CO. INC.
ENTERPRISE LICENSE AGREEMENT
This Enterprise License Agreement ("Agreement") is dated this 27th day of May,
1999, by and between Bear Stearns & Co. Inc. ("Bear Stearns"), a Delaware
corporation, having offices at 245 Park Avenue New York, NY 10167, and Tioga
Systems, Inc., ("Tioga"), having offices at 1816 Embarcadero Road, Palo Alto, CA
94303.
Section 1: GRANT OF LICENSE
1.1 Tioga hereby grants to Bear Stearns, and Bear Stearns hereby accepts, a
nonexclusive, nontransferable, perpetual license to install and use the
Licensed Materials described on the Exhibit A. Bear Stearns may however
assign this agreement to a successor in interest through merger or
acquisition, to a parent or subsidiary, or to a purchaser of all or
substantially all of the assets of the division that is to use the Licensed
Material(s). Any assignment of Bear Stearns's interest, other than as
described herein is prohibited without prior written consent of Tioga.
1.2 Bear Stearns is authorized to use the Licensed Materials on the number of
network computers, workstations and servers specified on Exhibit A for Bear
Stearns's own internal business purposes. Bear Stearns will not otherwise
copy or reproduce the Licensed Materials; except for disaster recovery,
back-up, archival or test purposes. Bear Stearns may use the Licensed
Materials at other than the specified site at no charge and without penalty
in the following circumstances: (i) if the specified site cannot be used
because equipment or software is inoperable; however, Bear Stearns shall
notify Tioga within five (5) business days after such relocation or, (ii)
if use of the Licensed Materials is only for testing purposes.
1.3 Bear Stearns shall not, directly or indirectly, nor shall Bear Stearns
permit others to: copy, duplicate or furnish to others any physical,
magnetic or optical version of the Licensed Materials provided by Tioga;
remove any copyright or other notice contained or included in the Licensed
Materials or any material provided by Tioga; or change, modify, reverse
engineer, decompile, disassemble or create derivative works from the
Licensed Materials or any other material provided by Tioga: provide, lease,
lend, use for timesharing, service bureau or hosting purposes or otherwise
use or allow others to use the Licensed Materials to or for the benefit of
third parties, modify, or, except to the extent expressly authorized
herein, incorporate into or with other software or create a derivative work
of any part of the License Materials, disseminate information or analysis
(including, without limitation, benchmarks) regarding the quality or
performance of the Licensed Materials from any source, and: use the output
or other information generated by the Licensed Materials (including,
without limitation, output describing the structure of a software program)
for any purpose other than use by the Licensed Materials in accordance with
its specifications. Notwithstanding anything else, Tioga retains all title
to, and, except as expressly licensed herein, all rights to the Licensed
Materials, all copies thereof and all related documentation and materials.
Bear Stearns must reproduce and include the copyright notice and other
proprietary notices that appear on the original Licensed Materials on any
copies and any media thereof made in accordance with the terms of this
Agreement.
1.4 More than one Exhibit A may be incorporated into this Agreement and each
Exhibit A together with the terms and conditions of this Agreement shall
constitute a separate Agreement which is independent from other Exhibit A
as incorporated into this Agreement. Subsidiaries and affiliates of Bear
Stearns shall have the right to incorporate Exhibit A under this Agreement
provided the terms and conditions of the Agreement are strictly adhered to.
Section 2: CHARGES, FEES, PAYMENT AND INVOICING
2.1 License fees and service fees under this Agreement are specified on the
Exhibit B. The prices and charges hereunder do not include any amount
for taxes or duties. If any duty, sales, use, excise, or other tax,
penalties or interest, except for taxes based upon Tioga's net income,
is, or should ultimately be, assessed against or is required to be
collected by Tioga or by any taxing authority in connection with their
performance required hereunder, Bear Stearns agrees to pay an amount
equal to any and all such charges, except where Bear Stearns is exempt
by law and Bear Stearns provides a bonafide exemption certificate to
Tioga.
<PAGE>
2.2 Bear Stearns shall make all payments hereunder to Tioga, in accordance with
instructions on the invoice which includes a due date of 30 days from the
receipt of a proper and correct invoice. Any late payments under this
Agreement shall be subject to a service charge amount equal to 1.5% of the
amount due (calculated on a monthly basis) or the maximum amount allowed by
law, whichever is less.
Section 3: DELIVERY AND INSTALLATION
3.1 Tioga shall deliver to Bear Stearns, the Licensed Materials within ten (10)
business days from the execution of this Agreement or at a different date
if agreed to by both parties. Accompanying the Licensed Materials will be
one (1) copy of the related Documentation regularly furnished by Tioga.
3.2 Tioga shall provide the amount of training, instruction and consultation
prepaid as set forth in Exhibit B at Tioga's the current rates for such
services, when requested by Bear Stearns. Such services are to be used at a
time to be mutually agreed upon by the parties and Bear Stearns shall, in
addition to the amount set forth in Exhibit B, reimburse Tioga for all
reasonable out-of-pocket expenses, including all transportation, lodging,
meals and other expenditures related to providing such services.
Section 4: SUPPORT AND MAINTENANCE
4.1 Support. During the one year period extending from the Effective Date (the
-------
"Support Period"), and provided Bear Stearns has paid the applicable annual
support and maintenance fee set forth in Exhibit B, Tioga shall provide
support and maintenance described in Exhibit C. Any patches, updates, etc.
provided as part of Maintenance shall be included within the definition of
the Licenses Materials for the purpose of this Agreement.
4.2 Renewals. Tioga's obligation to provide the above-described support and
--------
maintenance and Bear Stearns' obligation to pay the then-current applicable
annual support and maintenance fee shall renew automatically upon each
anniversary of the Effective Date (or such other consolidated Licensed
Materials purchase date agreed to by the parties in writing), unless either
Bear Stearns or Tioga has given the other party prior written notice of
cancellation at least thirty (30) days prior to the expiration of the then
current term. If Bear Stearns elects not to renew support and maintenance
for successive terms, Bear Stearns may reenroll only upon payment of the
applicable annual fee which would have been paid had Bear Stearns not
terminated support and maintenance.
4.3 Training. Upon Bear Stearns' request, Tioga will provide training to Bear
--------
Stearns in accordance with Tioga's then current training offerings and at
Tioga's then current prices at mutually agreed upon times and locations.
Tioga's current training offerings and their associated prices are set
forth in Exhibit D. In the event training services are provided at
locations other than at Tioga's premises, Bear Stearns shall be responsible
for all reasonable travel, meals, hotel and other associated expenses
related to providing such training services. If training services are
listed in Exhibit B, Bear Stearns agrees to pay Tioga for such training
services in accordance with the terms of this Agreement.
4.4 Deployment and Implementation Services. Bear Stearns shall be responsible
--------------------------------------
for deployment and implementation of the Licenses Materials. Bear Stearns,
at its option, may elect to have Tioga provide deployment and
implementation services at Tioga's then current rates for such services.
In the event provision of deployment and implementation services requires
Tioga's employees to travel to Bear Stearns's location or other locations,
Bear Stearns shall be responsible for all reasonable travel, meals, hotel
and other associated expenses related to providing such deployment and
implementation services. In the event any work product or code is created
in the provision of Deployment and Implementation services, such work
product or code shall be included within Licensed Materials and licensed to
Bear Stearns under the terms and conditions of this Agreement, and Tioga
shall retain all right, title and interest in and to such work product or
code and any derivatives, enhancements or modifications to the Licensed
Materials created by Tioga. If deployment and implementation services are
listed in Exhibit B, Bear Stearns agrees to pay Tioga for such deployment
and implementation services in accordance with the terms of this Agreement.
<PAGE>
Section 5: WARRANTIES
5.1 Tioga warrants to Bear Stearns that for a period of sixty (60) days from
the Effective Date, the Licensed Materials will achieve the functionality
described in the Documentation. Tioga does not warrant, however that Bear
Stearns use of the Licensed Materials will be uninterrupted or that the
operation of the Licenses Materials will be error-free. Tioga also warrants
that the media containing the Licensed Materials, if any, is free from
defects in material and workmanship and will so remain for ninety (90) days
from the date Bear Stearns acquired the Licensed Materials. Tioga's sole
liability (and Bear Stearns exclusive remedy) for any breach of this
warranty shall be, in Tioga's sole discretion, the use of commercially
reasonable efforts: (i) to replace Bear Stearns' media or Licensed
Materials; or (ii) to advise Bear Stearns how to achieve the same
functionality with the Licensed Materials as described in the Documentation
through a procedure different from that set forth in the Documentation; or
(iii) if the above remedies are impracticable, to refund the license fee
paid for the Licensed Materials and terminate this Agreement. Tioga shall
have no obligation with respect to a warranty claim unless notified of such
claim and provided evidence of the license purchase within the applicable
warranty period. Tioga will use reasonable commercial efforts to repair,
replace, advise or refund pursuant to the foregoing warranty within thirty
(30) days of being so notified.
5.2 Tioga warrants the Licensed Materials are free from computer viruses
introduced as a result of the gross negligence or intentional acts of
Tioga, its agents or employees and that Tioga, its agents or employees will
not embed any device in the Licensed Materials or take any action to
disrupt or terminate its operation of such Licensed Materials.
5.3 Tioga further warrants that it is the sole owner of, or that it has the
right to license the use of, the Licensed Materials being used for Bear
Stearns's purposes, and that it has the right to provide Bear Stearns with
a nonexclusive license for the use of those Licensed Materials.
5.4 The Licensed Materials (i) is designed to be used prior to, during, and
after the calendar year 2000 A.D.; (ii) will operate during each such time
period without any error or interruption relating to, or the product of,
data or input which includes an indication of or reference to a date ("Date
Data") which represents or references different centuries or more than one
century; (iii) will, under normal use and service, record, store, process
and present calendar dates falling on or after September 9, 1999, January
1, 2000 and February 29, 2000, in the same manner, and with the same
functionality, data integrity and performance, as the Licensed Materials
records, stores, processes and presents calendar dates on or before
September 8, 1999, December 1, 1999 and February 29, 1996; and (iv)
recognizes the year 2000 as a leap year.
5.5 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE LICENSED MATERIALS OR THE
SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING
(WITHOUT LIMITATION) ANY WARRANTY OF NON INFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
Section 6: LIMITATIONS OF LIABILITY
EXCEPT AS STATED HEREIN, NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, INDIRECT AND/OR CONSEQUENTIAL DAMAGES OF ANY KIND, RESULTING FROM
EITHER PARTY'S PERFORMANCE OR FAILURE TO PERFORM PURSUANT TO THE TERMS OF THIS
AGREEMENT OR ANY OF THE SCHEDULES OR ATTACHMENTS HERETO, OR RESULTING FROM THE
FURNISHING, PERFORMANCE OR USE OR LOSS OF ANY LICENSED PRODUCTS OR OTHER
MATERIALS DELIVERED TO BEAR STEARNS THEREUNDER, INCLUDING WITHOUT LIMITATION ANY
INTERRUPTION OF BUSINESS, WHETHER RESULTING FROM BREACH OF CONTRACT OR BREACH OF
WARRANTY, EVEN IF THE PARTIES HERETO HAVE BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
Tioga's liability to Bear Stearns under any provision of this Agreement shall be
limited to the amounts actually paid by Bear Stearns to Tioga pursuant to the
Exhibit A and/or subsequent Exhibit A hereto. The existence of more than one
claim shall not enlarge or extend the limit. Bear Stearns releases Tioga from
all obligations, liability, claims or demands related to the Licensed Materials
supplied by Tioga to Bear Stearns under this agreement in excess of the
limitation provided for in this section.
<PAGE>
The parties acknowledge that the limitations set forth in this section are
integral to the amount of fees charged for the license granted under this
Agreement and services provided in connection with the same, and recognize that
were Tioga to assume any further liability beyond that set forth in this
section, such fees would be substantially higher.
Section 7: DISCLOSURE
7.1 The Licensed Materials and Documentation received by Bear Stearns from
Tioga under this Agreement are and shall be treated as proprietary and
confidential information of Tioga. Any material or information relating to
the business policies, procedures, customs and forms of Bear Stearns
including information previously divulged or delivered to Tioga by Bear
Stearns regarding the aforementioned subject matter and all information and
data which are proprietary to a third party and which the Bear Stearns is
obligated to treat as confidential obtained by Tioga or its officers,
employees or agents, or disclosed to them in connection with the
performance by Tioga of its obligations under this Agreement, is hereby
designated as confidential and proprietary information of Bear Stearns.
The obligations of confidentiality contained in this Section 7 shall not
apply to information which: (i) is known to a party at the time of
disclosure as proven by written records of the receiving party; (ii) is
independently received by a party without obligations of confidentiality
from a third party which has the legal right to give such information; or
(iii) is generally known to third parties through no fault or action of the
receiving party.
7.2 The parties agree not to use or copy the other's confidential information
unless such use or copying is approved by, and for the benefit of, the
other party.
7.3 Using the Licensed Material and Documentation or any part of the data
therein in original or remanipulated form for the purpose of creating any
form of list, directory, reporting service whether for internal use or
release to persons outside the Bear Stearns organization, is expressly
prohibited.
7.4 Each party hereto will take all reasonable steps to assure that the
confidential information of the other party shall not be disclosed by them
to others, in whole or in part, without the prior written permission of the
other party. Such prohibition on disclosures shall not apply to
disclosures by Bear Stearns to its employees and agents, provided such
disclosures are reasonably necessary to Bear Stearns's use of the Licensed
Materials and provided further that Bear Stearns shall take all reasonable
steps to insure that the Licensed Materials are not disclosed by such
employees in contravention of this Agreement.
Section 8: TITLE
Tioga shall retain title to the Licensed Material and Documentation
including all versions and embodiments thereof and all additions and
modifications thereto. Tioga does not by this Agreement convey any
proprietary interest therein to Bear Stearns. Bear Stearns agrees that
the Licensed Materials' Documentation and any derivative works thereof,
including all changes made thereto by anyone and any materials related
thereto that are supplied by or developed by Tioga, are the valuable
property of Tioga. Bear Stearns further agrees to treat the Licensed
Materials and related materials accordingly and agrees diligently to
preclude all access to the Licensed Materials except as provided herein, to
keep the same confidential, by using the same care and discretion that
Bear Stearns uses with respect to its own confidential property. Bear
Stearns agrees to keep all property of Tioga free and clear of all claims,
liens and encumbrances.
Section 9: INDEMNIFICATION
9.1 Tioga agrees to defend Bear Stearns and at Tioga's option, settle any
action or proceeding of any kind or description based upon a third party's claim
of copyright or trademark infringement asserted against Bear Stearns by such
third party based upon the use of the Licensed Materials by Bear Stearns,
provided: (i) the Licensed Materials are used as provided by Tioga; (ii) Tioga
shall have received from Bear Stearns notice of said claim within ten (10) days
of assertion thereof and, (iii) Tioga is given sole control to direct the
investigation, defense and settlement of each such claim. The foregoing
obligation of Tioga does not apply with respect to those portions of the
Licensed Materials (i) which are modified after shipment by any party other than
Tioga, if the alleged infringement relates to such modification, (ii) combined
with any non-Tioga products, processes or materials where the alleged
infringement relates to such combination, (iii) where the allegedly infringing
activity continues after Tioga has notified Licensee thereof or after Tioga has
informed Bear Stearns of modifications that would have avoided the alleged
infringement, (iv) where Bear Stearns' use of the Licensed Materials is incident
to an infringement not resulting primarily from the Licensed Materials, or (v)
infringement based on use of version other
<PAGE>
than the then current version of the Licensed Materials if such infringement
could have been avoided by use of the then current version. Bear Stearns shall
cooperate fully with Tioga in connection with the foregoing. If notified of
said claim within ten (10) days of assertion thereof brought against Bear
Stearns based on an allegation that Bear Stearns' use of the Licensed Materials
constitutes infringement, Tioga will pay reasonable attorney fees, associated
with resolving such claim and any amounts finally awarded in settlement, if any,
provided that Tioga shall have sole control of the resolution of any such claim
and all negotiations for its settlement. Any settlement made by Tioga under
this Section 9 shall not adversely affect Bear Stearns' ability to exercise the
license rights granted hereunder without Bear Stearns's prior written consent.
9.2 Should the Licensed Materials, become, or in Tioga's opinion are likely to
become, the subject of a claim of infringement, Tioga shall have the right,
at Tioga's option and expense, either: (i) to procure for the Bear Stearns
the right to continue using the Licensed Materials; (ii) to replace or
modify the same so that they become non-infringing; or, if after Tioga uses
its commercially reasonable efforts to accomplish (i) and (ii) and is
unable to do so, then; (iii) to grant the Bear Stearns a refund of the
unused portion of the license fees.
9.3 Both parties agree to indemnify, defend and hold harmless the other party,
its employees, agents and/or authorized representatives for any actual
damages, liabilities, costs and expenses, including reasonable attorneys
fees, due to claims alleging damage to the other parties property or
injury or death to any persons, arising directly out of the other parties
', or the other parties employee's, agent's or subcontractor's negligence
in performing the services contemplated under this Agreement.
Section 10: TERMINATION
10.1 In the event a party hereto materially defaults in the performance of any
of its duties or obligations hereunder, which default shall not be
substantially cured within thirty (30) days after notice is given to the
defaulting party specifying the default, then the party not in default may,
by giving notice thereof to the defaulting party specifying the default,
terminate this Agreement for cause. Notwithstanding the foregoing, with
respect to any such material default that cannot be reasonably cured within
thirty (30) days, if the defaulting party in good faith promptly proceeds
to commence curing said default and thereafter proceeds with all diligence
substantially to cure the same, the defaulting party shall have up to
another thirty (30) days (for a total of sixty (60) days) substantially to
cure such default. If such material default is not substantially cured
prior to the end of the second thirty (30) days, the party not in default
may, by giving notice thereof, terminate this Agreement for cause as of a
date specified in such notice of termination.
10.2 This agreement shall expire in the event Bear Stearns does not have any
active support services pursuant to Section 4 above. Additionally, Either
party hereto may have the right to terminate this Agreement and/or the
license granted hereunder, in the event that the other party: (i)
terminates or suspends its business, (ii) becomes subject to any bankruptcy
or insolvency proceeding under Federal or state statute, (iii) becomes
insolvent or becomes subject to direct control by a trustee, receiver or
similar authority, (iv) has liquidated, voluntarily or otherwise, or (v)
transfers, assigns or otherwise conveys control of itself, without the
prior written consent of the other party hereto.
Section 11: PUBLICITY
Tioga agrees to submit to Bear Stearns all advertising, sales promotion and
other publicity matter relating to this Agreement wherein Bear Stearns's
name is mentioned or language is used from which the connection of Bear
Stearns's name therewith may be inferred or implied; and Tioga further
agrees not to publish or use such advertising, sales promotion, or
publicity matter without the prior written consent of Bear Stearns.
Section 12: MONITORING
Tioga acknowledges that, as is the custom and practice in Bear Stearns's
industry, from time to time Bear Stearns monitors and/or records certain
telephone lines and other communications devices going into or out of Bear
Stearns's premises, and to the extent that any such monitoring and/or
recording occurs relating to any telephone call and other communication
going into or out of Bear Stearns's premises involving Tioga or any of its
employees, agents and sub-contractors, then Tioga, on behalf of its self
and its employees, agents and sub-contractors, consents thereto or will
ensure such other party consents thereto.
<PAGE>
Section 13: EXPORT RESTRICTIONS
Bear Stearns understands and acknowledges that certain technology licensed
hereunder may be subject to regulation by agencies of the U.S. government,
including the U.S. Department of Commerce, which prohibit export or
diversion of certain products and technology to certain countries. Bear
Stearns warrants that it will comply in all respects with the export
restrictions applicable to any materials or technology provided hereunder
and will otherwise comply with the Export Administration Regulations or
other United States laws and regulations in effect from time to time.
Section 14: MISCELLANEOUS
14.1 Any waiver, amendment or modification of any provisions of this Agreement
and/or any Exhibits and Attachments (if any) hereto shall not be effective
unless made in writing and signed by both parties. No failure or delay by
either party with respect to exercising any of its rights hereunder shall
operate as a waiver thereof.
14.2 If any provision of this Agreement is declared or found to be invalid,
illegal, unenforceable or void, then both parties shall be relieved of all
obligations arising under such provision, but only to the extent that such
provision is invalid, illegal, unenforceable or void, it being the intent
and agreement of the parties that this Agreement shall be deemed amended by
modifying such provision to the extent necessary to make it valid, legal
and enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is valid, legal and
enforceable and achieves the same objective. Each party agrees that it
will perform its obligations hereunder in accordance with all applicable
laws, rules and regulations now or hereafter in effect.
14.3 Headings are for reference purposes only.
14.4 Neither party shall be liable, or have recourse, in respect to any delay in
delivery or failure to deliver the Licensed Materials or any other
materials used in connection therewith provided by Tioga, or of the non-
performance or delay in performance of any term or condition of this
Agreement directly or indirectly resulting from any cause beyond the
control of Tioga. Such causes shall include, but not be limited to, acts
of God, strikes, lockouts, riots, acts of war, epidemics, governmental
regulations superimposed after the fact, fire, communication failures,
power failures, earthquakes or other disasters.
14.5 Tioga may, upon advance notice of at least ten (10) business days, conduct
and audit during regular business hours to verify compliance with the terms
of this Agreement, which shall be conducted at Tioga's expense unless the
results establish that inaccuracies from the audit have resulted in
underpayment to Tioga of more than 10% of the amount actually due, in which
case Bear Stearns shall pay all amount due and bear the expense of the
audit.
14.6 Any notices required or permitted to be sent hereunder shall be served
personally or by registered or certified mail, return receipt requested or
by facsimile with confirmation of receipt; to the addresses stated below:
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
115 South Jefferson Road 1816 Embarcadero Road
Whippany, NJ 07981 Palo Alto, CA 94303
Attn: IS-Contracts & Acquisitions Attn: Mark Vranesh
14.7 The laws of the State of New York shall govern and the parties consent and
submit to the jurisdiction and venue of the State or Federal Courts located
in New York.
14.8 Both parties acknowledges that it has read this Agreement, its Exhibits and
Attachments (if any), understands it and agrees to be bound by its terms,
and further agrees that it is the complete and exclusive statement of the
Agreement, which supersedes and merges all prior proposals, understandings
and all other agreements, oral and/or written, between the parties relating
to this Agreement. This Agreement may not be modified or altered except by
a written instrument duly executed by both parties.
<PAGE>
IN WITNESS WHEREOF, the parties, by their duly authorized representatives, have
caused this Agreement to be duly executed and delivered as of the day and year
first above written.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
- --------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
- --------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
- --------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sale
- --------------------------------- -------------------------------------
Title 5/27/99 Title 5-27-99
<PAGE>
EXHIBIT A
LICENSED MATERIALS
------------------
I. Description and Specifications of Software:
- -----------------------------------------------
Tioga Self-Healing System(TM) Version 1.2 in object code format.
II. Number of Network Computers and Workstations Licensed
- ----------------------------------------------------------
Catalogue Number and Program Name Number of Authorized Copies
- --------------------------------- ---------------------------
11-00001 Tioga/Desktop Agent See Scope Below
11-00002 Tioga/Mobile Agent See Scope Below
11-00006 Server Agent See Scope Below
11-00011 Tioga/Administration and One (1)
Healing Console - Enterprise
License
Scope: This is an Enterprise License deal with a term of three (3) years. Bear
Stearns may deploy any mixture of Desktop, Mobil, and/or Server agents as long
as the total number of authorized copies does not exceed [***] during the term
of the agreement. At the end of the three years, Bear Stearns will have a
perpetual right to use the number of licenses deployed during the term of this
agreement.
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
- --------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
- --------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
- --------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sale
- --------------------------------- -------------------------------------
Title 5/27/99 Title 5-27-99
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
EXHIBIT B
PAYMENT TERMS AND FEE SCHEDULE
------------------------------
I. Payment Terms:
- ------------------
The Fees described in VI. below will become due and payable upon the earlier to
occur of; (i) [***] by Bear Stearns of the initial rollout of the Company's
software on approximately [***] desktops at Bear Stearns whereby Tioga will
notify Bear Stearns in writing of the completion of the initial rollout and Bear
Stearns will have 10 business days to notify Tioga in writing of [***] of
the [***] or (ii) after [***] days from the Effective date. By mutual agreement,
both Companies may extend the [***] day [***] described in (ii) above.
II. Software License Fees
- ---------------------------
Item Fees
- ---- ----
License Fees $[***].
Licenses beyond the [***] limit may be purchased in blocks of [***] for a price
of $[***]/License.
III. Technical Support Fee Schedule
- -----------------------------------
Item Fees
- ---- ----
Standard Technical Support (Year 1) $ [***]
Standard Technical Support (Year 2) $ [***]
Standard Technical Support (Year 3 - [***]%) $ [***]
IV. Deployment and Implementation Fee Schedule
- ----------------------------------------------
V. Training
- ------------
VI. Payment of Fees
- --------------------
All fees are due and payable net 30 days from receipt of invoice. Payments are
due according to the following schedule:
. $[***] due June 30, 1999.Includes- First installment payment on software
license fees and payment of six months of product maintenance for 1999.
. $[***] due September 30, 1999. Second installment payment on software
license fees and payment of second six-months product maintenance for the
remainder of 1999 through May 2000.
. $[***] Maintenance Fee due May 31, 2000
. $[***] Maintenance Fee due May 31, 2001
. Beginning May 31, 2002, Maintenance fee due annually in advance at a rate
of [***]% of license fees billed to date (increased annually based on the
percentage increase reflected in the CPI).
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
- --------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
- --------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
- --------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sale
- --------------------------------- -------------------------------------
Title 5/27/99 Title 5-27-99
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
EXHIBIT C
SUPPORT
-------
Standard Technical Support
- --------------------------
Support Hours
Tioga will provide support from 8AM to 6PM Pacific time, Monday through
Friday
Response Time
Tioga will respond to customer inquiries within 24 hours
Contact Methods
Tioga will provide a 1-800 number support line
Tioga will provide e-mail support
Contacts
Customer is allowed one named contact per TAC (Tioga Administration
Console) User License purchased
Customer receives a reasonable amount of phone and e-mail support for those
contacts
Software Maintenance for product purchased
Customer will receive software patches and maintenance releases
Customer will receive major releases that are generally made available by
Tioga without charge
Product Information
Customer will receive quarterly product information updates
<PAGE>
EXHIBIT D
TRAINING
--------
Tioga Administrator Training
- ----------------------------
One day training course that includes the following:
Systems Administration Training
- - Installation and configuration of Tioga Self-Healing System
- - Configuration and administration of Tioga Servers
- - Installation and configuration of Tioga Agents
HelpDesk Administration Training
- - Tioga Self-Healing System Overview
- - User issues and education
- - Remote Diagnosis and Repair
Training to be provided at Bear Stearns facilities.
Fee Schedule
- ------------
See exhibit B.
<PAGE>
EXHIBIT 10.16
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
AMENDMENT NO. 1 TO Enterprise license agreement
This Amendment No. 1 to Enterprise License Agreement (this "Amendment") is
---------
entered into as of September ___, 1999 (the "Effective Date") by and between
--------------
Tioga Systems, Inc., a Delaware corporation ("Tioga"), and Bear Stearns & Co.,
-----
Inc., a Delaware corporation ("Bear Stearns").
------------
Whereas, the parties desire to amend the Enterprise License Agreement
by and between the parties dated as of May 27, 1999 (the "Agreement") as set
forth in this Amendment;
NOW THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
1. Unless otherwise specifically defined herein, the capitalized terms in
this Amendment have the definitions set forth in the Agreement.
2. Except as expressly amended by this Amendment, the terms and conditions
of the Agreement remain in full force and effect.
3. The Agreement, as amended, and this Amendment together constitute the
entire agreement between the parties concerning its subject matter, and
supercede any prior or contemporaneous agreements whether written or
oral. In the event of any conflict or inconsistency between the
Agreement and this Amendment, this Amendment shall prevail and control.
4. The Agreement is hereby amended by adding an Exhibit E & F attached
hereto.
5. This Amendment may be amended or modified only by a subsequent writing
signed by both parties to this Amendment. If any provision of this
Amendment is declared invalid, illegal or unenforceable, such provision
shall be severed and all remaining provision shall continue in full
force and effect. This Amendment may be executed in counterparts, each
of which shall be an original as against any party whose signature
appears on such counterpart and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Amendment as of the Effective Date
set forth above.
<TABLE>
<S> <C>
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
- --------------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
- --------------------------------------- --------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
- --------------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sales
- --------------------------------------- -------------------------------------
Title 9/29/99 Title 10/6/99
</TABLE>
<PAGE>
EXHIBIT E
ADDITIONAL LICENSED MATERIALS
-----------------------------
I. Description and Specifications of Software:
- ----------------------------------------------
Latest Version of Tioga Self-Healing System in object code format.
II. Number of Network Computers and Workstations Licensed
- ---------------------------------------------------------
<TABLE>
<S> <C>
Catalogue Number and Program Name Number of Authorized Copies
- --------------------------------- ---------------------------
11-00001 Tioga/Desktop Agent See Scope below.
11-00002 Tioga/Mobile Agent See Scope below.
11-00006 Server Agent See Scope below.
11-00011 Tioga/Administration and Healing Console - Enterprise See Scope below.
License
11-00050 Support.com Portal See Scope below.
</TABLE>
Scope: This is an [***] License deal with a term of three (3) years. Bear
Stearns may deploy any mixture of Desktop, Mobil, and/or Server agents to their
[***] customer machines during the term of the agreement. At the end of the
three years, Bear Stearns will have a perpetual right to use the number of
licenses deployed during the term of this agreement.
<TABLE>
<S> <C>
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
- --------------------------------------- --------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
- --------------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
- --------------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sales
- --------------------------------------- -------------------------------------
Title 9/29/99 Title 10/6/99
</TABLE>
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
EXHIBIT F
ADDITIONAL PAYMENT TERMS AND FEE SCHEDULE
-----------------------------------------
I. Payment Terms:
- -----------------
The Fees described in VI. below will become due and payable on the following
terms; (i) payments tied to [***] will be due and payable net [***] days of the
date (ii) deployment and implementation fees related to the [***] Support
Portal ("Portal") will be due net [***] days after the [***]. The Portal will be
considered [***] when Tioga notifies Bear Stearns in writing of the [***], and
Bear Stearns does not, within [***] business days, notify Tioga in writing of
[***]. If Bear Stearns notifies Tioga of [***] within [***] days, Tioga will
have [***] business days to address the issues raised and [***]. This process
will continue until Bear Stearns does not notify Tioga within [***] business
days, in writing, of [***] of the [***], at which point the [***].
II. Software License Fees
- -------------------------
Item Fees
- ---- ----
License Fees $[***]
III. Technical Support Fee Schedule
- -----------------------------------
Item Fees
- ---- ----
Standard Technical Support (Year 1) [***]
Standard Technical Support (Year 2) $[***]
Standard Technical Support (Year 3 - [***]%) $[***]
IV. Deployment and Implementation Fee Schedule
- ----------------------------------------------
Item Fees
- ---- ----
Creation of Bear Stearns branded [***] Support $[***]
Portal, including web-based integration with Remedy.
Additional integration work and portal services
consulting to be mutually agreed upon.
V. Training
- ------------ Fees
----
Training Onsite at Bear Stearns Facilities [***]
Additional training for Bear personnel will be provided [***] to Bear
(based on space available) for 3 years, provided Bear personnel attend training
at Tioga's offices in Redwood City, CA.
VI. Payment of Fees
- -------------------
All fees are due and payable net 30 days from receipt of invoice. Payments are
due according to the following schedule:
. $[***] due September 30, 1999.
. $[***] due December 31, 1999.
. $[***] due upon delivery and acceptance of final [***] Support
. Portal, estimated 2/15/2000.
. $[***] Maintenance Fee due September 30, 2000
. $[***] Maintenance Fee due September 30, 2001
. Beginning September 30, 2002, Maintenance fee due annually in advance at a
rate of [***]% of license fees billed to date (increased annually based on
the percentage increase reflected in the CPI) .
<TABLE>
<S> <C>
Bear, Stearns & Co. Inc. Tioga Systems, Inc.
- --------------------------------------- -------------------------------------
/s/ Geryl W. Darington /s/ Robert Amaral Jr.
- --------------------------------------- -------------------------------------
Signature Signature
Geryl W. Darington Robert Amaral Jr.
- --------------------------------------- -------------------------------------
Print or Type Name Print or Type Name
Senior Managing Director Vice-President of Sales
- --------------------------------------- -------------------------------------
Title 9/29/99 Title 10/6/99
</TABLE>
[*] CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 15, 2000, in the Registration Statement
(Form S-1) and related Prospectus of Support.com, Inc. for the registration of
its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
February 17, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> DEC-07-1997 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 2,807 4,023
<SECURITIES> 0 8,466
<RECEIVABLES> 75 3,490
<ALLOWANCES> (10) (40)
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,388 16,390
<PP&E> 279 1,198
<DEPRECIATION> (23) (317)
<TOTAL-ASSETS> 3,672 17,525
<CURRENT-LIABILITIES> 409 7,052
<BONDS> 0 0
5,237 21,449
1 1
<COMMON> 1 1
<OTHER-SE> (2,425) (13,255)
<TOTAL-LIABILITY-AND-EQUITY> 3,672 17,525
<SALES> 18 3,315
<TOTAL-REVENUES> 18 3,315
<CGS> 0 969
<TOTAL-COSTS> 2,822 17,779
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (51) (331)
<INCOME-PRETAX> (2,750) (14,294)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,750) (14,294)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,750) (14,294)
<EPS-BASIC> (0.57) (2.31)
<EPS-DILUTED> (0.57) (2.31)
</TABLE>
