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SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN MATEO

, Individually and on Behalf ) of All Others Similarly Situated, )

Plaintiff, )

VS. )

APIGEE CORPORATION, ) CHET KAPOOR, ) TIM WAN, ) BOB L. COREY, ) NEAL DEMPSEY, )

PROMOD HAQUE, )

WILLIAM " BJ" JENKINS, JR., ) EDMOND MESROBIAN, ) ROBERT SCHWARTZ, ) STUART G. PHILLIPS, ) BAY MANAGEMENT COMPANY X, LLC, ) BAY PARTNERS X, LP, ) MORGAN STANLEY & CO. LLC, ) J.P. MORGAN SECURITIES LLC, ) CREDIT SUISSE SECURITIES ( USA) LLC, ) PACIFIC CREST SECURITIES, a division of )

KEYBANC CAPITAL MARKETS INC., ) JMP SECURITIES LLC, ) NOMURA SECURITIES INTERNATIONAL,)

INC. and ) DOES 1- 25, inclusive, )

Defendants.

VIA FAX

Case No. '

CLASS ACTION

COMPLAINT FOR VIOLATIONS OF THEFEDERAL SECURITIES LAWS

DEMAND FOR JURY TRIAL

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

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Plaintiff ("plaintiff'), individually and on behalfofall others similarly situated,

by plaintiff' s undersigned attorneys, for plaintiffs complaint against defendants, alleges the following

based upon personal knowledge as to plaintiff and plaintiffs own acts, and upon information and belief

as to all other matters based on the investigation conducted by and through plaintiffs attorneys, which

included, among other things, a review of Apigee Corporation' s (" Apigee" or the " Company") press

releases, U.S. Securities and Exchange Commission ("SEC") filings, analyst reports, media reports, and

other publicly disclosed reports and information about defendants. Plaintiff believes that substantial

evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for

discovery.

NATURE OF THE ACTION

1. This is a securities class action on behalf of all those who purchased Apigee common

stock in or traceable to Apigee' s April 24, 2015 initial public stock offering ( the " IPO"), seeking to

pursue remedies under the Securities Act of 1933 ( the " 1933 Act").

JURISDICTION AND VENUE

2. The claims alleged herein arise under §§ 11 and 15 ofthe 1933 Act, 15 U.S. C. §§77k and

77o. Jurisdiction is conferred by §22 ofthe 1933 Act, 15 U.S. C. §77v, and venue is proper pursuant to

22 of the 1933 Act. Section 22 of the 1933 Act explicitly states that "[ e] xcept as provided in section

16( c), no case arising under this title and brought in any State court of competent jurisdiction shall be

removed -to any court in the United States." Section 16( c) refers to " covered class actions," which are

defined as lawsuits brought as class actions or brought on behalf of more than 50 persons asserting

claims under state or common law. This is an action asserting federal law claims. Thus, it does not fall

within the definition ofa " covered class action" under § 16( b) -(c) and is therefore is not refnovable to

court, under the Securities Litigation Uniform Standards Act of 1998 or otherwise. See Luther

24 11 v. Countrywide Fin. Corp., 195 Cal. App. 4th 789, 792 (20 11) (" The federal Securities Act of 1933 ....

25 11 as amended by the Securities Litigation Uniform Standards Act ... , provides for concurrent

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for cases asserting claims under the 1933 Act ...."); Luther v. Countrywide Horne

Servicing LP, 533 F.3d 1031, 1032 (9th Cir. 2008) (" Section 22(a) ofthe Securities Act of 1933 creates

concurrent jurisdiction in state and federal courts over claims arising under the Act. It also specifically

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provides that such claims brought in state court are not subject to removal to federal court."); Plymouth

Cty. Ret. Sys. v. Model N, Inc., No. 14- cv-04516- WHO, 2015 U.S. Dist. LEXIS 1104, at * 8 ( N.D. Cal.

Jan. 5, 2015) (" Since 2013, , .. every court in this district to [ adjudicate a motion to remand an action

brought in state court pursuant to the 1933 Act] Irms-granted remand.").'

3. The violations of law complained ofherein occurred in this State and in large part in this

County. Defendant Wan, the Company' s Chief Financial Officer (" CFO"), resides in San Mateo

County, the controlling shareholder entities of the Venture Capital Defendants ( defined herein) are

domiciled in San Mateo County, and defendant Phillips resides in San Mateo County as well. Each of

the Underwriter Defendants (defined herein) has a sizable San Mateo County practice and maintains

substantial and continuous contact with California by conducting significant investment banking

operations in this County and throughout this State.

PARTIES

4. Plaintiff purchased Apigee common stock pursuant and traceable to the

IPO, and was damaged thereby.

5. Defendant Apigee is a San Jose, California-based software development company that

has developed a software platform designed to enable application -programming interface (" API") based

digital strategies and business insights for enterprises.

6. Defendant Chet Kapoor (" Kapoor") is, and was at the time of the IPO, a member

Apigee' s Board ofDirectors and its ChiefExecutive Officer. Defendant Kapoor joined Apigee in 2007,

after its founding but before its IPO.

7. Defendant Tim Wan (" Wan") is, and was at the time of the IPO, the CFO of Apigee.

Defendant Wan joined Apigee in March 2015, one month before the IPO.

8. Defendants Bob L. Corey, Neal Dempsey (" Dempsey"), Promod. Haque, William B̀J"

Jenkins, Jr., Edmond Mesrobian and Robert Schwartz are, and were at the time ofthe IPO, members of

the Apigee Board of Directors (the " Board").

9. The defendants referenced above in 1116- 8 signed the false and misleading Registration

Statement used to- conduct the IPO and are referred to herein as the " Individual Defendants." The

defendants referenced above in 116- 7 are executives ofApigee, participated in the roadshow to sell the

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COMPLAINT FOR VIOLATIONS OF TIM FEDERAL SECURITIES LAWS

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IPO and are sometimes referred to herein as the " Executive Defendants." Defendant Apigee and the

Individual Defendants are strictly liable for the false and misleading statements incorporated into the

Registration Statement.

10. Defendants Dempsey, Stuart G. Phillips (" Phillips"), Bay Management Company X,

LLC and Bay Partners X, LP (the " Venture Capital Defendants") are part of a venture capital stake in

Apigee and beneficially owned, through partnerships they controlled (Bay Partners X Entrepreneurs

Fund, LP and Bay Partners X, LP), over 18% of the Company' s shares at the time of the IPO. Those

shares controlled by the Venture Capital Defendants, Series A Convertible Preferred Stock, Series B

Convertible Preferred Stock, Series C, D, E, F and G Convertible Preferred Stock, and Series H

Convertible Preferred Stock, automatically converted into publicly tradable common stock immediately

prior to the completion of the IPO, on a 1: 1. 261, 1: 1. 363, 1: 1, and 1: 1. 037 basis, respectively. These

shares represented over 18% of the voting power on Apigee' s Board just prior to the IPO. As of the

IPO, Dempsey and Phillips were co -managers of Bay Management Company X, LLC, the general

partner to Bay Partners X, LP and Bay Partners X Entrepreneurs Fund, LP, and as such had voting and

dispositive power over the shares held by those entities. As a result of those holdings and by having a

director on Apigee' s Board, the Venture Capital Defendants effectively controlled Apigee and caused it

to conduct the IPO. Indeed, the Registration Statement refers to the Venture Capital Defendants as

follows: "[ O] ur directors ... and significant stockholders that beneficially own more than 5% of our

common stock will continue to have substantial control over us after this offering." The offices of the

Venture Capital Defendants are in San Mateo County.

11. Defendants Morgan Stanley & Co. LLC, J. P. Morgan Securities LLC, Credit Suisse

Securities ( USA) LLC, Pacific Crest Securities, a division of KeyBanc Capital Markets Inc., JMP

Securities LLC and Nomura Securities International, Inc. are investment banking firms that acted as

underwriters of the IPO, helping to draft and disseminate the IPO documents. These defendants are

referred to herein as the " Underwriter Defendants." Pursuant to the 1933 Act, the Underwriter

Defendants are liable for the false and misleading statements in the Registration Statement as follows:

a) The Underwriter Defendants are investment banking houses which specialize,

inter alia, in underwriting public IPOs of securities. They served as the underwriters of the IPO and

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shared more than $6 million in fees collectively. The Underwriter Defendants determined that in return

for their share of the. IPO proceeds, they were willing to merchandize Apigee stock in the IPO. The

Underwriter Defendants arranged a multi -city roadshow prior to the IPO during which they, and the

Executive Defendants, met with potential investors and presented highly favorable information about

the Company, its operations and its financial prospects.

b) The Underwriter Defendants also demanded and obtained an agreement from

Apigee that Apigee would indemnify and hold the Underwriter Defendants harmless from any liability

under the federal securities laws. They also made certain that Apigee had purchased millions ofdollars

in directors' and officers' liability insurance.

c) Representatives of the.Underwriter Defendants also assisted Apigee and the

Individual Defendants in planning the IPO, and purportedly conducted an adequate and reasonable

investigation into the business and operations of Apigee, an undertaking known as a " due diligence"

investigation. The due diligence investigation was required of the Underwriter Defendants in order to

engage in the IPO. During the course of their " due diligence," the Underwriter Defendants had

continual access to confidential corporate information concerning Apigee' s operations and financial

prospects.

d) In addition to availing themselves of virtually unbridled access to internal

corporate documents, agents of the Underwriter Defendants met with Apigee' s management, top

executives and outside counsel and engaged in "drafting sessions" between at least November 2014 and

April 2015. During these sessions, understandings were reached as to: ( i) the strategy to best

accomplish the IPO; (ii) the terms ofthe IPO, including the price at which Apigee stock would be sold;

iii) the language to be used in the Registration Statement; ( iv) what disclosures about Apigee would be

made in the Registration Statement; and (v) what responses would be made to the SEC in connection

with its review of the Registration Statement. As a result of those constant contacts and

communications between the Underwriter Defendants' representatives and management and top

executives, the Underwriter Defendants knew, or should have known, ofApigee' s existing problems as

detailed herein.

MCOMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

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e) The Underwriter Defendants caused the Registration Statement to be filed with

the SEC and declared effective in connection with offers and sales thereof, including to plaintiffand the

Class ( defined herein).

12. The true names and capacities ofdefendants sued herein under California Code ofCivil

Procedure §474 as Does 1. through 25, inclusive, are presently not known to plaintiff, who therefore

sues these defendants by such fictitious names. Plaintiffwill seek to amend this complaint and include

these Doe defendants' true names and capacities when -they are ascertained. Each of the fictitiously j

named defendants is responsible in some manner for the conduct alleged herein and for the injuries'

suffered by the Company as a result of defendants' wanton and illegal conduct.

SUBSTANTIVE ALLEGATIONS

Apigee' s Business Leading Up to the IPO

13. Apigee provides a software platform designed to permit businesses to design, deploy,

and scale APIs as a connection layer between their core IT systems and data and the applications

through which their customers, partners, employees and other users engage with their business. Using

Apigee' s platform, businesses are supposed to be able to securely connect their core services and data to

developers to enable them to develop applications and experiences for customers, partners, employees

and other users.

14. An API is a set ofprogramming instructions and standards for accessing a Web -based

software application or Web tool. Simply stated, an API is the way software applications talk to one

another. A software company releases its API to the public so that other software developers can design

products that are powered by its service.

15. For example, Amazon.com released its API so that website developers could more easily

access Amazon' s product information. Using the Amazon API, a third -party website can post direct

links to Amazon products with updated prices and an option to " buy now." Another example is the

ability to look at a Google map inside Yelp.com. This is possible because Google " exposes" its

mapping capabilities via an API, which Yelp uses in its app, enabling the Yelp app to retrieve data from

Google Maps. Yelp doesn' t have to know how Google Maps works internally but just has to know their

API to use it in its app.

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16. To be sure, an API is a software -to -software interface, not a user interface. With APIs,

applications talk to each other without any user knowledge or intervention. -For example, when a

consumer purchases movie tickets online and enters his or her credit card information to do so, the

movie ticket website uses an API to send the credit card information to a remote application that

verifies whether that credit card information is correct. Once payment is confirmed, the remote

application sends a response back to the movie ticket website saying it is appropriate to issue the tickets.

17. An API resembles Software as a Service (" SaaS"), since software developers do not have

to start from scratch every time they write a program. Instead ofbuilding one core application that tries

to do everything — e-mail, billing, tracking, etc. — the same application can contract out certain

responsibilities to remote software that does it better.

18. Apigee was originally incorporated in Delaware as Nexgen Machines, Inc. on June 3,

2004. The Company changed its name to Sonoa Systems, Inc. on November 15, 2004, and then

changed its name to Apigee Corporation on September 21, 2010.

19. At the time of its IPO, Apigee' s product offerings included: Apigee Edge: a self-service

API-gateway/management solution that enables businesses to manage exposure of their services and

data through APIs to the use of those APIs by developers who are building consumer -facing and I

enterprise applications, that was the foundation ofthe Company' s platform strategy and responsible for

95% of its historical revenues; andApigee Insights: a self-service predictive analytics software toolset

designed to help companies analyze big data to provide personalized experiences for customers thathad

not been launched until September 2014. Both Edge and Insights could be deployed either in the cloud

or on a customer' s premises. When implemented on -premises, Apigee' s platform is behind the user' s

firewall whereas when implemented in the cloud it is an SaaS offering. At the time of the IPO,

approximately 60% of Apigee' s new customers were selecting cloud deployments while 40% were

selecting on -premise deployments.

20. In terms of revenues, the on -premises solution is sold either as a perpetual license

recognized -upfront or as a term license recognized over the term of the contract, while the cloud' s

solution is sold as a subscription recognized ratably. At the time ofits IPO, the Company reported three


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revenue line items: License, Subscription, and Support, and Professional Services.' License revenue

reflected the revenue recognized from sales ofon -premises software licenses. A substantial majority of

License revenue was from perpetual licenses, under which Apigee generally recognized the license fee

portion of the arrangement upfront. Subscription and Support revenue was derived primarily from

subscription fees from the customer accessing Apigee' s software in the cloud. Apigee also generated

revenue from maintenance and support agreements for on -premises licenses. Apigee typically

recognized Subscription and Support revenues ratably over the term ofthe arrangement. Professional

Services revenues (associated with implementing the Company' s solutions) were recognized primarily

on a time and materials basis as services were delivered. For the Company' s three fiscal years ended

prior to its IPO, the Company had reported the following revenue breakdown:

FISCAL

YEAR

TOTAL .

REVENUES LICENSE

SUBSCRIPTION

AND SUPPORT

PROFESSIONAL

SERVICES

2012 27.7M 9.5M 7.3M 10. 8M

2013 43.2M 13. 9M 15. 2M 14.OM

2014 52.7M 11 AM 20.2M 21. 1M

21. There is more fluctuation in sales ofperpetual licenses, meaning License revenue is more

lumpy quarter to quarter, and. so Apigee sought to increase subscription sales which revenue is

recognized on a ratable basis. According to the Company at the time of its IPO, 70% of new paying'

customers over the prior few quarters had been opting for the cloud product. However, some

companies cannot put their and their customers' data on the cloud. due to regulator and other issues,

making subscription sales more difficult to obtain.

22. Moreover, by the time of the IPO the Company' s revenues from one of its largest

customers and an early -adopter of its technology, AT&T Corporation (" AT&T"), were significantly

decreasing. In 2011, AT&T had started using Apigee' s platform as part of its digital initiative to

securely open up its network -based services, such as location, messaging, payment and speech, and

enable outside developers to create an ecosystem of innovative apps using AT&T' s network. Using

Apigee Edge, AT&T securely managed and shared select back -end services ( defined through APIs)

At the time of the IPO, Apigee provided a free, self-service, non -expiring cloud -based trial ofApigee Edge to developers to entice them to develop compatible apps..

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with third -party developers. Additionally, in 2013, AT&T expanded its use of Apigee' s platform to

manage APIs and data delivery for its mission -critical system used by national reseller partners to

securely activate AT&T mobile phones. As a result, for fiscal years 2014, 2013 and 2012, respectively,

AT&T had accounted for 15%, 36% and 38% of the Company' s total revenues. In fiscal 2012, AT&T

accounted for 35% ofApigee' s License revenue, 20% of its Subscription and Support revenue, and 53%

of its Professional Services and Other revenue; in fiscal 2013, AT&T accounted for 54% ofApigee' s

License revenue, 10% of its Subscription and Support revenue, and 47% of its Professional Services

and Other revenue; and in fiscal 2014, AT&T accounted forjust 7% ofthe Company' s Subscription and

Support revenue and 30% of its Professional Services and Other revenue. AT&T had made an

unusually large License purchase in 2013 that had not repeated in 2014; and then in 2014, AT&T began

reducing its reliance on Apigee' s Professional Services. By 2015, following the IPO, AT&T would

account for just 5% of the Company' s revenues.

23. As a result, the Company was growing more dependent upon sales through channel

partners including Accenture and SAP. The Accenture partnership was forged in 2013 when Accenture

signed a Master Alliance Agreement with Apigee that gave Accenture the right to co -sell as well as

resell Apigee as part of its own larger implementations. Accenture also has a minority investment in

Apigee. The Company' s OEM and reseller partnership with SAP dates back to July 2014. Under the

agreement, SAP agreed to deliver a comprehensive API management application built on Apigee Edge

product on SAP' s Hana Cloud to SAP' s cloud customers, as well as resell the Apigee Edge product on a

stand- alone basis to its on -premises customers.

24. Because of the Company' s relatively short operating history, its unusually long sales

cycle (typically lasting six to nine months), its historically high telco company customer concentration,

the loss of much of AT&T' s business going into the IPO, the Company' s statements describing its

business metries, sales trends, achievements in diversifying its customer base, and its financial

prospects were all particularly material to would-be investors going into Apigee' s IPO. This was

especially true because Apigee expressly stated in its offering documents that the Company did not

intend to pay a dividend on its common stock in the foreseeable future, meaning that being able to cash


1 in on stock price appreciation resulting from strong financial performance marked investors' only

2 opportunity to profit on their investment in Apigee common stock.

3 25. Apigee' s fiscal year runs from August 1 to July -31. So the Company' s April 24, 2015

4 IPO was being conducted just days before the third quarter 2015 (" 3Q 2015") ended on April 30, 2015.

5 The False and Misleading Registration Statement

6 26. On or about November 28, 2014, Apigee filed with the SEC its registration statement on

7 Form S- 1 ( Registration No. 333- 202885), which, following several amendments made in response to

8 comments received from the SEC and being declared effective by the SEC on April 23, 2015, would

9 later be utilized for the IPO (the " Registration Statement"). On or about April 24, 2015, Apigee and the

10 Underwriter Defendants priced the IPO at $ 17 per share, filed with the SEC the final prospectus for the

11 common stock IPO (the " Prospectus"), which forms part ofthe Registration Statement ( the Prospectus

12 and Registration Statement are collectively referred to herein as the " Registration Statement"), and sold

13 5, 115, 000 shares of Apigee common stock to the investing public.

14 27. . The Registration Statement was negligently prepared and, as a result, contained untrue

15 statements of material facts or omitted to state other facts necessary to make the statements made not

16 misleading, and was not prepared in accordance with the rules and regulations governing its

17 preparation.

18 28. Concerning the Company' s relationship with Amazon, the Registration Statement stated

19 that Apigee was then procuring from Amazon Web Services (" AWS") " a distributed computing

20 infrastructure platform for business operations, or what is commonly referred to as a cloud computing

21 service," stating that it had " architected [ its] software and computer systems so as to utilize data

22 processing, storage capabilities and other services provided by AWS" and that " the vast majority of

23 [ Apigee' s own] cloud service infrastructure [ was then being] run on AWS." What the Registration

24 Statement failed to disclose was that Amazon was then developing and would soon introduce its own

25 Amazon API Gateway, a " fully managed service that makes it easy for developers to create, publish,

26 maintain, monitor, and secure APIs at any scale," and that potential new customers already using the

27 Amazon stack would prefer the Amazon API Gateway over Apigee' s Edge. The Registration Statement

28 further failed to disclose that Amazon' s API Gateway was equivalent to a free offering, and could

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2 platform offered. While identifying both International Business Machines Corporation and Oracle

3 Corporation as potential competitors, "both ofwhich;" the Registration Statement stated, could "bundle

4 competing products and services with other software offerings, or offer them at a low price as part ofa

5 larger sale," the Registration Statement stated nothing about Amazon' s efforts to create a competing

6 platform in-house, despite' that Amazon was in a very good position to do so based on Amazon' s

7 operation of the very distributed computing infrastructure platform Apigee was using and the popularity

8 of Amazon' s own AWS.

9 29. Concerning steadiness of growth in the Company' s bookings and revenue growth, the

10 Registration Statement provided the following quarterly sales figures,

11 ' nit ee Mouths Elided

Oct. 31, Jan. 31, AprJl 3D, Jnh• 31, Oct. 3.1, Jaa. 31

1013 101f 1014 2611 ? Oli 201S

101 thmtsandsj

L, Consolidated Statement of Operations Data:

Revenue

13Lieens., $ 688 S 2, 878 $ 3, 739 S - 4, 106 S 4, 416 $ 5, 106

Subscription 3, 209. 3, 901 3, 644 3984 4, 547 5, 447

Support 1.; 21'? 1, 329 1, 399 1, 559 1, 946 ' 2; 224

14 Ptofessiclnal .services and other 5, 135 5,075 5, 606 . 5; 248 4,698 4, 231

Total revenue 10,23.1 13, 183 14, 388 14; 89'7 15,607 17, 008

15stating that Apigee' s " total revenue ha[ d] increased over the periods presented due to increasedsales to

16new customers as well as expanded sales to existing customers that seek to increase their digital

17deployments or expand the use ofour software through additional use cases or broader deployment

18within their organizations," and that its "quarterly results in recent periods ha[d] not reflected seasonal

19variations in ... total revenue due to [ its] growth and the revenue recognition policies applicable to -

20license revenue derived from time -based licenses and to subscription and support revenue." Elsewhere,

21the Registration Statement emphasized that the Company had " experienced rapid growth in recent

22periods," stating that "gross billings were $36.7 million, $43. 1 million and $63. 8 million in fiscal 2012,

232013 and 2014, respectively, representing growth rates of 18% from fiscal 2012 to fiscal 2013 and 48%

24from fiscal 2013 to fiscal 2014," that " gross billings were $23. 7 million and $37.6 million in the six

25months ended January 31, 2014 and 2015, respectively, representing a growth rate of 59%," that " total

26revenue was $27. 6 million, $43. 2 million and $52.7 million in fiscal 2012, 2013 and 2014, respectively,

27and $23.4 million and $32.6 million in the six months ended January 31, 2014 and 2015, respectively."

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The Registration Statement further stated that "[ t]otal revenue increased $9.2 million, or 39%, in the six

months ended January 31, 2015, compared to six months ended January 31, 2014, primarily dire to an

increase its license revenue of $6.0 million, or 167%, and growth in subscription and support revenue

of $4. 5 million, or 47%,". stating that the " increase in license revenue was driven primarily by growth in

our on -premises deployments," that the " increase in subscription revenue of $2.9 million for the six

months ended January 31, 2015, compared to six months ended January 31, 2014, was primarily due to

growth in the number ofcustomers adopting [the Company' s] cloud -based solution," and that "revenue

from software support increased by $1. 6 million for the six months ended January 31, 2015, compared

to six months ended January 31, 2014, as a result of on -premises software licenses that increased [ its]

cumulative installed base ofcustomers that pay for recurring software support fees." While repeatedly

lauding the Company' s bookings and revenue growth, the Registration Statement failed to disclose that

the reported bookings and revenues in the 4Q 2014 ( ended July 31, 2014) and 2Q 2015 ( ended

January 31, 2015) had been inflated due to non-recurring one- time deals recognized in those quarters.

30. The Registration Statement also identified a reporting metric that did not comply with

Generally Accepted Accounting Principles ("GAAP") as " Non -GAAP Gross Profit and Gross Margin."

According to the Registration Statement, " non -GAAP gross profit" was defined as " total revenue

less ... total cost of revenue, adjusted to exclude stock -based compensation associated with equity

awards granted to professional services and maintenance personnel and amortization of acquired

intangible assets," and " non -GAAP gross margin" was defined as " non -GAAP gross profit as a

percentage of. . . total revenue." The Registration Statement stated that Apigee' s " non -GAAP gross

profit was $ 15. 6 million, $21. 4 million and $25. 8 million in fiscal 2012, 2013 and 2014, and grew 37%

and 20% year -over -year in fiscal 2013 and fiscal 2014, respectively," and that its " non -GAAP gross

profit was $ 8. 2 million and $ 20.5 million in the six months ended January 31, 2014 and 2015,

respectively, and grew 149%." Emphasizing that "[ n] on-GAAP gross profit and gross margin [were]

key measures used by [ Apigee Is] management to understand and - valuate [ its] operating

and trends," the Registration Statement stated that "[ t]he increase in non -GAAP gross

profit in fiscal 2014 and the six months ended January 31, 2015, was largely as a result of increased

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I total revenue," while again failing to disclose that the increases in revenue in the 4Q 2014 and 2Q 2015

2 had been inflated due to non-recurring one- time deals recognized in those quarters.

3 31. As demonstrated in the following slide used in presentations made to investors by the

4 Executive Defendants during the roadshow conducted by the Underwriter Defendants to sell the IPO,

5 defendants continued the strong sales growth mantra while failing to disclose that the increases in

6 revenue in the 4Q 2014 and 2Q 2015 had been inflated due to non-recurring one- time deals recognized

7 in those quarters:

8

apigee910 Rapid Fk;vente and Billings C aroMth

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1832. Slides used in the roadshow presentation further claimed that investors could count on

19increasing predictability" in Apigee' s revenue growth due to ongoing " subscription growth":

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33. The statements referenced above in 1128- 32 were each materially false and misleading

because they failed to disclose and misrepresented the following adverse facts that existed at the time of

the IPO:

a) Apigee faced direct competition from Amazon, upon whose platform Apigee' s

entire cloud infrastructure was running, and who was preparing to compete against Apigee for potential

new customers, particularly potential new customers who were already using Amazon' s technology

stack;

b) Apigee' s 2Q 2015 revenues ofjust $17 million had included an " unusually large

transaction" of $5. 9 million from just one customer which had comprised approximately 35% of that

quarter' s revenues and was not repeating going forward;

c) Apigee' s 4Q 2014 billings ofjust $21. 7 million had included $8. 6 million from

three very large deals (one was a SAP renewal and another a telco deal) that had comprised a full 39%

of that quarter' s revenues and were not repeating going forward;

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d) Lowered demand for Apigee' s product offerings was requiring the Company to

scale back on its direct sales efforts and to focus more of its efforts on selling through channel partners

such as Accenture and SAP;

e) As a result of the foregoing, Apigee was experiencing lowered billings; and

f) As a result, at the time of the IPO, the Company' s business and financial'

prospects were not what defendants had led the market to believe they were in the Registration

Statement.

34. Pursuant to Item 303 of Regulation S -K, 17 C.F.R. §229.303, and the SEC' s related

interpretive releases thereto, issuers are required to disclose events or uncertainties, including any

known trends, that have had or are reasonably likely to cause the registrant' s financial information not

to be indicative of future operating results. At the time of the IPO, unbeknownst to investors, the

Company' s recent quarter included non-recurring revenues, the Company was facing competition from

Amazon whose infrastructure Apigee' s own platform was running on, and the Company was

experiencing reduced demand for direct sales of its product offerings which had required the Company

to begin focusing its efforts on selling its products indirectly through channel partners. The adverse

events and uncertainties associated with these negative trends were reasonably likely to have a material

impact on Apigee' s profitability, and, therefore, were required to be disclosed in the Registration

Statement, but were not.

35. The IPO was successful for the Company and the Underwriter Defendants who sold

5, 115, 000 shares ofApigee common stock, raising nearly $87 million in gross proceeds ($80.9 million

net of underwriting fees and IPO costs).

36. However, the price of Apigee common stock plummeted as the market learned,

following the IPO, that the Company' s business metrics and financial prospects were not as strong as

represented in the Registration Statement. As a result, the price of Apigee common stock has

plummeted to trade as low as $ 5. 14 and now trades well below $8. 00 per share, or approximately 47%

of the price the stock was sold at in the IPO.

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CLASS ACTION ALLEGATIONS

37. Plaintiffbrings this action as a class action on behalf ofall those who purchased Apigee

common stock pursuant to the Registration Statement issued in connection with the IPO (the " Class").

Excluded from the Class are defendants and their families, the officers, directors and affiliates of

defendants, at all relevant times, members of their immediate families and their legal representatives,

heirs, successors or assigns, and any entity in which defendants have or had a controlling interest.

38. The members of the Class are so numerous that joinder ofall members is impracticable.

While the exact number of Class members is unknown ' to 'plaintiff at this time and can only be

ascertained through appropriate discovery, plaintiffbelieves that there are hundreds ofmembers in the

proposed Class. Record owners and other members of the Class may be identified from records

maintained by Apigee or its transfer agent and may be notified of the pendency of this action by mail,

using the form of notice similar to that customarily used in securities class actions.

39. Plaintiff' s claims are typical of the claims of the members ofthe Class as all members of

the Class are similarly affected by defendants' wrongful conduct in violation of federal law that is

complained of herein.

40. Plaintiffwill fairly and adequately protect the interests ofthe members ofthe Class and

has retained counsel competent and experienced in class and securities litigation.

41. Common questions oflaw and fact exist as to all members of the Class and predominate

over any questions solely affecting individual members of the Class. Among the questions of law and

fact common to the Class are:

a) whether defendants violated the 1933 Act;

b) whether statements made by defendants to the investing public in the Registration

Statement and Prospectus misrepresented material facts about the business and operations of Apigee;

and

c) to what extent the members of the Class have sustained damages and the proper

I measure of damages.

42. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

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damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for members of the Class to individually redress the wrongs

done to them. There will be no difficulty in the management of this action as a class action.

FIRST CAUSE OF ACTION

Violations of §11 of the 1933 ActAgainst All Defendants

43. Plaintiff incorporates ¶114. 2 by reference.

44. This Cause of Action is brought.pursuant to § 11 of the 1933 Act, 15 U.S. C. § 77k, on

behalf of the Class, against all defendants. This is a non -fraud cause ofaction. Plaintiffdoes not assert

that defendants committed intentional or reckless misconduct or that defendants acted with scienter or

fraudulent intent.

45. The Registration Statement for the IPO was inaccurate and misleading, contained untrue

statements of material facts, omitted to state other facts necessary to make the statements made not

misleading, and omitted to state material facts required to be stated therein.

46. The defendants named in this Cause ofAction are strictly liable to plaintiffand the Class

for the misstatements and omissions.

47. None of the defendants named herein made a reasonable investigation or possessed

reasonable grounds for the belief that the statements contained in the Registration Statement were true

and without omissions of any material facts and were not misleading.

48. By reason of the conduct herein alleged, each defendant named herein violated, and/or

controlled a person who violated, § 11 of the 1933 Act.

49. Plaintiff acquired Apigee common stock in the IPO.

50. _ Plaintiffand the Class have sustained damages. The value ofApigee common stock has

declined substantially subsequent to and due to these defendants' violations.

51. At the time oftheir purchases ofApigee common stock, plaintiff and other members of

the Class were without knowledge of the facts concerning.the wrongful conduct alleged herein and

could not have reasonably discovered those facts prior to the disclosures herein. Less than one year has

elapsed from the time that plaintiff discovered or reasonably could have discovered the facts upon

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COMPLAINT FOR VIOLATIONS OFTHE FEDERAL SECURITIES LAWS

1 which this complaint is based to the time that plaintiff commenced this action. Less than three years

2 has elapsed between the time that the securities upon which this Cause of Action is brought were

3 offered to the public and the time plaintiff commenced this action.

4 SECOND CAUSE OF ACTION

5 - For Violation of §15 of the 1933 ActAgainst Apigee, the Individual Defendants and the Venture Capital Defendants

652. Plaintiff incorporates 111- 51 by reference.

753. This Cause of Action is brought pursuant to § 15 of the 1933 Act, 15 U.S. C. § 77o,

8against Apigee, the Individual Defendants and the Venture Capital Defendants.

954. The Individual Defendants each were control persons of Apigee by virtue of their

10positions as directors and/ or senior officers of Apigee. Each of the Venture Capital Defendants

11controlled Apigee by their voting and dispositive control over approximately 18% of Apigee' s

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outstanding voting shares, pre -IPO shareholder agreements, and by having a designee on Apigee' s13

Board at the time of the IPO, Dempsey. The Individual Defendants each had a series of direct and/ or14

indirect business and/or personal relationships with other directors and/or officers and/ or major15

shareholders of Apigee. Apigee controlled the Individual Defendants and all of its employees. 16

55. The Venture Capital Defendants had a financial interest in taking the Company' s stock17

public in order to increase the holding value and marketability of the Venture Capital Defendants' 18

investment in Apigee. Apigee, the Venture Capital Defendants and the Individual Defendants, each, 19

were critical to effecting the IPO, based on their signing or authorization of the signing of the20

Registration Statement, by voting ( including voting their shares) to execute the IPO, and having21

otherwise directed through their authority the processes leading to execution of the IPO. 22

PRAYER FOR RELIEF

23WHEREFORE, plaintiff prays for relief and judgment, as follows:

24A. Determining that this action is a proper class action, certifying plaintiff as a Class

25representative under California Rule ofCourt 3. 764 and California Code ofCivil Procedure §382, and

26plaintiffs counsel as Class counsel;

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B. Awarding compensatory damages in favor of plaintiff and the other Class members

against all defendants, jointly and severally, for all damages sustained as a result of defendants'

wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding plaintiff and the Class their reasonable costs and expenses incurred in this

action, including counsel fees and expert fees;

D. Awarding rescission or a' rescissory measure of damages; and

E. Such equitable/ injunctive or other relief as deemed appropriate by the Court.

JURYDEMAND

Plaintiff hereby demands a trial by jury.

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