<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 2000
REGISTRATION NO. 333-95689
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LIVEPERSON, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7379 13-3861628
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
------------------------------
462 SEVENTH AVENUE
10TH FLOOR
NEW YORK, NY 10018-7606
(212) 277-8950
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
ROBERT P. LOCASCIO
CHIEF EXECUTIVE OFFICER
LIVEPERSON, INC.
462 SEVENTH AVENUE
10TH FLOOR
NEW YORK, NY 10018-7606
(212) 277-8950
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code of
Agent for Service)
------------------------------
Copies to:
<TABLE>
<S> <C>
ALEXANDER D. LYNCH, ESQ. DEANNA L. KIRKPATRICK, ESQ.
BRIAN B. MARGOLIS, ESQ. DAVIS POLK & WARDWELL
BROBECK, PHLEGER & HARRISON LLP 450 LEXINGTON AVENUE
1633 BROADWAY, 47TH FLOOR NEW YORK, NY 10017
NEW YORK, NY 10019 (212) 450-4000
(212) 581-1600
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) OFFERING PRICE (2) REGISTRATION FEE (3)
<S> <C> <C> <C> <C>
Common stock, par value $0.001
per share...................... 4,600,000 $15.00 $69,000,000 $18,216
</TABLE>
(1) Includes 600,000 shares which may be sold pursuant to the underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) of the Securities Act of 1933.
(3) $15,180 has been previously paid.
------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 10, 2000
PROSPECTUS
4,000,000 SHARES
[LOGO]
COMMON STOCK
This is an initial public offering of common stock by LivePerson, Inc.
LivePerson is selling 4,000,000 shares of common stock. The estimated initial
public offering price is between $13.00 and $15.00 per share.
--------------
Prior to this offering, there has been no public market for our common
stock. We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol LPSN.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to LivePerson, before expenses..................... $ $
</TABLE>
LivePerson has granted the underwriters an option for a period of 30 days to
purchase up to 600,000 additional shares of our common stock.
--------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
-------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CHASE H&Q
THOMAS WEISEL PARTNERS LLC
PAINEWEBBER INCORPORATED
, 2000
<PAGE>
INSIDE FRONT COVER:
- --Entire page contains a photograph of an overturned, empty shopping cart in the
foreground, occupying most of the lower half of the page. The shopping cart
appears alone in a dusty field, with other empty shopping carts in the
background. The text on the page is superimposed over the photograph.
- --Title text reading: " 2/3 of all online shopping carts are abandoned. *"
- --Upper-left quarter of page contains text reading:
"How can you convert an online shopper into a buyer?" (bold text)
"Human interaction." (bold text)
"LivePerson's clients believe in the value of real-time sales and
customer service on the Web. Through an easy-to-use text dialogue window,
they can interact with their customers at crucial moments to solve
problems and assist in closing sales. And with low upfront costs, we've
made it simple to add live customer service to your site."
- --Left middle of page contains the LivePerson Web site address:
"www.liveperson.com"
- --Right middle of page contains the LivePerson logo
- --Bottom right of page includes footnote: "* The Forrester Report: "Making Net
Shoppers Loyal" (June 1999)"
LEFT PAGE OF GATEFOLD:
- --Upper left of page contains picture of woman typing on a computer, with the
following text to the right of the picture:
"Enabling Live Online Customer Service" (bold text)
"LivePerson technology changes the way Web site owners communicate with
their customers."
- --Center and center-right of page contains screen shot of the LivePerson Web
site homepage, with screen shot of sample text dialogue window superimposed over
homepage, indicating button on homepage which leads to the text dialogue window.
The following text is above the screen shots:
"Real-time Interaction" (bold text)
"LivePerson enables its clients to interact with their customers
on a one-to-one basis, answering questions and solving
problems in real time."
<PAGE>
RIGHT PAGE OF GATEFOLD:
- --Upper left of page contains the following text:
"LivePerson is an Outsourced Solution" (bold text)
" - LivePerson hosts, upgrades and maintains the service"
" - The LivePerson service is easy to install"
" - Our clients' information technology resources are free to
focus on other priorities"
- --Lower half of page contains a Y-shaped schematic of the LivePerson service,
with diagrams one and two, two and three, and diagram two and the data
collection diagram, respectively, linked by two-way arrows. The description of
each diagram is as follows:
- --Diagram one is labeled "1. Internet user" and contains an illustration of an
Internet user viewing a LivePerson client Web site, with the text dialogue
window linked to the LivePerson icon on the client Web page. Underneath the
diagram is the following text: "Internet users click on the LivePerson icon"
- --Diagram two is labeled "2. LivePerson" and contains an illustration of
computers labeled "LivePerson Servers."
- --The data collection diagram is a cylinder labeled "LivePerson Data Collection"
with the following text alongside it: "Both users and operators are linked
through LivePerson's server facilities"
- --Diagram three is labeled "3. Operator" and is an illustration of an operator
using a computer, with a supervisor standing over the operator. Underneath the
diagram is the following text: "Customer service operators chat in real-time
with Internet users"
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Forward-Looking Statements.................................. 20
Use of Proceeds............................................. 21
Dividend Policy............................................. 21
Capitalization.............................................. 22
Dilution.................................................... 24
Selected Financial Data..................................... 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 27
Business.................................................... 36
Management.................................................. 49
Certain Relationships and Related Party Transactions........ 61
Principal Stockholders...................................... 64
Description of Capital Stock................................ 67
Shares Eligible for Future Sale............................. 72
Underwriting................................................ 75
Legal Matters............................................... 78
Experts..................................................... 78
Where You Can Find More Information......................... 78
Index to Financial Statements............................... F-1
</TABLE>
We have applied for federal registration of the marks "Live Person" and
"LivePerson Give Your Site a Pulse". "LivePerson" is a common law trademark of
ours. Other trademarks and service marks appearing in this prospectus are the
property of their respective holders.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND
THE RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION.
LIVEPERSON
LivePerson is a leading provider of technology that facilitates real-time
sales and customer service for companies doing business on the Internet. We are
an Application Service Provider, or ASP, and we offer our proprietary real-time
interaction technology as an outsourced service. Our service appears as a
LivePerson-branded or custom-created icon on our clients' Web sites. When a
customer or other Web visitor clicks on the icon, a pop-up dialogue window
appears, enabling our clients to communicate directly with Internet users via
text-based chat. Our clients can respond to customer inquiries in real time, and
can thereby enhance their customers' online shopping experience. Our technology
requires no software or hardware installation by our clients or their customers.
We believe that our service offers our clients the opportunity to increase
sales, reduce customer service costs and increase responsiveness to customer
needs and preferences. Because we are an ASP and provide our clients with a
service rather than an in-house technology solution, our clients can devote
their information technology resources to other priorities. We offer low
start-up costs and reasonable ongoing monthly fees. We can implement our
LivePerson service immediately following a two-hour training session. Upgrades
to the LivePerson service are automatic because they are installed on our
servers, without requiring action by either our clients or their customers. We
also offer our clients the ability to add capacity whenever requested.
We currently have more than 450 clients. Our service benefits companies of
all sizes doing business on the Internet, including online retailers, online
service providers and traditional offline businesses with a Web presence. Our
clients include EarthLink, GMAC's ditech.com, Intuit, iQVC, LookSmart,
Priceline.com and ShopNow.
We plan to enhance our current position as a leading provider of real-time
sales and customer service technology for companies doing business on the
Internet. The key elements of our strategy include:
- strengthening our market position by significantly expanding our
installed client base;
- adding features and functionality to our live interaction platform to
increase the value of our service to our clients and their reliance on
its benefits;
- continuing to build brand awareness;
- continuing to develop our technological capabilities by devoting
significant resources to network architecture and software design;
- seeking opportunities to form strategic alliances and make acquisitions
where appropriate; and
- expanding our international presence.
3
<PAGE>
Our business was incorporated in the State of Delaware in November 1995
under the name Sybarite Interactive Inc. Prior to November 1998, we generated
programming revenue from services primarily related to Web-based community
programming and media design. In 1998, we shifted our core business focus to the
development of the LivePerson service and phased out our programming and media
design business. Following our introduction of the LivePerson service in
November 1998, we changed our name in January 1999 to Live Person, Inc., and on
March 8, 2000 to LivePerson, Inc. Our principal executive offices are located at
462 Seventh Avenue, 10th Floor, New York, New York 10018-7606. Our telephone
number is (212) 277-8950. The address of our Web site is www.liveperson.com.
Information contained on our Web site does not constitute part of this
prospectus.
RECENT FINANCING
On January 27, 2000, we completed a private placement of 3,157,895 shares of
our series D redeemable convertible preferred stock with an affiliate of, and
other entities associated with, Dell Computer Corporation and with NBC
Interactive Media, Inc. (a division of NBC) at a purchase price of $5.70 per
share. We received net proceeds of approximately $17.9 million from this private
placement. Our series D redeemable convertible preferred stock will convert, at
a two-for-three ratio, into common stock upon the closing of this offering. The
common stock has an assumed value of $14.00 per share, the mid-point of the
range set forth on the cover page of this prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
------------------------
Prospective investors should be aware that investing in our common stock
involves many risks, which are described more fully in the section "Risk
Factors" beginning on page 7. In particular, we face risks including, but not
limited to, the facts that:
- we have an unproven business model and will rely on revenues from the
LivePerson service for substantially all of our revenues for the
forseeable future;
- we have a limited operating history related to the LivePerson service and
a history of significant losses;
- we have an accumulated deficit of approximately $7.9 million as of
December 31, 1999;
- we anticipate incurring losses in the foreseeable future which may be
substantial; and
- we operate in an emerging and highly competitive marketplace with
relatively low barriers to entry.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by LivePerson........... 4,000,000 shares
Common stock to be outstanding after this
offering................................... 29,323,804 shares
Use of proceeds.............................. General corporate purposes, including working
capital, and strategic alliances and
acquisitions, if any.
Proposed Nasdaq National Market symbol....... LPSN
</TABLE>
------------------------
The number of shares of common stock to be outstanding after the offering is
based on the number of shares outstanding as of March 8, 2000 and excludes:
- 10,000,000 shares of common stock reserved for issuance under our 2000
Stock Incentive Plan, of which 5,528,970 shares are issuable upon the
exercise of stock options outstanding as of March 8, 2000 with a weighted
average exercise price of $2.28 per share;
- 94,500 shares of common stock reserved for issuance upon the exercise of
stock options with an exercise price of $1.60 per share granted outside
of the predecessor to our 2000 Stock Incentive Plan;
- 450,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
- 542,968 shares of common stock issuable upon the exercise of warrants
outstanding as of March 8, 2000, with a weighted average exercise price
of $1.60 per share.
------------------------
Unless otherwise indicated, all information in this prospectus:
- reflects the automatic conversion of all of our outstanding shares of
convertible preferred stock, including the series D redeemable
convertible preferred stock, at a two-for-three ratio into 17,962,273
shares of our common stock upon the closing of this offering;
- reflects a three-for-two stock split of shares of our common stock
effected on March 8, 2000;
- assumes the filing of our amended and restated certificate of
incorporation and the adoption of our amended and restated bylaws, each
as contemplated to be in effect as of the closing of this offering; and
- assumes no exercise of the underwriters' over-allotment option.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THE TABLE BELOW SETS FORTH SUMMARY FINANCIAL INFORMATION FOR THE PERIODS
INDICATED. IT IS IMPORTANT THAT YOU READ THIS INFORMATION TOGETHER WITH THE
SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1997 1998 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue..................................... $ -- $ -- $ 1 $ 600
Programming revenue................................. 11 245 378 39
---------- ---------- ---------- -----------
Total revenue....................................... 11 245 379 639
---------- ---------- ---------- -----------
Total operating expenses.............................. 42 251 399 8,920
Loss from operations.................................. (31) (6) (20) (8,281)
Net loss.............................................. (30) (6) (20) (7,808)
========== ========== ========== ===========
Basic and diluted net loss per share.................. $ 0.00 $ 0.00 $ 0.00 $ (1.10)
========== ========== ========== ===========
Weighted average basic and diluted shares
outstanding......................................... 7,092,000 7,092,000 7,092,000 7,092,000
========== ========== ========== ===========
Pro forma basic and diluted net loss per share........ $ (0.50)
===========
Shares used in pro forma basic and diluted net loss
per share........................................... 15,465,304
===========
</TABLE>
Shares used in computing pro forma basic and diluted net loss per share
include the shares used in computing basic and diluted net loss per share
adjusted for the conversion of our series A convertible preferred stock,
series B convertible preferred stock and series C redeemable convertible
preferred stock to common stock at a two-for-three ratio as if the conversion
occurred at the date of their original issuance.
The pro forma balance sheet data summarized below give effect to:
- the receipt of net proceeds of approximately $17.9 million from the sale
of our series D redeemable convertible preferred stock on January 27,
2000; and
- the automatic conversion into common stock of all of our outstanding
convertible preferred stock (including our series D redeemable
convertible preferred stock) at a two-for-three ratio upon the closing of
this offering.
The pro forma as adjusted balance sheet data summarized below give effect to
our receipt of the estimated net proceeds from the sale of the 4,000,000 shares
of common stock offered hereby at an assumed initial public offering price of
$14.00 per share (the mid-point of the range set forth on the cover page of this
prospectus), after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ---------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $14,944 $32,844 $83,924
Working capital........................................... 13,380 31,280 82,360
Total assets.............................................. 19,289 37,189 88,269
Redeemable convertible preferred stock.................... 18,990 -- --
Total stockholders' equity (deficit)...................... (2,327) 34,563 85,643
</TABLE>
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW, TOGETHER WITH THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT DECISION.
AS A RESULT OF THE FOLLOWING RISKS, THE MARKET PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY PROVIDING THE LIVEPERSON SERVICE AND EXPECT
TO ENCOUNTER DIFFICULTIES FACED BY EARLY STAGE COMPANIES IN NEW AND RAPIDLY
EVOLVING MARKETS.
We have only a limited operating history providing the LivePerson service
upon which to base an evaluation of our current business and future prospects.
We began offering the LivePerson service in November 1998; accordingly, the
revenue and income potential of our business and the related market are
unproven. As a result of our limited operating history as a provider of
real-time sales and customer service technology for companies doing business on
the Internet, we have only one year of historical financial data relating to the
LivePerson service upon which to forecast revenue and results of operations.
In addition, because this market is relatively new and rapidly evolving, we
have limited insight into trends that may emerge and affect our business. Before
investing in us, you should evaluate the risks, expenses and problems frequently
encountered by companies such as ours that are in the early stages of
development and that are entering new and rapidly changing markets. These risks
include our ability to:
- attract more clients and retain existing clients;
- sell additional operator access accounts (seats), which generate monthly
fees, and other services to our existing clients;
- effectively market and maintain our brand name;
- respond effectively to competitive pressures;
- continue to develop and upgrade our technology; and
- attract, integrate, retain and motivate qualified personnel.
If we are unsuccessful in addressing some or all of these risks, our
business, financial condition and results of operations would be materially and
adversely affected.
OUR ANNUAL REVENUE HAS NEVER EXCEEDED $640,000, WE HAD AN ACCUMULATED DEFICIT OF
$7.9 MILLION AS OF DECEMBER 31, 1999 AND WE EXPECT TO INCUR SIGNIFICANT
LOSSES FOR THE FORESEEABLE FUTURE.
We have not achieved profitability and, as we expect to continue to incur
significant operating expenses and to make significant capital expenditures, we
expect to continue to experience significant losses and negative cash flow for
the foreseeable future. We recorded a net loss of $20,000 for the year ended
December 31, 1998 (the year in which we commenced offering the LivePerson
service) and a net loss of approximately $7.8 million for the year ended
December 31, 1999. As of December 31, 1999, our accumulated deficit was
approximately $7.9 million. Even if we do achieve profitability, we cannot
assure you that we can sustain or increase profitability on a quarterly or
annual basis in the future. Failure to achieve or maintain profitability may
materially and adversely affect the market price of our common stock.
WE HAVE AN UNPROVEN BUSINESS MODEL AND MAY NOT GENERATE SUFFICIENT REVENUE FOR
OUR BUSINESS TO SURVIVE.
Our business model is based on the delivery of real-time sales and customer
service technology to companies doing business on the Internet, a largely
untested business. Sales and
7
<PAGE>
customer service historically have been provided primarily in person or by
telephone. Our business model assumes that companies doing business on the
Internet will choose to provide sales and customer service via the Internet. Our
business model also assumes that many companies will recognize the benefits of
an outsourced application, that their customers will choose to engage a customer
service representative in a live text-based interaction, that this interaction
will maximize sales opportunities and enhance the online shopping experience and
that companies will seek to have their online sales and customer service
technology provided by us. If any of these assumptions is incorrect, our
business may be harmed.
WE EXPECT THAT SUBSTANTIALLY ALL OF OUR REVENUE WILL COME FROM THE LIVEPERSON
SERVICE FOR THE FORESEEABLE FUTURE AND IF WE ARE NOT SUCCESSFUL IN SELLING
THE SERVICE, OUR REVENUE WILL NOT INCREASE AND MAY DECLINE.
The success of our business currently depends, and for the foreseeable
future will continue to substantially depend, on the sale of only one service.
Revenue related to the LivePerson service, which will account for substantially
all of our revenue for the forseeable future, is comprised of initial
non-refundable set-up fees and ongoing monthly fees. Ongoing monthly fees, in
turn, result from the sale of seats to new clients and the sale of additional
seats to existing clients. We introduced our LivePerson service in
November 1998, and we currently have more than 450 clients. We cannot be certain
that there will be client demand for our service or that we will be successful
in penetrating the market for real-time sales and customer service technology. A
decline in the price of, or fluctuation in the demand for, the LivePerson
service, is likely to cause our revenue to decline. In addition, if our clients
were to reduce the number of seats used or fail to purchase additional seats,
our revenue might not increase.
THE SUCCESS OF OUR BUSINESS REQUIRES THAT CLIENTS CONTINUE TO USE THE LIVEPERSON
SERVICE AND PURCHASE ADDITIONAL SEATS.
Our LivePerson service agreements typically have no termination date and are
terminable upon 30 to 90 days' notice without penalty. If a significant number
of our clients, or any one client with a significant number of seats, were to
terminate these service agreements, reduce the number of seats purchased or fail
to purchase additional seats, our results of operations may be negatively and
materially affected. We cannot assure you that we will continue to experience
high client retention rates. Our client retention rates may decline as a result
of a number of factors, including competition, consolidation in the Internet
industry or termination of operations by a significant number of our clients.
Dissatisfaction with the nature or quality of our services could also lead
clients to terminate our service. We depend on monthly fees from the LivePerson
service for substantially all our revenue. If our retention rate declines, our
revenue could decline unless we are able to obtain additional clients or
alternate revenue sources. Further, because of the historically small number of
seats sold in initial orders, we depend on sales to new clients and sales of
additional seats to our existing clients.
OUR QUARTERLY REVENUE AND OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT
FLUCTUATIONS WHICH MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR COMMON
STOCK.
We expect our quarterly revenue and operating results to fluctuate
significantly in the future due to a variety of factors, including:
- market acceptance of real-time sales and customer service technology;
- our clients' business success;
- our clients' demand for seats;
- seasonal factors affecting our clients' businesses;
- our ability to attract and retain clients;
8
<PAGE>
- the amount and timing of capital expenditures and other costs relating to
the expansion of our operations, including those related to acquisitions;
- the introduction of new services by us or our competitors;
- changes in our pricing policies or the pricing policies of our
competitors;
- economic conditions specific to the Internet, electronic commerce and
online media; and
- general economic conditions.
Factors relating to the operation of our business and products are generally
within our control. All other factors are, in whole or in part, outside of our
control.
Many of our clients' businesses are seasonal. Our clients' demand for
real-time sales and customer service technology in general and their demand for
seats, in particular, may be seasonal as well. As a result, our future revenue
and profits may vary from quarter to quarter.
We do not believe that period-to-period comparisons of our operating results
are meaningful. You should not rely upon these comparisons as indicators of our
future performance.
Due to the foregoing factors, it is possible that our results of operations
in one or more future quarters may fall below the expectations of securities
analysts and investors. If this occurs, the trading price of our common stock
would decline.
COMPETITION FOR PERSONNEL IN OUR INDUSTRY IS INTENSE.
We may be unable to retain our key employees or attract, integrate or retain
other highly qualified employees in the future. We have experienced, and expect
to continue to experience, difficulty in hiring highly-skilled employees with
appropriate qualifications. As we continue to increase our client base and
expand our operations, we expect that we will hire additional technical
personnel, client services personnel and sales and marketing personnel. There is
significant competition for qualified employees in our industry, particularly
employees with technical backgrounds. If we do not succeed in attracting new
personnel or retaining and motivating our current personnel, or if we are unable
to outsource certain functions, our business, results of operations and
financial condition will be materially and adversely affected.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR EXPANDING OPERATIONS.
Since the launch of the LivePerson service in November 1998, we have grown
rapidly. This growth has placed a significant strain on our managerial,
operational, technical and financial resources. In 2000, we intend to replace
our existing accounting and other back-office systems at a cost of approximately
$1.0 million. The new systems will have to be integrated with our operations,
controls and procedures. If we are not able to successfully integrate these new
systems with our existing systems, or if we incur significant costs in order to
achieve such integration, our business could be harmed. In order to manage our
growth, we must also continue to implement new or upgraded operating and
financial systems, procedures and controls. Our failure to expand our operations
in an efficient manner could cause our expenses to grow, our revenue to decline
or grow more slowly than expected and could otherwise have a material adverse
effect on our business, results of operations and financial condition.
Further, as a result of our growth, the number of our employees grew from
six at December 31, 1998 to 125 at March 8, 2000. In the area of technology,
which grew from one employee to 46 employees during this period, we plan to
continue to significantly expand our personnel. We cannot assure you that we
will be successful in integrating these new employees or that such integration
will not distract valuable management resources.
In addition, in January 2000, we hired our Chief Operating Officer, Dean
Margolis, and our Chief Technology Officer, James L. Reagan, who do not have
significant experience working with us or with each other. The process of
integrating new members of our senior management team can be time-consuming and
may distract other members of management from the operation of
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our business. If members of our senior management are unable to work together
successfully or manage our growth, our business will be harmed.
OUR REPUTATION DEPENDS, IN PART, ON FACTORS WHICH ARE ENTIRELY OUTSIDE OF OUR
CONTROL.
Our service appears as a LivePerson-branded or custom-created icon on our
clients' Web sites. When a customer or other Web visitor clicks on the icon, a
pop-up dialogue window appears, which, in nearly all cases, displays the slogan
"Powered by LivePerson." The customer service operators who respond to the
inquiries of our clients' customers or Web visitors are employees or agents of
our clients; they are not employees of LivePerson. As a result, we have no way
of controlling the actions of these operators. In addition, a customer of our
client may not know that the operator is an employee or agent of our client,
rather than a LivePerson employee. If a customer were to have a negative
experience in a LivePerson-powered real-time dialogue, it is possible that this
experience could be attributed to us, which could diminish our brand and harm
our business. Finally, we believe the success of our service depends on the
prominent placement of the icon on the client's Web site, over which we also
have no control.
WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE LIVEPERSON BRAND NAME.
Building recognition of our brand is critical to establishing the advantage
of being among the first ASPs to provide real-time sales and customer service
and to attracting new clients. If we fail to successfully promote and maintain
our brand or incur significant expenses in promoting our brand without an
associated increase in our revenue, our business, results of operations and
financial condition may be materially and adversely affected.
WE ARE DEPENDENT ON TECHNOLOGY SYSTEMS THAT ARE BEYOND OUR CONTROL.
The success of the LivePerson service depends in part on our clients' online
services as well as the Internet connections of visitors to their Web sites,
both of which are outside of our control. As a result, it may be difficult to
identify the source of problems if they occur. In the past, we have experienced
problems related to connectivity which have resulted in slower than normal
response times to customer chat requests and messages and interruptions in
service. The LivePerson service relies both on the Internet and on our
connectivity vendors for data transmission. Therefore, even when connectivity
problems are not caused by the LivePerson service, our clients or their
customers may attribute the problem to us. This could diminish our brand and
harm our business, divert the attention of our technical personnel from our
product development efforts or cause significant client relations problems.
In addition, we rely on two Web hosting services for Internet connectivity
to deliver our service, power, security and technical assistance. They have, in
the past, experienced problems that have resulted in slower than normal response
times and interruptions in service. If we are unable to continue utilizing the
services of our existing Web hosting providers or if our Web hosting services
experience interruptions or delays, it is possible that our business could be
harmed.
Our service also depends on many third parties for hardware and software,
which products could contain defects. Problems arising from our use of such
hardware or software could require us to incur significant costs or divert the
attention of our technical personnel from our product development efforts. To
the extent any such problems require us to replace such hardware or software, we
may not be able to do so on acceptable terms, if at all.
TECHNOLOGICAL DEFECTS COULD DISRUPT OUR SERVICE, WHICH COULD HARM OUR BUSINESS
AND REPUTATION.
We face risks related to the technological capabilities of the LivePerson
service. We expect the number of simultaneous chats between operators and our
clients' customers over our system to increase significantly as we expand our
client base. Our network hardware and software may not
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be able to accommodate this additional volume. Additionally, we must continually
upgrade our software to improve the features and functionality of the LivePerson
service in order to be competitive in our market. If future versions of our
software contain undetected errors, our business could be harmed. As a result of
major software upgrades at LivePerson, our client sites have, from time to time,
experienced slower than normal response times and interruptions in service. If
we experience system failures or degraded response times, our reputation and
brand could be harmed. We may also experience technical problems in the process
of installing and initiating the LivePerson service on new Web hosting services.
These problems, if unremedied, could harm our business.
The LivePerson service also depends on complex software which may contain
defects, particularly when we introduce new versions onto our servers. We may
not discover software defects that affect our new or current services or
enhancements until after they are deployed. It is possible that, despite testing
by us, defects may occur in the software. These defects could result in:
- damage to our reputation;
- lost sales;
- delays in or loss of market acceptance of our products; and
- unexpected expenses and diversion of resources to remedy errors.
WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE AND CHANGING
CLIENT PREFERENCES IN OUR INDUSTRY AND THIS MAY HARM OUR BUSINESS.
If we are unable, for technological, legal, financial or other reasons, to
adapt in a timely manner to changing market conditions in the online sales and
customer service industry or clients' or their customers' requirements, our
business, results of operations and financial condition would be materially and
adversely affected. Business on the Internet is characterized by rapid
technological change. Sudden changes in client and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies, such as broadband communications, and the emergence of new
industry standards and practices could render the LivePerson service and our
proprietary technology and systems obsolete. The rapid evolution of these
products and services will require that we continually improve the performance,
features and reliability of the LivePerson service. Our success will depend, in
part, on our ability to:
- enhance the features and performance of the LivePerson service;
- develop and offer new services that are valuable to companies doing
business on the Internet and their customers; and
- respond to technological advances and emerging industry standards and
practices in a cost-effective and timely manner.
If any of our new services, including upgrades to the LivePerson service, do not
meet our clients' or their customers' expectations, our business may be harmed.
Updating our technology may require significant additional capital expenditures
and could materially and adversely affect our business, results of operations
and financial condition.
IF WE ARE NOT COMPETITIVE IN THE MARKET FOR REAL-TIME SALES AND CUSTOMER SERVICE
TECHNOLOGY, OUR BUSINESS COULD BE HARMED.
There are no substantial barriers to entry in the real-time sales and
customer service technology market, other than the ability to design and build
scalable software and, with respect to outsourced solution providers, the
ability to design and build scalable network architecture. Established or new
entities may enter this market in the near future, including those that provide
real-time interaction online, with or without the user's request.
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We compete directly with companies focused on technology that facilitates
real-time sales and customer service interaction. Our competitors include
customer service enterprise software providers such as eGain Communications
Corp., eShare Technologies, Inc., Kana Communications, Inc. and WebLine
Communications (a part of Cisco Systems' applications technology group), some of
which are beginning to offer hosted solutions.
We also face potential competition from larger enterprise software companies
such as Oracle Corporation and Siebel Systems. In addition, established
technology companies, including IBM, Hewlett-Packard and Microsoft, may also
leverage their existing relationships and capabilities to offer real-time sales
and customer service applications.
Finally, we face competition from clients and potential clients that choose
to provide a real-time sales and customer service solution in-house as well as,
to a lesser extent, traditional offline customer service solutions, such as
telephone call centers.
We believe that competition will increase as our current competitors
increase the sophistication of their offerings and as new participants enter the
market. Many of our current and potential competitors have:
- longer operating histories;
- larger client bases;
- greater brand recognition;
- more diversified lines of products and services; and
- significantly greater financial, marketing and other resources.
These competitors may enter into strategic or commercial relationships with
larger, more established and better-financed companies. These competitors may be
able to:
- undertake more extensive marketing campaigns;
- adopt more aggressive pricing policies; and
- make more attractive offers to businesses to induce them to use their
products or services.
Any delay in the general market acceptance of the real-time sales and
customer service solution business model would likely harm our competitive
position. Delays would allow our competitors additional time to improve their
service or product offerings, and would also provide time for new competitors to
develop real-time sales and customer service applications and solicit
prospective clients within our target markets. Increased competition could
result in pricing pressures, reduced operating margins and loss of market share.
IF WE DO NOT SUCCESSFULLY INTEGRATE POTENTIAL FUTURE ACQUISITIONS, OUR BUSINESS
COULD BE HARMED.
In the future, we may acquire or invest in complementary companies, products
or technologies. Acquisitions and investments involve numerous risks to us,
including:
- difficulties in integrating operations, technologies, products and
personnel;
- diversion of financial and management resources from efforts related to
the LivePerson service or other then-existing operations;
- risks of entering new markets beyond those that we currently serve;
- potential loss of either our existing key employees or key employees of
any companies we acquire; and
- our inability to generate sufficient revenue to offset acquisition or
investment costs.
These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we
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may incur debt or issue equity securities to pay for any future acquisitions.
The issuance of equity securities could be dilutive to our existing
stockholders.
WE COULD FACE ADDITIONAL REGULATORY REQUIREMENTS, TAX LIABILITIES AND OTHER
RISKS AS WE EXPAND INTERNATIONALLY.
We intend to expand internationally. There are risks related to doing
business in international markets, such as changes in regulatory requirements,
tariffs and other trade barriers, fluctuations in currency exchange rates and
adverse tax consequences. In addition, there are likely to be different consumer
preferences and requirements in specific international markets. Furthermore, we
may face difficulties in staffing and managing any foreign operations. One or
more of these factors could harm any future international operations.
OUR BUSINESS AND PROSPECTS WOULD SUFFER IF WE ARE UNABLE TO PROTECT AND ENFORCE
OUR INTELLECTUAL PROPERTY RIGHTS.
Our success and ability to compete depend, in part, upon the protection of
our intellectual property rights relating to the technology underlying the
LivePerson service. We currently have a U.S. patent application pending relating
to such technology and have not filed applications outside the U.S. It is
possible that:
- our pending patent application may not result in the issuance of a
patent;
- any patent issued may not be broad enough to protect our intellectual
property rights;
- any patent issued 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 invention claimed in the patent;
- current and future competitors may independently develop similar
technology, duplicate our service or design around any patent we may
have; and
- effective patent protection may not be available in every country in
which we do business.
We also rely upon copyright, trade secret and trademark law, written
agreements and common law to protect our proprietary technology, processes and
other intellectual property, to the extent that protection is sought or secured
at all. We currently have one patent application pending. To the extent that the
invention described in our U.S. patent application was made public prior to the
filing of the application, we may not be able to obtain patent protection in
certain foreign countries. We currently have a common law trademark,
"LivePerson", and three pending U.S. trademark applications. The trademark
examiner assigned to our applications has issued non-final office actions with
respect to our applications, requesting additional information and making
initial refusals. However, no final determinations as to the registrability of
the marks have been made. We are in the process of responding to these office
actions prior to their respective deadlines, but ultimately we may not be able
to secure registration of our trademarks. In addition, we do not have any
trademarks registered outside the U.S., nor do we have any trademark
applications pending outside the U.S. We cannot assure you that any steps we
might take will be adequate to protect against infringement and misappropriation
of our intellectual property by third parties. Similarly, we cannot assure you
that third parties will not be able to independently develop similar or superior
technology, processes or other intellectual property. The unauthorized
reproduction or other misappropriation of our intellectual property rights could
enable third parties to benefit from our technology without paying us for it. If
this occurs, our business, results of operations and financial condition would
be materially and adversely affected. In addition, disputes concerning the
ownership or rights to use intellectual property could be costly and
time-consuming to litigate, may distract management from operating our business
and may result in our loss of significant rights.
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OUR PRODUCTS AND SERVICES MAY INFRINGE UPON INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES AND ANY INFRINGEMENT COULD REQUIRE US TO INCUR SUBSTANTIAL
COSTS AND MAY DISTRACT OUR MANAGEMENT.
Although we attempt to avoid infringing known proprietary rights of third
parties, we are subject to the risk of claims alleging infringement of
third-party proprietary rights. If we infringe upon the rights of third parties,
we may not be able to obtain licenses to use those rights on commercially
reasonable terms. In that event, we would need to undertake substantial
reengineering to continue offering our service. Any effort to undertake such
reengineering might not be successful. In addition, any claim of infringement
could cause us to incur substantial costs defending against the claim, even if
the claim is invalid, and could distract our management from our business.
Furthermore, a party making such a claim could secure a judgment that requires
us to pay substantial damages. A judgment could also include an injunction or
other court order that could prevent us from selling our products. If any of
these events occurred, our business, results of operations and financial
condition would be materially and adversely affected.
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS TO EXECUTE OUR BUSINESS STRATEGY AND
WE MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING.
We believe that the net proceeds from this offering, together with the
proceeds from the sale of our series D redeemable convertible preferred stock,
and our current cash and cash equivalents, will be sufficient to fund our
working capital and capital expenditure requirements for at least the next
12 months. To the extent that we require additional funds to support our
operations or the expansion of our business, or to pay for acquisitions, we may
need to sell additional equity, issue debt or convertible securities or obtain
credit facilities through financial institutions. In the past, we have obtained
financing principally through the sale of preferred stock, common stock and
warrants. If additional funds are raised through the issuance of debt or
preferred equity securities, these securities could have rights, preferences and
privileges senior to holders of common stock. The terms of any debt securities
could impose restrictions on our operations. If additional funds are raised
through the issuance of additional equity or convertible securities, our
stockholders could suffer dilution. We cannot assure you that additional
funding, if required, will be available to us in amounts or on terms acceptable
to us. If sufficient funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of acquisition
opportunities, develop or enhance our services or products, or otherwise respond
to competitive pressures would be significantly limited. Those limitations would
materially and adversely affect our business, results of operations and
financial condition.
OUR BUSINESS IS DEPENDENT ON A FEW KEY EMPLOYEES, INCLUDING OUR CHIEF EXECUTIVE
OFFICER, ROBERT P. LOCASCIO.
Our future success depends to a significant extent on the continued services
of our senior management team, including Robert P. LoCascio, our founder and
Chief Executive Officer. The loss of the services of any member of our senior
management team, in particular Mr. LoCascio, could have a material and adverse
effect on our business, results of operations and financial condition.
WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE PERSONAL INFORMATION BELONGING
TO OUR CLIENTS' CUSTOMERS.
We maintain dialogue transcripts of the text-based chats between our clients
and their customers and store on our servers information supplied voluntarily by
these customers in exit surveys which follow the chats. We provide this
information to our clients to allow them to perform customer analyses and
monitor the effectiveness of our service. Some of the information
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we collect in text-based chats and exit surveys may include personal
information, such as contact and demographic information. If third parties were
able to penetrate our network security or otherwise misappropriate personal
information relating to our clients' customers or the text of customer service
inquiries, we could be subject to liability. We could be subject to negligence
claims or claims for misuse of personal information. These claims could result
in litigation which could have a material adverse effect on our business,
results of operations and financial condition. We may incur significant costs to
protect against the threat of security breaches or to alleviate problems caused
by such breaches.
PROBLEMS RESULTING FROM THE YEAR 2000 PROBLEM COULD REQUIRE US TO INCUR
UNANTICIPATED EXPENSES, DIVERT MANAGEMENT'S TIME AND ATTENTION, AND DISRUPT
OUR BUSINESS.
Many currently installed computer systems and software products produced
before January 1, 2000 were coded to accept or recognize only two-digit entries
in the date code field. These systems may interpret the date code "00" as the
year 1900 rather than as the year 2000. As a result, computer systems and
software in use today may need to be upgraded or replaced to comply with Year
2000 requirements or risk system failure or miscalculations causing disruptions
of normal business activities. We are not aware of any material Year 2000
problems that have harmed or threaten to harm our business, but we cannot assure
you that no such problems will emerge. Our failure to correct a material Year
2000 problem could result in an interruption in, or a failure of, aspects of our
normal business activities or operations. In addition, a significant Year 2000
problem involving the LivePerson service, including our hosting facilities or
equipment provided to us by third-party vendors, could cause our clients to
consider seeking alternate solutions or cause an unmanageable burden on our
internal client service and network support staff. Any significant Year 2000
problem could require us to incur significant unanticipated expenses to remedy
these problems and could divert management from other tasks of operating our
business, which would harm our business, results of operations and financial
condition. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000" for more detailed information
regarding the Year 2000 issue.
DATA AND PROJECTIONS INCLUDED IN THIS PROSPECTUS RELATING TO THE GROWTH OF THE
INTERNET ARE BASED ON ASSUMPTIONS THAT COULD TURN OUT TO BE INCORRECT, AND
ACTUAL RESULTS COULD BE MATERIALLY DIFFERENT.
This prospectus contains various third-party data and projections, including
those relating to Internet business activity. These data and projections have
been included in the results of studies prepared by third parties, and purport
to be based on surveys, reports and models used by these firms. Actual results
or circumstances may be materially different from the data or projections. Any
difference could reduce our revenue and harm our results of operations.
RISKS RELATED TO OUR INDUSTRY
WE ARE DEPENDENT ON CONTINUED GROWTH IN THE USE OF THE INTERNET AS A MEDIUM FOR
COMMERCE.
We cannot be sure that a sufficiently broad base of consumers will adopt,
and continue to use, the Internet as a medium for commerce. Our long-term
viability depends substantially upon the widespread acceptance and development
of the Internet as an effective medium for consumer commerce. Use of the
Internet to effect retail transactions is at an early stage of development.
Convincing our clients to offer real-time sales and customer service technology
may be difficult.
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Demand for recently introduced services and products over the Internet is
subject to a high level of uncertainty. Few proven services and products exist.
The development of the Internet into a viable commercial marketplace is subject
to a number of factors, including:
- continued growth in the number of users;
- concerns about transaction security;
- continued development of the necessary technological infrastructure;
- development of enabling technologies;
- uncertain and increasing government regulation; and
- the development of complementary services and products.
WE DEPEND ON THE CONTINUED VIABILITY OF THE INFRASTRUCTURE OF THE INTERNET.
To the extent that the Internet continues to experience growth in the number
of users and frequency of use by consumers resulting in increased bandwidth
demands, we cannot assure you that the infrastructure for the Internet will be
able to support the demands placed upon it. The Internet has experienced outages
and delays as a result of damage to portions of its infrastructure. Outages or
delays, including those resulting from Year 2000 problems, could adversely
affect online sites, email and the level of traffic on the Internet. We also
depend on Internet service providers that provide our clients and their
customers with access to the LivePerson service. In the past, users have
experienced difficulties due to system failures unrelated to our service. In
addition, the Internet could lose its viability due to delays in the adoption of
new standards and protocols required to handle increased levels of Internet
activity. Insufficient availability of telecommunications services to support
the Internet also could result in slower response times and negatively impact
use of the Internet generally, and our clients' sites (including the LivePerson
pop-up dialogue window) in particular. If the use of the Internet fails to grow
or grows more slowly than expected, if the infrastructure for the Internet does
not effectively support growth that may occur or if the Internet does not become
a viable commercial marketplace, we may not achieve profitability and our
business, results of operations and financial condition will suffer.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. Recently, the United
States Congress enacted Internet legislation relating to issues such as
children's privacy, copyright and taxation. The children's privacy legislation
imposes restrictions on the collection, use and distribution of personal
identification information obtained online from children under the age of 13.
The copyright legislation establishes rules governing the liability of Internet
service providers and Web site publishers for the copyright infringement of
Internet users. The tax legislation places a moratorium on certain forms of
Internet taxes for three years; however, this moratorium does not apply to sales
and use taxes. Additionally, the European Union recently adopted a directive
addressing data privacy which imposes restrictions on the collection, use and
processing of personal data. Existing legislation and any new legislation could
hinder the growth in use of the Internet generally and decrease the acceptance
of the Internet as a medium for communication, commerce and advertising. The
laws governing the Internet remain largely unsettled, even in areas where
legislation has been enacted. It may take several years to determine whether and
how existing laws such as those governing intellectual property, taxation and
personal privacy apply to the Internet and Internet services. In addition, the
growth and development of the market for Internet commerce may prompt calls for
more stringent consumer protection laws,
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both in the U.S. and abroad, which may impose additional burdens on companies
conducting business online. Our business, results of operations and financial
condition could be materially and adversely affected if we do not comply with
recent legislation or laws or regulations relating to the Internet that are
adopted or modified in the future.
For example, the LivePerson service allows our clients to capture and save
information about their customers, possibly without their knowledge.
Additionally, our service uses a tool, commonly referred to as a "cookie" to
uniquely identify each of our clients' customers. To the extent that additional
legislation regarding Internet user privacy is enacted, such as legislation
governing the collection and use of information regarding Internet users through
the use of cookies, the effectiveness of the LivePerson service could be
impaired by restricting us from collecting information which may be valuable to
our clients. The foregoing could harm our business, results of operations and
financial condition.
SECURITY CONCERNS COULD HINDER COMMERCE ON THE INTERNET.
User concerns about the security of confidential information online has been
a significant barrier to commerce on the Internet and online communications. Any
well-publicized compromise of security could deter people from using the
Internet or other online services or from using them to conduct transactions
that involve the transmission of confidential information. If Internet commerce
is inhibited as a result of such security concerns, our business would be
harmed.
RISKS RELATED TO THIS OFFERING
AFTER THIS OFFERING, OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER
STOCKHOLDERS WILL EXERCISE CONTROL OVER ALL MATTERS REQUIRING A STOCKHOLDER
VOTE.
After this offering, our executive officers, directors and existing
stockholders who each own greater than 5% of the common stock that was
outstanding immediately before this offering and their affiliates, each of whom
is listed in "Principal Stockholders," will, in the aggregate, beneficially own
approximately 74.7% of our outstanding common stock. As a result, these
stockholders will be able to exercise control over all matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership could
also have the effect of delaying or preventing a change in control.
OF OUR TOTAL OUTSTANDING SHARES, 25,323,804 ARE RESTRICTED FROM IMMEDIATE RESALE
PURSUANT TO CONTRACTUAL AGREEMENTS AND PROVISIONS OF LAWS, BUT MAY BE SOLD
INTO THE MARKET IN THE NEAR FUTURE. THE SALE OF THESE SHARES COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS
IS DOING WELL.
After this offering, we will have outstanding 29,323,804 shares of common
stock. Of these shares, the 4,000,000 shares sold in this offering will be
freely tradable except for any shares purchased by our "affiliates" as that term
is used in Rule 144 of the Securities Act, who are generally those persons who
directly or indirectly control LivePerson, such as our directors, executive
officers, and significant stockholders. Affiliates may only sell their shares
pursuant to
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the requirements of Rule 144 or in a registered public offering. The remaining
25,323,804 shares will become available for resale in the public market at
various times in the future.
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<C> <S>
4,000,000 After the date of this prospectus, freely tradable shares
sold in this offering and shares saleable under Rule 144(k)
that are not subject to the 180-day lock-up
0 After 90 days from the date of this prospectus, shares
saleable under Rule 144 or Rule 701 that are not subject to
the 180-day lock-up
20,586,962 After 180 days from the date of this prospectus, the 180-day
lock-up is released and these shares are saleable under Rule
144 (subject, in some cases, to volume limitations), Rule
144(k) or Rule 701
4,736,842 After 180 days from the date of this prospectus, restricted
securities that are held for less than one year are not yet
saleable under Rule 144
</TABLE>
As restrictions on resale end, the market price of our stock could drop
significantly if the holders of restricted shares sell them or are perceived by
the market as intending to sell them. For more detailed information, see "Shares
Eligible for Future Sale."
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND OUR STOCK PRICE MAY
EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS.
Prior to this offering, investors could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering. The initial public offering price will be
determined by negotiations between us and the representatives of the
underwriters. The market price of our common stock may decline below the initial
public offering price after this offering.
Fluctuations in market price and volume are particularly common among
securities of Internet and other technology companies. The market price of our
common stock may fluctuate significantly in response to the following factors,
some of which are beyond our control:
- variations in our quarterly operating results;
- changes in market valuations of Internet and other technology companies;
- our announcements of significant client contracts, acquisitions,
strategic partnerships, joint ventures or capital commitments;
- our failure to complete significant sales;
- additions or departures of key personnel;
- future sales of our common stock; and
- changes in financial estimates by securities analysts.
In the past, companies that have experienced volatility in the market price
of their common stock have been the object of securities class action
litigation. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and distract management from other
aspects of operating our business.
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WE MAY SPEND A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF THIS OFFERING IN WAYS
WITH WHICH YOU MAY NOT AGREE.
The net proceeds of this offering are not allocated for specific uses. Our
management will have broad discretion to spend the net proceeds from this
offering in ways with which you may not agree. The failure of our management to
apply these funds effectively could result in unfavorable returns. This could
have a material and adverse effect on our business, results of operations and
financial condition, and could cause the price of our common stock to decline.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of our amended and restated certificate of incorporation, such as
our staggered board of directors, the manner in which director vacancies may be
filled and provisions regarding the calling of stockholder meetings, could make
it more difficult for a third party to acquire us, even if doing so might be
beneficial to our stockholders. In addition, provisions of our amended and
restated bylaws, such as advance notice requirements for stockholder proposals,
and applicable provisions of Delaware law, such as the application of business
combination limitations, could impose similar difficulties.
INVESTORS PURCHASING SHARES IN THIS OFFERING WILL SUFFER IMMEDIATE AND
SUBSTANTIAL DILUTION.
Investors purchasing shares in this offering will incur immediate and
substantial dilution in pro forma net tangible book value, in the amount of
$11.06 per share. To the extent outstanding options to purchase common stock are
exercised, there will be further dilution. Please see "Dilution."
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which involve risks and
uncertainties. These forward-looking statements, which are usually accompanied
by words such as "may," "might," "will," "should," "could," "intends,"
"estimates," "predicts," "potential," "continue," "believes," "anticipates,"
"plans," "expects" and similar expressions, relate to, without limitation,
statements about our market opportunities, our strategy, our competition, our
projected revenue and expense levels and the adequacy of our available cash
resources. This prospectus also contains forward-looking statements attributed
to third parties relating to their estimates regarding Internet business
activity. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Our actual
results could differ materially from those expressed or implied by these
forward-looking statements as a result of various factors, including the risk
factors described above and included elsewhere in this prospectus. We undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
20
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of the shares of
common stock in this offering of $51.1 million, assuming an initial public
offering price of $14.00 per share (the mid-point of the range set forth on the
cover page of this prospectus) and after deducting estimated underwriting
discounts and commissions and estimated offering expenses. If the underwriters
exercise their over-allotment option in full, we estimate that our net proceeds
will be $58.9 million.
We presently intend to use the proceeds for general corporate purposes,
including working capital. The primary purposes of this offering are to obtain
additional equity capital, create a public market for our common stock and
facilitate future access to public capital markets. We also believe
opportunities may exist to expand our current business through strategic
alliances and acquisitions, and we may utilize a portion of the proceeds for
such purposes. We are not currently a party to any contracts or letters of
intent with respect to any strategic alliances or acquisitions.
Pending such uses, we intend to invest the net proceeds of this offering in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since
our inception. We intend to retain future earnings, if any, to finance the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future. Consequently, stockholders will need to
sell shares of common stock to realize a return on their investment, if any.
21
<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents, and
capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to give effect to:
- the receipt of net proceeds of approximately $17.9 million from the
sale of our series D redeemable convertible preferred stock on January
27, 2000; and
- the automatic conversion into common stock of all of our outstanding
convertible preferred stock (including the series D redeemable
convertible preferred stock) at a two-for-three ratio upon the closing
of this offering;
- on a pro forma as adjusted basis to give effect to the sale of 4,000,000
shares of common stock by us in this offering at an assumed initial
public offering price of $14.00 per share (the mid-point of the range set
forth on the cover page of this prospectus), after deducting estimated
underwriting discounts and commissions and estimated offering expenses
payable by us.
The information set forth in the table below is based on shares outstanding
as of December 31, 1999, and excludes:
- 10,000,000 shares of common stock reserved for issuance under our 2000
Stock Incentive Plan, of which 5,528,970 shares are issuable upon the
exercise of stock options outstanding as of March 8, 2000 with a weighted
average exercise price of $2.28 per share;
- 93,750 shares of common stock issued upon the exercise of options since
December 31, 1999;
- 94,500 shares of common stock reserved for issuance upon the exercise of
stock options with an exercise price of $1.60 per share granted outside
of the predecessor to our 2000 Stock Incentive Plan;
- 450,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan;
- 542,968 shares of common stock issuable upon the exercise of warrants
outstanding as of March 8, 2000, with a weighted average exercise price
of $1.60 per share; and
- 175,781 shares of common stock issued upon the exercise of warrants since
December 31, 1999.
22
<PAGE>
This information should be read in conjunction with our financial statements
and the related notes to those statements included in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................. $14,944 $32,844 $83,924
======= ======= =======
Series C redeemable convertible preferred stock, $.001
par value; actual--5,132,433 shares authorized, issued
and outstanding; pro forma and pro forma as
adjusted--no shares authorized, issued or
outstanding............................................ $18,990 $ -- $
Series D redeemable convertible preferred stock, $.001
par value; actual, pro forma and pro forma as
adjusted--no shares authorized, issued or
outstanding............................................ -- --
Stockholders' equity (deficit):
Series A convertible preferred stock, $.001 par value;
actual--2,541,667 shares authorized, issued and
outstanding; pro forma and pro forma as adjusted--no
shares authorized, issued or outstanding............... 3 --
Series B convertible preferred stock, $.001 par value;
actual--1,142,857 shares authorized, issued and
outstanding; pro forma and pro forma as adjusted--no
shares authorized, issued or outstanding............... 1 --
Preferred stock, $.001 par value, actual and pro
forma--no shares authorized, issued or outstanding; pro
forma as adjusted--5,000,000 shares authorized and no
shares issued or outstanding........................... -- --
Common stock, $.001 par value; actual--30,000,000 shares
authorized and 7,092,000 shares issued and outstanding;
pro forma--100,000,000 shares authorized and 25,054,273
shares issued and outstanding; pro forma as adjusted--
100,000,000 shares authorized and 29,054,273 shares
issued and outstanding................................. 7 25 29
Additional paid-in capital............................... 5,928 42,804 93,880
Deferred compensation.................................... (402) (402) (402)
Accumulated deficit...................................... (7,864) (7,864) (7,864)
------- ------- -------
Total stockholders' equity (deficit)................... (2,327) 34,563 85,643
------- ------- -------
Total capitalization................................... $16,663 $34,563 $85,643
======= ======= =======
</TABLE>
23
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
$34.2 million, or $1.37 per share. Pro forma net tangible book value per share
is determined by dividing the amount of our pro forma tangible net worth (pro
forma total tangible assets less total liabilities) by the number of shares of
our common stock outstanding after giving pro forma effect to the receipt of net
proceeds of approximately $17.9 million from the sale of our series D redeemable
convertible preferred stock on January 27, 2000 and to the automatic conversion
of each outstanding share of our convertible preferred stock into common stock
at a two-for-three ratio upon the closing of this offering. Dilution in pro
forma net tangible book value per share represents the difference between the
amount per share paid by investors in this offering and the net tangible book
value per share of common stock immediately after the completion of this
offering. After giving effect to our sale of 4,000,000 shares offered hereby at
an assumed initial public offering price of $14.00 per share (the mid-point of
the range set forth on the cover page of this prospectus) and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
and the application of the estimated net proceeds therefrom, our pro forma net
tangible book value as of December 31, 1999 would have been $85.3 million, or
$2.94 per share. This represents an immediate increase in pro forma net tangible
book value of $1.57 per share to existing stockholders and an immediate dilution
in pro forma net tangible book value of $11.06 per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $ 14.00
Pro forma net tangible book value per share at
December 31, 1999................................... $ 1.37
Increase per share attributable to new investors...... 1.57
-------
Pro forma net tangible book value per share after this
offering.............................................. 2.94
-------
Dilution per share to new investors..................... $ 11.06
=======
</TABLE>
The following table sets forth, on a pro forma basis as of December 31,
1999, after giving effect to the automatic conversion of all outstanding shares
of preferred stock into common stock upon the closing of this offering, the
total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to us by existing
stockholders and by new investors who purchase shares of common stock in this
offering, before deducting the estimated underwriting discounts and commissions
and estimated offering expenses, assuming an initial public offering price of
$14.00 per share (the mid-point of the range set forth on the cover page of this
prospectus):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 25,054,273 86.2% $41,600,000 42.6% $ 1.66
New investors............. 4,000,000 13.8 56,000,000 57.4 14.00
---------- ----- ----------- ------
Total............. 29,054,273 100.0% $97,600,000 100.0%
========== ===== =========== ======
</TABLE>
The foregoing tables and calculations assume no exercise of any stock
options or warrants outstanding as of December 31, 1999. Specifically, these
tables and calculations exclude:
- 10,000,000 shares of common stock reserved for issuance under our 2000
Stock Incentive Plan, of which 5,528,970 shares are issuable upon the
exercise of stock options outstanding as of March 8, 2000 with a weighted
average exercise price of $2.28 per share;
24
<PAGE>
- 93,750 shares of common stock issued upon the exercise of options since
December 31, 1999;
- 94,500 shares of common stock reserved for issuance upon the exercise of
stock options with an exercise price of $1.60 per share granted outside
of the predecessor to our 2000 Stock Incentive Plan;
- 450,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan;
- 542,968 shares of common stock issuable upon the exercise of warrants
outstanding as of March 8, 2000, with a weighted average exercise price
of $1.60 per share; and
- 175,781 shares of common stock issued upon the exercise of warrants since
December 31, 1999.
To the extent that any of these options or warrants are exercised, there
will be further dilution to new investors.
25
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The selected balance sheet data as of December 31, 1998 and 1999 and the
selected statement of operations data for each of the years in the three-year
period ended December 31, 1999 have been derived from our audited financial
statements included elsewhere in this prospectus. The balance sheet data as of
December 31, 1996 and 1997 and the statement of operations data for 1996 have
been derived from our audited financial statements not included in this
prospectus. We were incorporated in 1995 but did not commence operations until
1996. Historical results are not indicative of the results to be expected in the
future and results of interim periods are not necessarily indicative of results
for the entire year. You should read these selected financial data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our financial statements and the related notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1997 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue........................................ $ -- $ -- $ 1 $ 600
Programming revenue.................................... 11 245 378 39
----------- ----------- ----------- -----------
Total revenue........................................ $ 11 $ 245 $ 379 639
----------- ----------- ----------- -----------
Operating expenses:
Cost of revenue........................................ 6 121 70 856
Product development.................................... -- -- 93 1,637
Sales and marketing.................................... -- -- 33 3,987
General and administrative............................. 36 130 178 1,706
Non-cash compensation.................................. -- -- 25 734
----------- ----------- ----------- -----------
Total operating expenses............................. 42 251 399 8,920
----------- ----------- ----------- -----------
Loss from operations....................................... (31) (6) (20) (8,281)
----------- ----------- ----------- -----------
Other income (expense):
Interest income........................................ 1 -- -- 474
Interest expense....................................... -- -- -- (1)
----------- ----------- ----------- -----------
Total other income (expense), net.................... 1 -- -- 473
----------- ----------- ----------- -----------
Net loss................................................... $ (30) $ (6) $ (20) $ (7,808)
----------- ----------- ----------- -----------
Basic and diluted net loss per share....................... $ 0.00 $ 0.00 $ 0.00 $ (1.10)
----------- ----------- ----------- -----------
Weighted average basic and diluted shares outstanding...... 7,092,000 7,092,000 7,092,000 7,092,000
=========== =========== =========== ===========
Pro forma basic and diluted net loss per share............. $ (0.50)
===========
Shares used in pro forma basic and diluted net loss per
share.................................................... 15,465,304
===========
</TABLE>
Shares used in computing pro forma basic and diluted net loss per share
include the shares used in computing basic and diluted net loss per share
adjusted for the conversion of our series A convertible preferred stock,
series B convertible preferred stock and series C redeemable convertible
preferred stock to common stock at a two-for-three ratio as if the conversion
occurred at the date of their original issuance.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1997 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 2 $ 10 $ 107 $ 14,944
Working capital (deficit).................................. (29) (35) (30) 13,380
Total assets............................................... 2 30 142 19,289
Redeemable convertible preferred stock..................... -- -- -- 18,990
Total stockholders' equity (deficit)....................... (29) (35) (30) (2,327)
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ TOGETHER WITH OUR CONSOLIDATED FINANCIAL STATEMENTS
AND THE RELATED NOTES, WHICH APPEAR ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR CURRENT PLANS,
ESTIMATES AND BELIEFS AND INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE
DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS, PARTICULARLY IN THE SECTION
ENTITLED "RISK FACTORS."
OVERVIEW
We are a leading provider of technology that facilitates real-time sales and
customer service for companies doing business on the Internet. We are an
Application Service Provider, and we offer our proprietary real-time interaction
technology as an outsourced service. We currently generate revenue from the sale
of our LivePerson service, which enables our clients to communicate directly
with Internet users via text-based chat. Our clients can respond to customer
inquiries in real time, and can thereby enhance their customers' online shopping
experience.
Our business was incorporated in the State of Delaware in November 1995
under the name Sybarite Interactive Inc.; however, we did not commence
operations until January 1996. We had no significant revenue until 1997, when we
began to generate revenue from services primarily related to Web-based community
programming and media design.
In 1998, we shifted our core business focus to the development of the
LivePerson service and phased out our prior programming efforts, which last
generated revenue in December 1999. We introduced the LivePerson service in
November 1998.
REVENUE
With respect to the LivePerson service, our clients pay us an initial
non-refundable set-up fee, as well as a monthly fee for each seat. Our set-up
fee is intended to recover certain costs incurred by us (principally customer
service, training and other administrative costs) prior to deployment of our
service. Such fees are recorded as deferred revenue and recognized over a period
of 24 months, representing the estimated expected term of a client relationship.
As a result of recognizing set-up fees in this manner, combined with the fact
that we have more seats on an aggregate basis than clients, revenue attributable
to our monthly service constitutes a substantial majority of LivePerson service
revenue for any given period. In addition, because we expect the aggregate
number of seats to continue to grow, we expect the set-up fee to represent a
decreasing percentage of total revenue over time. We do not charge an additional
set-up fee if an existing client adds more seats. We recognize monthly service
revenue fees as services are provided. Given the time required to schedule
training for our clients' operators and our clients' resource constraints, we
have historically experienced a lag between signing a client contract and
generating revenue from that client.
Prior to November 1998, when the LivePerson service was introduced, we
generated revenue from services primarily related to Web-based community
programming and media design. Revenue from such services was $245,000 for the
year ended December 31, 1997, $378,000 for the year ended December 31, 1998 and
$39,000 for the year ended December 31, 1999. As of January 2000, we no longer
generate any revenue from these services. Revenue generated from Web-based
community programming and media design services is recognized upon completion of
the project provided that no significant obligations remain outstanding and
collection of the resulting receivable is probable.
27
<PAGE>
OPERATING EXPENSES
Our cost of revenue associated with programming activity consisted primarily
of the personnel expenses associated with outsourced programming and design. We
no longer incurred these costs as of December 1998. We began developing the
LivePerson service in the third quarter of 1998. We did not allocate development
costs of the LivePerson service separately. Accordingly, since November 1998,
our cost of revenue has principally been associated with the LivePerson service
and has consisted of:
- compensation costs relating to employees who provide customer service to
our clients, consisting of 17 people at December 31, 1999;
- compensation costs relating to our network support staff, consisting of
five people at December 31, 1999;
- allocated occupancy costs and related overhead; and
- the cost of supporting our infrastructure, including expenses related to
leasing space and connectivity for our services, as well as depreciation
of certain hardware and software.
Our product development expenses consist primarily of compensation and
related expenses for product development personnel, consisting of 15 people at
December 31, 1999, allocated occupancy costs and related overhead, and expenses
for testing new versions of our software. Product development expenses are
charged to operations as incurred.
Our sales and marketing expenses consist of compensation and related
expenses for sales personnel and marketing personnel, consisting of 21 people at
December 31, 1999, allocated occupancy costs and related overhead, advertising,
sales commissions, marketing programs, public relations, promotional materials,
travel expenses and trade show exhibit expenses.
Our general and administrative expenses consist primarily of compensation
and related expenses for executive, accounting and human resources personnel,
consisting of 15 people at December 31, 1999, allocated occupancy costs and
related overhead, professional fees, provision for doubtful accounts and other
general corporate expenses.
In 1999 we increased our allowance for doubtful accounts principally due to
an increase in accounts receivable as a result of the growth in our business. We
base our allowance for doubtful accounts on specifically identified known
doubtful accounts plus a general reserve for potential future doubtful accounts.
We adjust our allowance for doubtful accounts when accounts previously reserved
have been collected.
COMPENSATION EXPENSE
In 1998 and 1999, we recorded an aggregate of $25,000 and $474,000,
respectively, of compensation expense in connection with our grants to
consultants of options to acquire an aggregate of 458,010 shares of common
stock. The expenses were determined using a Black-Scholes pricing model.
In addition, during May 1999, we issued an option to purchase 94,500 shares
of common stock at an exercise price of $1.60 per share to ShopNow.com Inc., a
client, in connection with an agreement by us to provide the LivePerson service
over a two-year period. The original terms of the option provided that it would
vest in or before May 2001 if the client met certain defined revenue targets. At
December 31, 1999, the total value ascribed to this option, using a Black-
Scholes pricing model, of $235,000, was recorded as a deferred cost. In 1999, we
amortized $36,000 of this deferred cost.
In February 2000, we amended the option agreement with ShopNow.com Inc. to
provide that this option was fully vested and immediately exercisable.
ShopNow.com Inc. has agreed, however, that it will not sell the underlying
common stock until the earlier of February 2005 and, if it has achieved certain
revenue targets, between May and June 2001. The value ascribed to the option
28
<PAGE>
at the time the option agreement was amended, using a Black-Scholes pricing
model, was $1.1 million. As a result, in the first quarter of 2000, the deferred
cost will be increased from $235,000 to $1.1 million, and the unamortized
balance will be amortized ratably over the remaining service period of
approximately 18 months.
Through March 8, 2000, we granted stock options to purchase 5,246,085 shares
of common stock to employees, of which options to purchase 5,164,710 shares of
common stock at a weighted average exercise price of $2.36 remained outstanding
at March 8, 2000. Certain of these options were granted at less than the deemed
fair value at the date of grant. The deemed fair value of our common stock
ranged from $0.67 to $13.00 for the period during which these options were
granted. In connection with the granting of these options, we recorded deferred
compensation of $576,000 in 1999 and expect to record additional deferred
compensation of $13.1 million in the first quarter of 2000, representing the
difference between the deemed fair value of the common stock at the date of
grant for accounting purposes and the exercise price of the related options.
This amount will be recorded as deferred compensation in our financial
statements and will be amortized over the vesting period, typically three to
four years, of the applicable options. In 1999, we amortized $174,000 of
deferred compensation. We expect to amortize the remaining deferred compensation
annually as follows:
- 2000--$9.0 million, of which $3.5 million is expected to be recorded in
the first quarter;
- 2001--$2.7 million;
- 2002--$1.4 million; and
- 2003--$461,000.
In January 1999, we issued 41,667 shares of Series A Convertible Preferred
Stock in exchange for consulting services provided by Silicon Alley Venture
Partners, LLC in the amount of $50,000.
RESULTS OF OPERATIONS
Due to the phasing out of our programming services and our limited operating
history, we believe that comparisons of our 1999 operating results with those of
prior periods are not meaningful and that our historical operating results
should not be relied upon as indicative of future performance.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUE. Total revenue increased to $639,000 in 1999, from $379,000 in
1998. Revenue associated with the LivePerson service increased to $600,000 in
1999 from $1,000 in 1998 and revenue associated with Web-based community
programming and media design services decreased to $39,000 in 1999 from $378,000
in 1998. We no longer provided these services as of January 2000; accordingly,
we believe period-to-period comparisons are not meaningful.
COST OF REVENUE. Cost of revenue increased to $856,000 in 1999, from
$70,000 in 1998. This increase was primarily attributable to $279,000 of costs
associated with the addition of client services staff as well as $65,000 of
depreciation of computer hardware and software. We did not incur any
depreciation expense in 1998 because we rented all of our equipment during that
period, the total cost of which was not significant.
PRODUCT DEVELOPMENT. Product development costs increased to $1.6 million
for 1999, from $93,000 in 1998. This increase was primarily attributable to
$809,000 associated with an increase in the number of LivePerson service product
development personnel, which grew from four to 15 people in 1999, and $342,000
of technology development activities related to the LivePerson service,
consisting of network architecture and software design expenses.
29
<PAGE>
SALES AND MARKETING. Sales and marketing expenses increased to
$4.0 million for 1999, from $33,000 in 1998. This increase was primarily
attributable to $1.1 million associated with an increase in salaries and related
expenses resulting from an increase in sales and marketing personnel, which grew
from two to 21 people in 1999, and to an increase in advertising and promotional
expenses of $1.9 million, both of which related to the LivePerson service.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $1.7 million for 1999, from $178,000 in 1998. This increase was due primarily
to $711,000 associated with increases in personnel expenses related to support
and administration, occupancy costs, and to an increase of $339,000 in
recruitment costs, principally for our officers. The number of our executive,
accounting and human resources personnel grew from one to 15 in 1999.
NON-CASH COMPENSATION. In 1999, non-cash compensation represented
amortization of deferred compensation of $174,000 and compensation expense
incurred in connection with options and preferred stock issued to non-employees
in lieu of payment for services rendered.
OTHER INCOME. Interest income amounted to $474,000 for 1999, and consists
of interest earned on cash and cash equivalents generated by the receipt of
proceeds from our preferred stock issuances. Other income in 1998, representing
interest earned on cash balances, was less than $500.
NET LOSS. Our net loss increased to $7.8 million for 1999, from $20,000 in
1998.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUE. Revenue increased to $379,000 in 1998 from $245,000 in 1997. This
increase was due to an increase in revenue associated with Web-based community
programming and media design.
COST OF REVENUE. Cost of revenue decreased to $70,000 in 1998 from $121,000
in 1997. This decrease was primarily attributable to a reduction of outsourced
programming and design and related expenses as we performed more functions
internally at lower costs.
PRODUCT DEVELOPMENT. Product development costs increased to $93,000 in 1998
from $0 in 1997. This increase was primarily due to the hiring of our product
development staff related to our programming services.
SALES AND MARKETING. Sales and marketing expenses increased to $33,000 in
1998 from $0 in 1997. This increase was primarily due to our initiating the
sales and marketing efforts related to our programming services.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased to
$178,000 in 1998 from $130,000 in 1997. This increase was primarily due to
increases in personnel expenses and occupancy costs incurred as our operations
grew.
NET LOSS. Our net loss increased to $20,000 in 1998 from $6,000 in 1997.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our financial
information for the four most recent quarters ended December 31, 1999. In our
opinion, this unaudited information has been prepared on a basis consistent with
our annual financial statements and includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the unaudited
information for the periods presented. This information should be read in
conjunction with the financial statements, including the related notes, included
elsewhere in this prospectus. The results of operations for any quarter are not
necessarily indicative of results that we may achieve for any subsequent
periods.
30
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------------- --------------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue:
Service revenue.......................... $ 15 $ 26 $ 145 $ 414
Programming revenue...................... 9 23 4 3
------- ------- ------- -------
Total revenue.......................... 24 49 149 417
------- ------- ------- -------
Operating expenses:
Cost of revenue.......................... 24 51 173 608
Product development...................... 139 147 478 873
Sales and marketing...................... 51 396 1,429 2,111
General and administrative............... 158 189 422 937
Non-cash compensation.................... 50 91 19 574
------- ------- ------- -------
Total operating expenses............... 422 874 2,521 5,103
------- ------- ------- -------
Loss from operations....................... (398) (825) (2,372) (4,686)
------- ------- ------- -------
Other income (expense):
Interest income.......................... 20 38 199 217
Interest expense......................... (1) -- -- --
------- ------- ------- -------
Total other income (expense), net...... 19 38 199 217
------- ------- ------- -------
Net loss................................... $ (379) $ (787) $(2,173) $(4,469)
======= ======= ======= =======
</TABLE>
Our revenue from the LivePerson service has increased in each of the last
four quarters, from $15,000 to $414,000, due primarily to increased market
acceptance of our service, which is in part attributable to the growth of our
direct sales force. The growth of our sales force has allowed us to solicit more
prospective clients and to respond more quickly and effectively to their
inquiries. We cannot assure you that we will achieve similar growth in future
periods.
Programming revenue, which has decreased from $9,000 to $3,000 during the
last four quarters, represents income from business activities which we are no
longer pursuing. We do not anticipate any significant programming revenue in the
future.
Our total operating expenses have increased significantly in absolute terms
in each of the last four quarters, increasing from $422,000 to $5.1 million. As
a percentage of revenue, operating expenses declined slightly over the period.
We expect our operating expenses to continue to increase as we expand our
business.
The increase in our cost of revenue has been primarily due to the addition
of client services personnel and the expansion of our technological
infrastructure. We expect the cost of our client services department to continue
to increase as we continue to hire additional personnel. We also expect to
continue to expend significant amounts to expand our technological
infrastructure and to incur increased depreciation expenses related to such
spending. As a result, we expect cost of revenue as a percentage of revenue to
increase in the short term.
Product development costs increased significantly in absolute dollar terms
in each of the last four quarters, from $139,000 to $873,000, principally as a
result of increased headcount and allocated occupancy costs and related
overhead. As a percentage of revenue, however, product development costs in each
of the three quarters declined.
Our sales and marketing expense has increased significantly in each of the
last four quarters, from $51,000 to $2.1 million, due to increases in the size
of our sales and marketing staff and an increase in marketing-related
activities. The increase in sales staff headcount is attributable to the
expansion of our sales efforts. The increase in our marketing headcount and
related expenses is due to our increasing efforts to enhance our brand
recognition. We expect sales and marketing expense to continue to increase as we
expand our business.
31
<PAGE>
General and administrative costs increased in absolute dollar terms in each
of the last four quarters, from $158,000 to $937,000, principally due to an
increase in the number of employees and, to a lesser extent, to professional
fees. We expect general and administrative costs to increase in connection with
our becoming a public company and as our business grows.
Other income (expense), which is principally comprised of interest income
earned on cash and cash equivalents, has increased in each of the last four
quarters. The increase, particularly in the third quarter of 2000, is due
primarily to interest earned on the net proceeds from the July 1999 private
placement of our series C redeemable convertible preferred stock. We expect
interest income to increase with the investment of the proceeds from the
issuance of our series D redeemable convertible preferred stock and of this
offering in short-term, interest-bearing, investment-grade securities, pending
our use of such proceeds.
The increase in non-cash compensation expense during 1999 was due to
deferred compensation recognized in connection with employee options and
compensation expense incurred in connection with options and preferred stock
issued to non-employees in lieu of payment for services rendered.
We have experienced substantial increases in our expenses since our
introduction of the LivePerson service and we anticipate that our expenses will
continue to grow in the future. Although our revenue from the LivePerson service
has grown in each of the quarters since its introduction, we cannot assure you
that we can sustain this growth or that we will generate sufficient revenue to
achieve profitability. Consequently, we believe that period-to-period
comparisons of our operating results may not be meaningful, and as a result, you
should not rely on them as an indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations principally through
cash generated by private placements of our convertible preferred stock. Through
December 31, 1999, we have raised a total of $23.5 million in aggregate net
proceeds in three private placements. As of December 31, 1999, we had
$14.9 million in cash and cash equivalents, an increase of $14.8 million from
December 31, 1998. In addition, on January 27, 2000, we issued 3,157,895 shares
of series D redeemable convertible preferred stock at $5.70 per share, raising
total net proceeds of approximately $17.9 million. Since December 31, 1999 we
have entered into two letters of credit, which serve as the security deposits
for our new leases of office space, in an aggregate amount of $2.3 million for
2000. We expect to enter into an additional letter of credit for $2.2 million in
2001.
Net cash used in operating activities was $6.0 million for the year ended
December 31, 1999. Net cash provided by operating activities was $19,000 and
$42,000 for the years ended December 31, 1998 and 1997, respectively. Net cash
used in operating activities for the year ended December 31, 1999 consisted
primarily of net operating losses, depreciation expense, non-cash compensation
and changes in accounts receivable, prepaid expenses and other current assets,
security deposits, accounts payable and accrued expenses and deferred revenue.
Net cash provided by operating activities for the years ended December 31, 1998
and 1997 was primarily due to changes in accounts receivable, prepaid expenses
and other current assets, security deposits, accounts payable and accrued
expenses and deferred revenue, partially offset by net operating losses and
non-cash compensation charges.
Net cash used in investing activities was $2.6 million for the year ended
December 31, 1999 and $0 for each of the years ended December 31, 1998 and 1997.
Net cash used in investing activities for the year ended December 31, 1999 was
related to purchases of property and
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equipment. There were no investments in fixed assets for the years ended
December 31, 1998 or 1997.
Net cash provided by financing activities was $23.4 million for the year
ended December 31, 1999 and $78,000 for the year ended December 31, 1998. Net
cash used in financing activities was $34,000 for the year ended December 31,
1997. Net cash provided by financing activities for the year ended December 31,
1999 was attributable to proceeds from the sale of our convertible preferred
stock. Net cash provided by financing activities for 1998 was principally
attributable to $100,000 in proceeds from the issuance of a note payable, which
was converted into 83,333 shares of our series A convertible preferred stock in
January 1999. Net cash used in financing activities in 1997 was attributable to
an advance made to an officer.
As of December 31, 1999, our principal commitments consisted of $70,000 due
per month under operating leases. Although we have no material commitments for
capital expenditures, we anticipate an increase in capital expenditures and
lease commitments consistent with our anticipated growth in operations,
infrastructure and personnel.
In the first quarter of 2000 we entered into two additional leases for
office space, one in San Francisco and one in New York City. The lease for our
San Francisco office space, entered into in February 2000, provides for annual
aggregate payments of $275,000. In February 2000, we also entered into a
sublease for approximately 8,000 square feet in New York City expiring in
September 2000, providing for annual aggregate payments of $238,000. In March
2000, we entered into a lease for an aggregate of approximately 83,500 square
feet on two floors at a location in New York City. The lease provisions with
respect to one floor, consisting of approximately 40,500 square feet, commence
in June 2000, with rent of approximately $1.4 million per year in the first
three years, $1.5 million per year in years four through seven and $1.6 million
per year in years eight through ten. The related security deposit is $2.0
million for the first three years, $1.3 million for years four through seven and
$670,000 for years eight through ten. The other floor consists of approximately
43,000 square feet, and the lease provisions relating to that floor commence in
August 2001, with rent of approximately $1.5 million per year in the first three
years, $1.6 million per year in years four through seven and $1.7 million per
year in years eight through ten. The related security deposit is $2.2 million
for the first three years, $1.5 million for years four through seven and
$747,000 for years eight through ten. At our option, we may provide the security
deposit by a letter of credit.
We have incurred significant net losses and negative cash flows from
operations since inception, and as of December 31, 1999, had an accumulated
deficit of $7.9 million. These losses have been funded primarily through the
issuance of our convertible preferred stock. We intend to continue to invest
heavily in sales, marketing, promotion, technology and infrastructure
development as we grow. As a result, we expect to continue to incur operating
losses and negative cash flows for the foreseeable future.
We believe that the net proceeds from this offering, together with the
proceeds from the sale of our series D redeemable convertible preferred stock
and our current cash and cash equivalents will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. If cash generated from operations is insufficient to satisfy
our liquidity requirements, we may seek to sell additional equity or debt
securities or seek alternative sources of financing. If we are unable to obtain
this additional financing, we may be required to reduce the scope of our planned
sales and marketing and product development efforts, which could harm our
business, financial condition and operating results.
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YEAR 2000
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 may recognize a date using "00" as
the year 1900 rather than the year 2000. Prior to January 1, 2000, there was a
great deal of concern that this could result in system failures or
miscalculations, causing disruptions of operations for any company using such
computer programs or hardware, including, among other things, a temporary
inability to process transactions, send invoices or engage in normal business
activities. Most reports to date, however, are that computer systems are
functioning normally and the compliance and remediation work accomplished
leading up to the Year 2000 was effective to prevent any problems. Computer
experts have warned, however, that there may still be residual consequences. We
cannot assure you that any Year 2000 problems will not disrupt our service and
thereby result in a decrease in sales of the LivePerson service, an increase in
allocation of resources to address Year 2000 problems or an increase in
litigation costs.
We designed our internal systems as well as our software, hardware and
network architecture to be Year 2000 compliant, and we believe, based on our
initial reports, that such systems are Year 2000 compliant.
To date, we have not experienced any significant problems relating to the
Year 2000 compliance of our major suppliers. However, we cannot assure you that
these suppliers will not experience a Year 2000 problem in the future. In the
event that any such suppliers experience a Year 2000 problem, and we are unable
to replace it with an alternate source, our business would be harmed.
Our clients' online services may be affected by Year 2000 issues if they
need to expend significant resources to remedy a Year 2000 problem that may
arise. This may reduce funds available to purchase the LivePerson service.
We have not incurred any significant expenses to date, and we do not
anticipate that the total costs associated with our Year 2000 remediation
efforts, including both expenses incurred and any to be incurred in the future,
will be material.
It remains impossible to determine with complete certainty that all Year
2000 problems that may affect us have been identified or corrected. The number
of devices that could be affected and the interactions among these devices are
simply too numerous. In addition, no one can accurately predict how many Year
2000 problem-related failures will occur or the severity, duration or financial
consequences of these perhaps inevitable failures. As a result, we believe that
the following consequences, among others, are possible:
- operational inconveniences and inefficiencies for us, our suppliers and
our clients that may divert management's time and attention from ordinary
business activities; and
- some clients may postpone their purchases of our service and we will
experience a decrease in revenue.
Based on our initial assessment of our Year 2000 readiness, we do not
anticipate being required to implement any material aspects of a contingency
plan to address Year 2000 readiness of our critical operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued SOP No. 98-5, "Reporting on the Costs of Start-Up Activities,"
which provides guidance on the financial reporting of start-up costs. SOP 98-5
requires costs of start-up activities and
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organization costs to be expensed as incurred. We adopted SOP 98-5 on
January 1, 1999. As we had not capitalized such costs, the adoption of SOP 98-5
did not have an impact on our consolidated financial statements.
In April 1998, AICPA issued Statement of position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use
("SOP 98-1")." SOP 98-1 provides guidance for determining whether computer
software is internal-use software and on accounting for the proceeds of computer
software originally developed or obtained for internal use and then subsequently
sold to the public. It also provides guidance on capitalization of the costs
incurred for computer software developed or obtained for internal use. We
adopted SOP 98-1 in the first quarter of 1999, which did not have a material
effect on our financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. Subsequently, the FASB
issued SFAS No. 137 which deferred the effective date of SFAS No. 133. SFAS
No. 137 is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. We have not yet analyzed the impact of this pronouncement on our
financial statements.
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BUSINESS
OVERVIEW
LivePerson is a leading provider of technology that facilitates real-time
sales and customer service for companies doing business on the Internet. We
change the way Web site owners communicate with Internet users by enabling live
text-based chat. Historically, Internet users have had limited ways to
communicate with online businesses to inquire about matters such as product
features, transaction security and shipping details. The LivePerson service
enables our clients to communicate with Internet users via text-based chat. They
can respond to these and other customer inquiries in real time via text-based
chat, and can thereby enhance their customers' online shopping experience.
We are an Application Service Provider, or ASP, and we offer our proprietary
real-time interaction technology as an outsourced service. Our technology
requires no software or hardware installation by our clients or their customers.
We can implement our LivePerson service immediately following a two-hour
training session. Upgrades to the LivePerson service are automatic because they
are installed on our servers, without requiring action by either our clients or
their customers. We also offer our clients the ability to add capacity whenever
requested.
We believe that our service offers our clients the opportunity to increase
sales by answering customer questions and solving customer problems at critical
points in the buying process. It also enables our clients to reduce customer
service costs by allowing them to enhance operating efficiency and to improve
customer response times. Further, information captured in transcripts of live
text-based interactions can be used by our clients to increase their
responsiveness to customer needs and preferences, thereby improving customer
satisfaction, loyalty and retention.
We currently have more than 450 clients, including numerous online
retailers, online service providers and traditional offline businesses with a
Web presence. Our clients include EarthLink, GMAC's ditech.com, Intuit, iQVC,
LookSmart, Priceline.com and ShopNow.
INDUSTRY BACKGROUND
The Internet is evolving from primarily a static information source to a
widely accepted medium for commerce. Approximately 850,000 businesses currently
offer goods, services and information over the Web, according to an eMarketer
report of December 1999. Competition among online businesses is intense, with
new companies launching commercial Web sites every day. eMarketer estimates that
the number of actively maintained business Web sites will grow to 2.3 million
worldwide by the year 2002.
To compete effectively in this environment, online businesses are
increasingly striving to provide high quality service to attract and retain
customers. This increased focus is in turn leading to heightened expectations
for online service by Internet users. Whether to ask questions about product
features or transaction security, or to get help with completing an online
application, Internet users today expect effective, timely answers. Companies
that do not provide this level of service risk losing customers to competitors.
Companies are also increasingly focused on gathering information to improve
responsiveness and increase the rate of conversion from Web visitor to buyer.
Online shoppers have many purchasing options, with easy access to competitive
pricing, feature and distribution information. According to a Forrester Research
report of June 1999, 70% of all online merchants experience sales conversion
rates of less than 2%. In this environment, online businesses that collect
substantial information about their customers are better able to serve them
effectively. Customer feedback provides Web site owners with input on product
and service offerings, customer preferences and Web site usability.
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LIMITATIONS OF EXISTING SALES AND CUSTOMER SERVICE SOLUTIONS. Online
businesses currently use several methods to provide service and support to, and
gather information from, Internet users. Common methods include toll-free
telephone call centers, email response systems and listings of frequently asked
questions and answers.
Telephone support, while similar in some ways to an in-store experience,
typically requires that customers using the Internet with a single telephone
line log off the Web. Internet users, who know that competition is literally a
mouse-click away, may prefer to move quickly to a competitor's Web site rather
than take the time to place a telephone call and face a potentially lengthy wait
time.
Email support eliminates the need for the Internet user to log off to make a
telephone call and may result in lower telecommunication and support costs for
online businesses; however, email does not satisfy the real-time needs of
Internet users who desire communication at key points in the shopping process.
Frequently asked questions, though available to Internet users on demand,
are typically general in content and may also be unsuitable for transactions
involving expensive or complex products and services. Internet users may desire
the comfort of an active communication with a customer service representative
before actually making such a purchase. In addition, because frequently asked
questions provide only one-way communication, they provide a limited means for
companies to gather customer feedback.
In order to provide high quality service to customers and other Web users,
companies require a customer interaction solution that:
- provides real-time responses;
- maximizes sales opportunities;
- strengthens customer relationships;
- allows companies to gather information to remain responsive to customer
needs;
- can be implemented quickly and easily; and
- can be operated in a cost-effective manner.
THE LIVEPERSON SOLUTION
LivePerson provides technology that facilitates real-time sales and customer
service for companies doing business on the Internet. We are an ASP offering
this technology as an outsourced service to companies of all sizes. Our
technology enables our clients to interact with customers in real time at the
user's request through live text-based chat. This improves Web site
communication and enhances the online shopping experience.
To implement the LivePerson service, our clients simply place a
LivePerson-branded or custom-created icon on one or more pages of their Web
sites and give their operators access to our service via the Internet. When an
Internet user browsing a client's Web site desires assistance, the user simply
clicks on the icon. This causes a pop-up dialogue window to appear on the user's
screen. The Internet user and our client's operator then engage in a real-time
online conversation in this dialogue window. The operator may incorporate
graphics and links to Web pages into the dialogue window. Our service enables
this live conversation by linking the Internet user and our clients' operators
through our proprietary technology, which resides on our servers.
We create and store conversation transcripts and related data, and we also
enable our clients to generate optional customer exit surveys, which our clients
can use to collect additional
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information about their customers. Stored data include the Internet user's name,
browser type, Internet Protocol (IP) address and responses to exit surveys, the
operator's identity and time stamps for each chat transmission. In addition, we
provide our clients with tools to analyze the stored information. These tools
include summary reports of the number of chats in certain periods and the
duration of such chats, filters to sort data from exit surveys, statistical
summaries of those data and statistical summaries of operator performance.
We believe the LivePerson service gives our clients the opportunity to:
- MAXIMIZE SALES OPPORTUNITIES. Our clients are able to respond to customer
inquiries in real time. Live customer interaction creates opportunities
to:
- answer questions on demand and resolve customer issues as they occur;
- assist in closing sales that might otherwise have been abandoned
without direct one-to-one real-time interaction; and
- market additional products and services in order to increase average
order sizes.
- STRENGTHEN CUSTOMER RELATIONSHIPS. Personalized service generates
increased customer satisfaction. Our service enables our clients to build
relationships with their customers and offers our clients the opportunity
to market to their customers on a one-to-one basis. Furthermore,
transcripts from LivePerson conversations and optional exit surveys often
provide relevant customer data and valuable real-time feedback. Our
clients may then use this information to modify product offerings and
marketing efforts, improve Web site navigation and refine their
frequently asked questions listings.
- REDUCE OPERATING COSTS. Our clients' experience has shown that a single
operator can interact with as many as four users simultaneously. As a
result, an operator can provide service to more customers, thereby
reducing costs per customer interaction. In addition, our clients can
create pre-formatted responses to customer questions, allowing them to
improve response time and operator efficiency. An operator can simply
choose and, where appropriate, slightly modify a pre-formatted response
to answer many questions.
Because we are an ASP and provide our clients with a service rather than an
in-house technology solution, we provide our clients with the following
additional benefits:
- LOW SET-UP COSTS AND REASONABLE ONGOING FEES. We charge our clients a low
set-up fee and reasonable ongoing monthly fees.
- EFFECTIVE USE OF INTERNAL RESOURCES. Because the LivePerson service is an
outsourced application, our clients can devote their information
technology resources to other priorities.
- RAPID DEPLOYMENT. We provide the technology needed to facilitate
real-time sales and customer service without plug-ins or customization.
Our clients do not need to install any hardware or software in order to
immediately provide the LivePerson service, other than any hardware or
software they might need to install in order to connect to the Internet
generally. In addition, our clients' operators and customers can use our
service with any standard Web browser.
- AUTOMATIC UPGRADES. We install all upgrades to the LivePerson service on
our servers. As a result, upgrades are immediately available for use and
require no action by either our clients or their customers.
- EASE OF EXPANSION. Our clients can add additional operator seats simply
by requesting them, enabling the LivePerson service to meet our clients'
growth needs.
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OUR STRATEGY
Our objective is to enhance our current position as a leading provider of
real-time sales and customer service technology for companies doing business on
the Internet. The key elements of our strategy include:
STRENGTHENING OUR MARKET LEADERSHIP POSITION AND GROWING OUR RECURRING
REVENUE BASE. We intend to extend our market leadership position by
significantly increasing our installed client base. We intend to capitalize on
our growing base of existing clients by selling them additional seats and other
services as their customers are increasingly exposed to the benefits and
functionality of live text-based interaction. Increasing our client base will
enable us to continue to strengthen our recurring revenue stream. We also
believe that greater exposure of Internet users to our service will create
additional demand for real-time sales and customer service solutions. We plan to
continue expanding into all areas of Internet commerce which could benefit from
real-time sales and customer service technology.
INCREASING THE VALUE OF OUR SERVICE TO OUR CLIENTS. We strive to
continuously add new features and functionality to our live interaction
platform. Because we host our service, we can make new features available
immediately to our clients without client or end-user installation of software
or hardware. We currently offer a suite of reporting and administrative tools as
part of the LivePerson service. Over time, we intend to develop richer tools for
appropriate sectors of our client base, while adding further interactive
capabilities. We also intend to develop additional services that will provide
value to our clients. For example, we intend to provide advisory services to our
clients that enable improved reporting capabilities, data storage and bridges to
existing client systems. Our clients may use these capabilities to increase
productivity, manage call center staffing, develop one-to-one marketing tactics
and pinpoint sales opportunities. Through these and other initiatives, we intend
to increase the value of our service to clients and their reliance on its
benefits, which we believe will result in additional revenue from both new and
existing clients over time.
CONTINUING TO BUILD STRONG BRAND RECOGNITION. The LivePerson brand name is
prominently displayed on the pop-up dialogue window that appears when an
Internet user has requested assistance. We believe that high visibility
placement of our brand name will create greater brand awareness and increase
demand for the LivePerson service. In addition, we intend to leverage increasing
awareness of our brand and our reputation as a leading provider of real-time
sales and customer service technology to become a well-recognized solution for
companies doing business on the Internet. We intend to expand our traditional
and online marketing activities to achieve these goals.
MAINTAINING OUR TECHNOLOGICAL LEADERSHIP POSITION. We focus on the
development of tightly integrated software design and network architecture that
is both reliable and scalable. We continue to devote significant resources to
technological innovation. Specifically, we plan to expand the features and
functionality of our existing service, develop broader applications for our
service and create new products and services that will benefit our expanding
client base. We evaluate emerging technologies and industry standards and
continually update our technology in response to changes in the real-time
customer service industry. We believe that these efforts will allow us to
effectively anticipate changing client and end-user requirements in our rapidly
evolving industry.
EVALUATING STRATEGIC ALLIANCES AND ACQUISITIONS WHERE APPROPRIATE. We
intend to seek opportunities to form strategic alliances with or to acquire
other companies that will enhance our business. We have entered into selected
strategic alliances with customer service call centers and may enter into
additional alliances in the future. We have no present plans or commitments with
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respect to any strategic alliances or acquisitions and we are not currently
engaged in any material negotiations with respect to these opportunities.
EXPANDING OUR INTERNATIONAL PRESENCE. We currently have more than 35
non-U.S. based clients in Europe, Asia, South America and the Middle East, all
of which were sold and are serviced by our U.S. offices. We have also translated
the user interface for the LivePerson service into a variety of languages,
including presently, Dutch, French, German, Italian, Portuguese, Spanish and
Swedish, and are currently making them available for our international clients.
We intend to expand our international presence to better penetrate these markets
and are evaluating strategies to implement international expansion.
THE LIVEPERSON SERVICE
The LivePerson service appears on our clients' Web sites as a
LivePerson-branded or custom-created icon. An Internet user browsing a client's
Web site who desires assistance simply clicks on the icon, causing the
LivePerson pop-up dialogue window to appear on the user's screen. An operator
prompts the user with an offer of assistance, commencing a live text-based
interaction. In many instances pre-formatted responses are used to respond to
customer inquiries.
In addition, an operator may offer hyperlinks to other parts of a client's
Web site, product photos and graphics in the dialogue window. This allows an
operator to easily present additional products or services, thereby maximizing
sales opportunities.
The LivePerson technology consists of five integrated components that
form a comprehensive real-time interaction platform. We currently offer the
features and functionality outlined below to all customers and intend to add
more features in the future. These may include additional reporting and
administrative tools, new interactive capabilities and data bridges to existing
client systems.
[GRAPHIC APPEARS HERE]
The graphic is a three-dimensional diagram surrounded by a box comprised of
two layers. The first layer is subdivided into five equal sized cubes numbered 1
to 5 from left to right with the following titles: "Customer Interaction",
"Direct Marketing", "Operator Control", "Administrator Control" and "Customer
Data Collection" and a sixth cube titled "Future Component" that is raised
slightly higher than cubes 1 to 5. The second layer is an undivided layer
positioned directly below the first layer labelled "Integrated Network
Infrastructure".
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[GRAPHIC APPEARS HERE]
The graphic, positioned to the left of the text, is a larger cube positioned
upon a smaller three-dimensional cube, with the number 1 in the larger cube.
CUSTOMER INTERACTION. The customer interaction component is the
core of real-time communication between our clients' operators and
their customers.
- REAL-TIME TEXT-BASED INTERACTION. Real-time text-based
interaction is the communication vehicle between our clients'
operators and their customers. Text is currently the preferred
method of communication because it requires no special
plug-ins or hardware and it can be stored and analyzed.
- IMAGE / LINK / PAGE PRESENTER. An operator may present
photographs, images or links to other Web pages or sites in
the dialogue window in response to customer queries. An
operator may also "push" Web pages to a customer's screen.
- SHOPPING CART CONVERTER. The shopping cart converter is a
pop-up window feature that is often used to help prevent
shopping cart abandonment. Typically, after a customer has
been at a shopping cart for a set period, a pop-up window will
appear offering assistance. This enables the customer to
instantly ask a question before completing or potentially
abandoning a transaction.
- EXIT SURVEY. A customizable exit survey is presented to the
customer after each conversation. The survey can be modified
in real time and is used by our clients primarily for
gathering customer feedback, creating customer profiles and
quality control.
[GRAPHIC APPEARS HERE]
The graphic, positioned to the left of the text, is a larger cube positioned
upon a smaller three-dimensional cube, with the number 2 in the larger cube.
DIRECT MARKETING. The direct marketing component enables Web site
owners to classify customers and target outbound email to selected
groups.
- GROUP PROFILER. The group profiler provides administrators
with the power to analyze, profile and classify customers
based on various data collected in an exit survey. This is
used by the administrator to understand customer patterns and
to create customer groups.
- EMAIL TARGETER. Based on information collected in exit
surveys, the email targeter allows clients to target sales and
marketing campaigns to selected customer groups.
[GRAPHIC APPEARS HERE]
The graphic, positioned to the left of the text, is a larger cube positioned
upon a smaller three-dimensional cube, with the number 3 in the larger cube.
OPERATOR CONTROL. The operator control component enables
operators to efficiently manage interactions with multiple
customers.
- SKILL-BASED ROUTING. Customers can be routed to specific
operators based on the operator's particular knowledge of
specific products or services. For example, many of our
clients have specialized operator groups focusing separately
on sales or customer service to whom they selectively route
inquiries. This routing complements and partially automates
the alternative operator transfer capability.
- ALTERNATIVE OPERATOR TRANSFER. The operator can transfer a
customer to another operator or to an administrator with
unique skills or knowledge.
- PRE-FORMATTED RESPONSES. The operator can use and modify
pre-formatted responses to assist in responding to a customer,
rather than manually typing a response. Pre-formatted
responses are usually created by administrators and may be
accessed and modified on a real-time basis to continuously
improve response time and quality. Operators preview and
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may edit pre-formatted responses to respond appropriately to
customer inquiries.
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[GRAPHIC APPEARS HERE]
The graphic, positioned to the left of the text, is a larger cube positioned
upon a smaller three-dimensional cube, with the number 4 in the larger cube.
ADMINISTRATOR CONTROL. The administrator control component
enables administrators to manage operators.
- OPERATOR EVALUATION TOOL. The administrator can view operator
call activity by date, time, length and number of dialogues,
and operator response time, enabling real time operator
evaluation.
- REAL-TIME OPERATOR CONTROL CENTER. The administrator can view
the conversations between all operators online and their
customers. Administrators can also participate in
conversations to help operators respond to inquiries.
[GRAPHIC APPEARS HERE]
The graphic, positioned to the left of the text, is a larger cube positioned
upon a smaller three-dimensional cube, with the number 5 in the larger cube.
CUSTOMER DATA COLLECTION. The customer data collection component
captures, stores and processes all customer information.
- TEXT-BASED TRANSCRIPTS. All textual data, including exit
survey data, are archived in an indexed database which can be
queried on several criteria. Multiple transcripts from
conversations with the same customer are saved within one
record set, ensuring that an exact history of the customer's
interaction is accurately maintained. Transcripts of prior
conversations can be viewed by operators in real time as they
interact with customers.
- LAST-PAGE VIEWED TRACKER. The specific page that the customer
viewed before entering into a LivePerson text-based
interaction is captured and saved with the transcript of the
dialogue.
- BROWSER / IP ADDRESS TRACKER. The customer's browser type and
IP address are captured and saved with the transcript of the
dialogue.
- EXIT SURVEY ANALYZER. Survey results and summaries can be
instantly displayed, queried and graphed.
CLIENTS
We currently have more than 450 clients, including dedicated Internet
companies, Fortune 1000 companies and other companies with established
commercial Web sites. Our service benefits companies of all sizes doing business
on the Internet.
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The following is a selected list of clients using the LivePerson service as
of March 8, 2000:
<TABLE>
<S> <C> <C>
Adatom.com giftpoint.com MyHome.com
APC Gifts.com National Discount Brokers
Babygear.com GMAC's ditech.com Neiman Marcus
clickandmove Hand Technologies Playboy.com
betmaker.com Harris Interactive PlayersOnly.com
CMC Group Plc HealthAxis.com Priceline.com
CollegeClub.com Homelender.com PrintNation, Inc.
Comtrad Industries IGoGolf Professional Shopper
CyBerCorp IMX Exchange ScreamingMedia
DigitalWork.com Internet Financial Network ShopAtHome
Drake Software Solutions Intuit ShopNow
EarthLink iOwn.com The boxLot Company
ephones iQVC TradeCapture.com
eScore JB Oxford & Company USABancShares
evesta.com Last Minute Network USlaw.com
ExpressAutoparts.com Laidlaw Global Services Warrior Insurance Group
Financial Times LookSmart WebHosting.com
firstsource.com M&I Mortgage WhatsHotNow
Forextrading.com Miadora
</TABLE>
SALES, CLIENT SUPPORT AND MARKETING
SALES. The sales cycle for the LivePerson service has generally been short.
We sell LivePerson primarily via telephone as a monthly fee service. Due to the
relatively low start-up costs of the LivePerson service, our experience has
shown that purchase approval comes from customer service, sales or marketing
managers, and requires little or no involvement on the part of a client's
information technology staff.
We sell primarily through a direct sales organization and target companies
seeking to improve customer relations and increase Internet commerce activity.
Additionally, potential clients have contacted us as a result of our
participation in trade shows, press releases, news articles, online and offline
advertising campaigns or visits to our Web site. We demonstrate the LivePerson
service online and, for larger accounts, we provide in-person service
demonstrations.
We also have begun to enter into contractual arrangements that complement
our direct sales force. These are primarily with Web hosting and call center
service companies, and are in the form of value-added reseller or referral
agreements pursuant to which the parties are paid a commission based on
generated revenue.
CLIENT SUPPORT. Our client services group assists the client in launching
the LivePerson service, and manages our ongoing relationship with the client.
Each client is assigned a client services manager who is responsible for
day-to-day client interaction.
The following steps are required to launch a new LivePerson client:
- ACCOUNT SETUP. We create operator names and passwords for our client.
- SITE SETUP. Our client places our HTML link on its Web site.
- TRAINING. We provide telephone-based training of operators and
administrators.
Setup and training can generally be accomplished within the same day. We
also maintain a 24-hour per day / seven-day per week help desk to assist clients
with any technical concerns or issues.
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MARKETING. Our marketing strategy is focused on building brand awareness of
LivePerson as a leading provider of real-time sales and customer service
technology for companies doing business on the Internet. Our marketing targets
dedicated Internet companies, Fortune 1000 companies and other companies with
established commercial Web sites.
Our strategic advertising campaigns utilize both traditional and online
media. Our print advertising focuses on targeted trade publications, including
Internet commerce and other categories, while our online advertising targets
decision makers of companies doing business on the Internet. We also exhibit
prominently at key industry trade shows.
Our marketing strategy also includes aggressive public relations efforts.
These initiatives include interviews with media and industry analysts which
often result in published articles and studies. They also include speaking
engagements and byline articles featuring our executives.
COMPETITION
The market for real-time sales and customer service technology is new and
intensely competitive. There are no substantial barriers to entry in this
market, other than the ability to design and build scalable software and, with
respect to outsourced solution providers, the ability to design and build
scalable network architecture. Established or new entities may enter this market
in the near future, including those that provide real-time interaction online,
with or without the user's request.
We compete directly with companies focused on technology that facilitates
real-time sales and customer service interaction. Our competitors include
customer service enterprise software providers such as eGain Communications
Corp., eShare Technologies, Inc., Kana Communications, Inc. and WebLine
Communications (a part of Cisco Systems' applications technology group), some of
which are beginning to offer hosted solutions.
We also face potential competition from larger enterprise software companies
such as Oracle and Siebel Systems. In addition, established technology
companies, including IBM, Hewlett-Packard and Microsoft, may also leverage their
existing relationships and capabilities to offer real-time sales and customer
service applications.
Finally, we face competition from clients and potential clients that choose
to provide a real-time sales and customer service solution in-house as well as,
to a lesser extent, traditional offline customer service solutions, such as
telephone call centers.
We believe that competition will increase as our current competitors
increase the sophistication of their offerings and as new participants enter the
market. Many of our current and potential competitors have:
- longer operating histories;
- larger client bases;
- greater brand recognition;
- more diversified lines of products and services; and
- significantly greater financial, marketing and other resources.
These competitors may enter into strategic or commercial relationships with
larger, more established and better-financed companies. These competitors may be
able to:
- undertake more extensive marketing campaigns;
- adopt more aggressive pricing policies; and
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- make more attractive offers to businesses to induce them to use their
products or services.
Any delay in the general market acceptance of the real-time sales and
customer service solution business model would likely harm our competitive
position. Delays would allow our competitors additional time to improve their
service or product offerings, and would also provide time for new competitors to
develop real-time sales and customer service applications and solicit
prospective clients within our target markets. Increased competition could
result in pricing pressures, reduced operating margins and loss of market share.
TECHNOLOGY
Three key technological features distinguish the LivePerson service:
- All of our customers share the same servers, databases, and network
connections. We are therefore able to accommodate our expanding customer
base and increasing system usage without incrementally adding new
hardware or network infrastructure.
- Our network, hardware and software are designed to accommodate our
clients' demand for high-quality 24-hours per day / seven-days per week
service.
- As a hosted service we are able to add additional capacity and new
features quickly and efficiently. This has enabled us to immediately
provide these benefits simultaneously to our entire client base. In
addition, it allows us to maintain a relatively short development and
implementation cycle of several weeks.
As an ASP, we focus on the development of tightly integrated software design and
network architecture. We have dedicated significant resources to designing our
software and network architecture based on the fundamental principles of
reliability and scalability.
SOFTWARE DESIGN. Our software design provides a reliable store-and-forward
message delivery solution that actively routes messages between operators and
Internet users.
The LivePerson real-time interaction platform can efficiently accommodate
additional features and functionality due to its distributed processes, which
can be replicated on several servers. In some cases, key processes are run
independently to enhance performance. Our software design is also based on open
standards. These standard protocols facilitate integration with our clients'
legacy and third-party systems, and include:
- Java
- XML (Extensible Mark-up Language)
- HTML (Hypertext Mark-up Language)
- SQL (Structured Query Language)
- Internet Protocol (IP)
NETWORK ARCHITECTURE. The software underlying our service is integrated
with a scalable and reliable network architecture. Our network is scalable in
that we do not need to incrementally add new hardware or network capacity for
each new LivePerson client. This network architecture is supported by data
centers that have redundant network connections, servers and other features,
ensuring a high level of reliability.
Our network architecture is also based on proprietary packet routing and
server clustering techniques and superior network connectivity. Requests are
routed among several servers dynamically to ensure uninterrupted service. In
addition, we use a "multi-homed" Internet access
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system, which incorporates multiple direct Internet connections to reduce the
impact of latency that may occur on different parts of the Internet. This design
enables our clients and their customers to efficiently connect to our servers.
We also use advanced load-balancing techniques to ensure that each
LivePerson conversation is connected at an optimal speed and that no single
point of failure can affect the LivePerson service.
GOVERNMENT REGULATION
We are subject to federal, state and local regulation, including laws and
regulations applicable to access to or commerce over the Internet. Due to the
increasing popularity and use of the Internet and various other online services,
it is likely that a number of new laws and regulations will be adopted with
respect to the Internet or other online services covering issues such as user
privacy, freedom of expression, pricing, content and quality of products and
services, taxation, advertising, intellectual property rights and information
security. The nature of such legislation and the manner in which it may be
interpreted and enforced cannot be fully determined and, therefore, such
legislation could subject us and/or our clients or their customers to potential
liability, which in turn could have an adverse effect on our business, results
of operations and financial condition. The adoption of any such laws or
regulations might also impair the growth of Internet use, which in turn could
decrease the demand for our service or increase the cost of doing business or in
some other manner have a material adverse effect on our business, results of
operations and financial condition. In addition, applicability to the Internet
of existing laws governing issues such as intellectual property, taxation and
personal privacy is uncertain. The vast majority of such laws were adopted prior
to the advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies.
As a result of collecting data from live online customer dialogues, our
clients may be able to analyze the commercial habits of their customers. Privacy
concerns may cause customers to avoid online sites that collect such behavioral
information and even the perception of security and privacy concerns, whether or
not valid, may indirectly inhibit market acceptance of our services. In
addition, our clients may be harmed by any laws or regulations that restrict
their ability to collect or use this data. Several states have proposed
legislation that would govern the collection and use of personal user
information gathered online or require online services to establish privacy
policies. The Federal Trade Commission has initiated actions against online
services regarding the manner in which information is collected from users, used
by online services and/or provided to third parties, and has begun
investigations into the privacy practices of companies that collect information
about individuals on the Internet. The European Union has enacted its own
privacy regulations that may result in limits on the collection and use of some
user information. Changes to existing domestic or international laws or the
passage of new laws intended to address these or other issues, including some
recently proposed changes, could create uncertainty in the marketplace that
could reduce demand for our services or increase the cost of doing business as a
result of litigation costs or increased service delivery costs, or could in some
other manner have a material adverse effect on our business, results of
operations and financial condition.
It may take years to determine how existing laws apply to the Internet. Any
new legislation or regulation regarding the Internet, or the application of
existing laws and regulations to the Internet, could harm us. Additionally, as
we expand outside the U.S., the international regulatory environment relating to
the Internet could have a material and adverse effect on our business, results
of operations and financial condition.
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INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We rely upon a combination of patent, copyright, trade secret and trademark
law, written agreements and common law to protect our proprietary technology,
processes and other intellectual property, to the extent that protection is
sought or secured at all. We currently have one U.S. patent application pending.
To the extent that the invention described in our U.S. patent application was
made public prior to the filing of the application, we may not be able to obtain
patent protection in certain foreign countries. In addition, we have a common
law trademark, "LivePerson", and three pending U.S. trademark applications. The
trademark examiner assigned to our applications has issued non-final office
actions with respect to our applications, requesting additional information and
making initial refusals. However, no final determinations as to the
registrability of the marks have been made. We are in the process of responding
with respect to our applications, to these office actions prior to their
respective deadlines, but ultimately we may not be able to secure registration
of our trademarks. We do not have any trademarks registered outside the U.S.,
nor do we have any trademark applications pending outside the U.S.
Although we rely on patent, copyright, trade secret and trademark law,
written agreements and common law, we believe that factors such as the
technological and creative skills of our personnel, new service developments,
frequent enhancements and reliable maintenance are more essential to
establishing and maintaining a technology leadership position. We cannot assure
you that others will not develop technologies that are similar or superior to
our technology. We enter into confidentiality and other written agreements with
our employees, consultants and strategic partners, and through written
agreements, control access to and distribution of our software, documentation
and other proprietary information. Despite our efforts to protect our
proprietary rights, third parties may, in an unauthorized manner, attempt to
copy or otherwise obtain and use our service or technology or otherwise develop
a service with the same functionality as our products. Policing unauthorized use
of our products is difficult, and we cannot be certain that the steps we have
taken will prevent misappropriation of our technology, particularly in foreign
countries where the laws may not protect proprietary rights as fully as do the
laws of the United States.
Substantial litigation regarding intellectual property rights exists in the
software industry. Our service may be increasingly subject to third-party
infringement claims as the number of competitors in our industry segment grows
and the functionality of services in different industry segments overlaps. Some
of our competitors in the market for real-time sales and customer service
solutions may have filed or may intend to file patent applications covering
aspects of their technology. Although we believe that our service and technology
do not infringe upon the intellectual property rights of others and that we have
all rights necessary to utilize the intellectual property employed in our
business, we may be subject to claims alleging infringement of third-party
intellectual property rights. Any such claims could require us to spend
significant amounts in litigation, distract management from other tasks of
operating our business, pay damage awards, delay delivery of the LivePerson
service, develop non-infringing intellectual property or acquire licenses to the
intellectual property that is the subject of any such infringement. Therefore,
such claims could have a material adverse effect on our business, results of
operations and financial condition.
EMPLOYEES
As of March 8, 2000, we had 125 full-time employees. Members of senior
management have entered into employment agreements with us, some of which are
described in "Management--Employment Agreements." None of our employees are
covered by collective bargaining agreements. We believe our relations with our
employees are good.
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FACILITIES
We currently lease an aggregate of approximately 25,000 square feet at our
headquarters location in New York City, consisting of a lease for approximately
17,000 square feet expiring in October 2006 and a sub-lease for approximately
8,000 square feet expiring in September 2000. We also lease an additional,
approximately 6,000 square foot location in New York City, expiring in April
2000. In addition, in March 2000, we entered into a lease for an aggregate of
approximately 83,500 square feet on two floors at a location in New York City
which we expect to occupy in the third quarter of 2000.
We currently maintain offices in San Francisco subleased to us by one of our
investors, which we expect to vacate upon relocation to our new facility of
approximately 7,850 square feet. We expect to relocate in the second quarter of
2000. The term of the lease for our new facility expires in January 2005.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings. We may be subject to
various claims and legal actions arising in the ordinary course of business.
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MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The executive officers, key employees and directors of LivePerson, and their
ages and positions as of March 8, 2000, are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ----------- --------
<S> <C> <C>
Robert P. LoCascio*............. 31 President, Chief Executive Officer and Chairman of the Board
Dean Margolis*.................. 42 Chief Operating Officer
Timothy E. Bixby*............... 35 Executive Vice President, Chief Financial Officer, Secretary and
Director
Scott E. Cohen*................. 41 Executive Vice President, Sales/Client Services
James L. Reagan*................ 34 Chief Technology Officer
Vincent Beese................... 34 Vice President, Sales
Victor K. Cheng................. 26 Vice President, Product Management
Dwight D. Foster................ 37 Vice President, West Coast Sales
Christopher L. Smith............ 32 Vice President, Client Services
Lawrence A. Wasserman........... 34 Vice President, Marketing
Richard L. Fields............... 43 Director
Wycliffe K. Grousbeck........... 38 Director
Kevin C. Lavan.................. 47 Director
Edward G. Sim................... 29 Director
</TABLE>
- ----------------------------
* Denotes Executive Officer.
ROBERT P. LOCASCIO has been our President, Chief Executive Officer and
Chairman of our board of directors since our inception in November 1995.
Mr. LoCascio founded our company as Sybarite Interactive Inc., which developed a
community-based web software platform known as TOWN. Before founding Sybarite
Interactive, through November 1995, Mr. LoCascio was the founder and Chief
Executive Officer of Sybarite Media Inc. (known as IKON), a developer of
interactive public kiosks that integrated interactive video features with
advertising and commerce capabilities. Mr. LoCascio received a B.B.A. from
Loyola College.
DEAN MARGOLIS has been our Chief Operating Officer since January 2000. From
December 1996 until August 1999, Mr. Margolis was the founder and Chief
Executive Officer of Comet Systems, Inc., a Web site tools company which
licenses technology that allows a Web site publisher to change the appearance of
its cursor. Mr. Margolis was a consultant to several Internet companies between
August 1999 and January 2000, and between October 1995 and December 1996. From
November 1993 to October 1995, Mr. Margolis was President of Blackberry
Technologies, Inc., a software development firm. From April 1989 until November
1993, Mr. Margolis held various sales management positions with ABT Corporation,
a project management software company. Mr. Margolis received a M.B.A. and a M.S.
from Harvard University, and a B.A. from Columbia University.
TIMOTHY E. BIXBY has been our Chief Financial Officer since June 1999, our
Secretary and a director since October 1999 and an Executive Vice President
since January 2000. From March 1999 until May 1999, Mr. Bixby was a private
investor. From January 1994 until February 1999, Mr. Bixby was Vice President of
Finance for Universal Music & Video Distribution Inc., a manufacturer and
distributor of recorded music and video products, where he was responsible for
internal financial operations, third party distribution deals and strategic
business development. From October 1992 through January 1994, Mr. Bixby was
Associate Director, Business
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Development, with the Universal Music Group. Prior to that, Mr. Bixby spent
three years in Credit Suisse First Boston's mergers and acquisitions group as a
financial analyst. Mr. Bixby received a M.B.A. from Harvard University and an
A.B. from Dartmouth College.
SCOTT E. COHEN has been our Executive Vice President, Sales/Client Services
since November 1999 and was our Executive Vice President of Sales from
March 1999 until November 1999. Mr. Cohen was a consultant to several Internet
companies between January 1999 and March 1999. From February 1998 to
December 1998, Mr. Cohen was Senior Vice President, Strategic Alliances and
Direct Marketing at 24/7 Media, Inc., an online advertising network. Mr. Cohen
was Senior Vice President of Sales for Petry Interactive, Inc. from August 1997
until February 1998, and Vice President of Business Development from
November 1996 until August 1997. From November 1992 through November 1996,
Mr. Cohen held various positions with companies held by MacAndrews & Forbes
Holdings Inc., including Sales Executive and Manager of Business Development at
New World Communications Inc. and Director of Real Estate at Revlon Consumer
Products Corporation. Mr. Cohen received a M.B.A. from the University of
Rochester.
JAMES L. REAGAN has been our Chief Technology Officer since January 2000.
Prior to joining us, Mr. Reagan was Vice President, Technology Risk Management
for First Union National Bank, from June 1998 through December 1999, where he
led the risk management process associated with the strategy, use and deployment
of First Union's Internet commerce technology. From September 1996 through
June 1998, Mr. Reagan was Director of Strategic Information Technology for
AverStar, Inc., a systems and software development company, where he managed
strategic information technology products. From February 1985 through
September 1996, Mr. Reagan was in the United States Army, where most recently he
was a senior project manager in charge of management and operations for military
intelligence projects. Mr. Reagan received a M.S. from Bowie State University
and a B.A. from the State University of New York.
VINCENT BEESE has been our Vice President, Sales since May 1999. Prior to
joining us, from August 1996 through April 1999, Mr. Beese was the Advertising
and Alliance Director for AT&T's Interactive Group, concentrating on developing
strategic partnerships, as well as Internet commerce and advertising
opportunities. Prior to that, from April 1994 through August 1996, Mr. Beese
held various positions at BPI Communications Inc. including Marketing Associate
and Product Manager for Billboard Electronic Publishing Group, responsible for
product development, generating revenue and increasing new subscribers. Mr.
Beese received a B.A. from the University of Maryland.
VICTOR K. CHENG has been our Vice President, Product Management since
January 2000 and was Assistant to the Chief Executive Officer from September
1999 through January 2000. Prior to joining us, Mr. Cheng founded and was Chief
Executive Officer of eHaHa.com, Inc., a Web site serving online communities,
from January 1999 through August 1999. From March 1998 through December 1998,
Mr. Cheng founded and was Chief Executive Officer of Small Biz Media, Inc., an
online purchasing alliance for small businesses. Between September 1995 and
February 1998, Mr. Cheng worked for the consulting firm McKinsey & Company, as
an Associate from July 1997 through February 1998, and as a Business Analyst
between September 1995 and June 1997. Mr. Cheng received a M.A. and a B.A. from
Stanford University.
DWIGHT D. FOSTER has been our Vice President, West Coast Sales since August
1999. Prior to joining us, Mr. Foster was Western Region Account Manager for Net
Perceptions, Inc., from December 1997 through July 1999, responsible for
southern California as well as strategic accounts in the San Francisco area.
Prior to that, from November 1996 through December 1997, Mr. Foster was an
Account Executive with Careerbuilder.com. From July 1995 through November 1996,
Mr. Foster was Director of Business Development for Genwell Corp., a systems
integrator.
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From January 1994 through July 1995, Mr. Foster was Director of Sales and
Marketing for RangeStar International, an antenna manufacturer. Mr. Foster
received a B.A. from the University of Colorado.
CHRISTOPHER L. SMITH has been our Vice President, Client Services since
September 1999. Before joining us, Mr. Smith was Manager of Strategic
Development at Comcast Online Communications, a division of Comcast Corporation,
from March 1996 to September 1999, responsible for launching and developing
InYourTown.com, a network of city guides. Before that, Mr. Smith founded Travel
Media Services, Inc., a provider of travel products distributed by television
infomercials, serving as President from March 1995 to March 1996. From
September 1990 to July 1993, Mr. Smith was a Relationship Manager at The Chase
Manhattan Bank, responsible for small and middle market commercial clients. Mr.
Smith received a M.B.A. from Columbia University and a B.A. from Duke
University.
LAWRENCE A. WASSERMAN has been our Vice President, Marketing since March
1999. Prior to joining us, from March 1998 through January 1999, Mr. Wasserman
was Director, U.S. Marketing for Bertelsmann AG, helping develop the business
and marketing strategy for their online book retailer, BOL.com. Prior to that,
from March 1997 through February 1998, Mr. Wasserman was Director, Interactive
Media in the Interactive Media Department for Bertelsmann's Doubleday Direct,
Inc. Prior to that, from May 1994 through February 1997, Mr. Wasserman was
Director, Current Member Marketing, for Doubleday Direct's Specialty Clubs
division. Mr. Wasserman received a M.B.A. from the University of Michigan and a
B.S. from the State University of New York.
RICHARD L. FIELDS has been a director since July 1999, having been elected
pursuant to the terms of the Second Amended and Restated Stockholders' Agreement
dated as of July 19, 1999. Mr. Fields is a Managing Director of the investment
banking firm Allen & Company Incorporated, where he has been employed since
1986. Mr. Fields is a director of VoiceStream Wireless Corporation and the
Telecommunications Development Fund. Mr. Fields received a J.D. from Harvard
University, a M.B.A. from Stanford University and a B.S. from the Massachusetts
Institute of Technology.
WYCLIFFE K. GROUSBECK has been a director since July 1999, having been
elected pursuant to the terms of the Second Amended and Restated Stockholders'
Agreement dated as of July 19, 1999. Mr. Grousbeck has been a General Partner of
Highland Capital Partners, Inc. since August 1996 and joined as an Associate in
May 1995. Mr. Grousbeck was the founder, and President from September 1993 to
May 1995, of Grousbeck Medical Resources Inc., a start-up consumer medical
information and research company. Mr. Grousbeck is a director of EXACT
Laboratories, Inc., GuruNet Corporation, Mantra Software Corporation and Odyssey
Healthcare, Inc. Mr. Grousbeck received a M.B.A. from Stanford University, a
J.D. from the University of Michigan and an A.B. from Princeton University.
KEVIN C. LAVAN has been a director since January 2000. Mr. Lavan is
currently an Executive Vice President of Wunderman Cato Johnson, the direct
marketing and customer relationship marketing division of Young & Rubicam Inc.
From February 1997 to March 1999, Mr. Lavan was Senior Vice President of Finance
at Young & Rubicam. From January 1995 to February 1997, Mr. Lavan held various
positions at Viacom Inc., including Controller, and Chief Financial Officer for
Viacom's subsidiary, MTV Networks. Mr. Lavan received a B.S. from Manhattan
College.
EDWARD G. SIM has been a director since January 1999, having been elected
pursuant to the terms of the Stockholders' Agreement dated as of January 21,
1999. Since October 1999, Mr. Sim has been a Managing Director of Wit Capital
Corporation's Venture Capital Fund Group. Since April 1998, Mr. Sim has been a
Managing Director and Senior Vice President of DT Advisors LLC, which is the
managing entity of Dawntreader Fund I LP, and whose members now manage
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Wit Capital's venture capital funds. From April 1996 to April 1998, Mr. Sim was
an Associate with Prospect Street Ventures, a New York venture capital firm, and
from May 1994 to April 1996, he was a member of the Structured Derivatives Group
at J.P. Morgan Investment Management Inc. Mr. Sim is a director of
expertcity.com, inc., Flashbase, Inc., GuruNet Corporation and MaterialNet, Inc.
Mr. Sim received an A.B. from Harvard University.
COMPOSITION OF THE BOARD
Prior to the closing of this offering, we intend to file an amended and
restated certificate of incorporation pursuant to which our board of directors
will be divided into three classes, each of whose members will serve for a
staggered three-year term. Upon the expiration of the term of a class of
directors, directors in that class will be elected for three-year terms at the
annual meeting of stockholders in the year in which their term expires. Our
board of directors has resolved that Mr. Fields and Mr. Sim will be Class I
Directors whose terms expire at the 2000 annual meeting of stockholders.
Mr. Grousbeck and Mr. Bixby will be Class II Directors whose terms expire at the
2001 annual meeting of stockholders. Mr. Lavan and Mr. LoCascio will be
Class III Directors whose terms expire at the 2002 annual meeting of
stockholders. With respect to each class, a director's term will be subject to
the election and qualification of their successors, or their earlier death,
resignation or removal.
BOARD COMMITTEES
The Audit Committee of our board of directors reviews, acts on and reports
to our board of directors with respect to various auditing and accounting
matters, including the recommendations of our independent auditors, the scope of
the annual audits, the fees to be paid to the auditors, the performance of our
auditors and our accounting practices. The members of the Audit Committee are
Mr. Fields, Mr. Grousbeck and Mr. Lavan.
For our common stock to be included in the Nasdaq National Market, each
member of the Audit Committee of our Board of Directors must be considered
independent under Nasdaq's rules. Among other things, a director is not
independent under Nasdaq rules if he or she has been employed by us or our
affiliates in the current year or past three years. One non-independent director
may serve on the Audit Committee if our Board determines it to be in the best
interests of our company and our stockholders, but our current officers or other
employees are not able to serve on the Audit Committee under this exception.
The Compensation Committee of the board of directors recommends, reviews and
oversees the salaries, benefits and stock option plans for our employees,
consultants, directors and other individuals whom we compensate. The
Compensation Committee also administers our compensation plans. The members of
the Compensation Committee are Mr. Lavan, Mr. Sim and Mr. LoCascio.
DIRECTOR COMPENSATION
Directors who are also our employees receive no additional compensation for
their services as directors. Directors who are not our employees will not
receive a fee for attendance in person at meetings of the board of directors or
committees of the board of directors, but they will be reimbursed for travel
expenses and other out-of-pocket costs incurred in connection with attendance at
meetings. Pursuant to our 2000 Stock Incentive Plan, non-employee directors will
be granted 15,000 options to purchase common stock upon completion of this
offering. In addition, non-employee directors will be granted 5,000 options to
purchase common stock on each anniversary of their election to the board of
directors.
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EMPLOYMENT AGREEMENTS
Robert P. LoCascio, our President and Chief Executive Officer, is employed
pursuant to an employment agreement entered into as of January 1, 1999. After
its initial term, which expires on January 1, 2002, our agreement with
Mr. LoCascio will extend automatically for one-year terms on each of January 1,
2002 and January 1, 2003, unless either we or Mr. LoCascio gives notice not to
extend the term of the agreement. Mr. LoCascio is entitled to receive an annual
base salary of $125,000, plus an annual discretionary bonus of up to $50,000,
determined by our board based upon achievement of performance objectives. If
Mr. LoCascio is terminated by us without cause or following a material change or
diminution in his duties, a reduction in his salary or bonus, or if we are sold
or following a change in control of our company, or if we relocate him to a
location outside the New York metropolitan area, we must pay him an amount equal
to the amount of his salary for the 12 months following the date of termination,
and the pro rata portion of the bonus he would have been entitled to receive for
the fiscal year in which the termination occurred. These amounts are payable in
three monthly installments beginning 30 days after his termination. Pursuant to
the agreement, for a period of one year from the date of termination of
Mr. LoCascio's employment, he may not directly or indirectly compete with us,
including, but not limited to, being employed by any business which competes
with us, or otherwise acting in a manner intended to advance an interest of a
competitor of ours in a way that will or may injure an interest of ours.
On January 28, 2000, we entered into a three-year employment agreement with
Dean Margolis, our Chief Operating Officer. We will pay Mr. Margolis a fixed
annual base salary of $175,000, plus an annual discretionary bonus.
Mr. Margolis is also eligible under the agreement to receive a long-term
incentive award, determined by our board, consisting of options to purchase
common stock, with the initial award of options to purchase up to 510,000 shares
of common stock at a purchase price of $3.33 per share. These options will begin
vesting on July 1, 2000 in four equal annual installments. If, within 24 months
after a change in control of our company, we terminate Mr. Margolis without
cause or if he terminates his employment with us because we have reduced his
compensation or materially changed his duties or responsibilities, we will pay
him a lump-sum amount equal to one-half of his annual base salary and any
unvested options will vest immediately. In addition, if Mr. Margolis otherwise
terminates his employment following a change in control of our company, any
options which would have vested within 12 months after such termination will
continue to vest under the original vesting schedule. Pursuant to the agreement,
for a period of one year from the date of termination of Mr. Margolis's
employment, he may not directly or indirectly compete with us including, but not
limited to, being employed by any business which competes with us, or otherwise
acting in a manner intended to advance an interest of a competitor of ours in a
way that will or may injure an interest of ours.
Timothy E. Bixby, our Chief Financial Officer, is employed pursuant to an
employment agreement entered into as of June 23, 1999, which shall continue
until it is terminated by either party. Pursuant to the agreement, Mr. Bixby
receives an annual base salary of $140,000 and an annual discretionary bonus.
Mr. Bixby is also eligible to receive a long-term incentive award determined by
our board consisting of options to purchase common stock, with the initial award
of options to purchase up to 202,500 shares of common stock at a purchase price
of $0.67 per share. Twenty-five percent of those options vested on January 1,
2000 and the remaining options will vest in three equal annual installments
starting on January 1, 2001. In October 1999, Mr. Bixby was granted options to
purchase up to an additional 97,500 shares of common stock at a purchase price
of $2.00 per share. These options begin vesting on July 1, 2000 in four equal
annual installments. In January 2000, Mr. Bixby was granted options to purchase
up to an additional 75,000 shares of common stock at a purchase price of $3.33
per share. These options
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<PAGE>
begin vesting on July 1, 2000 in four equal annual installments. If Mr. Bixby is
terminated following a change in control of our company or if he terminates his
employment with us following a reduction in his salary, a material change or
diminution in his duties or if Robert LoCascio is no longer our President or
Chief Executive Officer, all of his options will vest immediately, and we must
pay him a lump-sum amount equal to his annual salary, and the pro rata portion
of the bonus he would have been entitled to receive for the year in which the
termination occurred. Pursuant to the agreement, for a period of one year from
the date of termination of Mr. Bixby's employment, he may not directly or
indirectly compete with us, including, but not limited to, being employed by any
business which competes with us, or otherwise acting in a manner intended to
advance an interest of a competitor of ours in a way that will or may injure an
interest of ours.
Scott E. Cohen, our Executive Vice President, Sales/Client Services, is
employed pursuant to an employment agreement entered into as of March 29, 1999.
The agreement's initial term expires on March 31, 2000 and has been extended for
one year. Mr. Cohen receives an annual base salary of $185,000 and an annual
discretionary bonus. For the first year of the agreement's term, we have agreed
to pay Mr. Cohen commissions on a quarterly basis in the amount of 10% of the
portion of our gross sales (consisting of revenues from sales invoiced by us,
net of tax and other surcharges payable by us and amounts rebated or refunded)
in excess of $1,000,000 during the first year of his employment. For the second
year of the agreement's term, we will pay him commissions on a quarterly basis
in the amount of 10% of the first $1,000,000 of gross sales in excess of the
amount of gross sales in the first year, plus 7.5% of all gross sales in excess
of that amount. Additionally, we granted Mr. Cohen options to purchase up to
588,960 shares of common stock at a purchase price of $0.80 each. Fifty percent
of those options will vest on March 31, 2000 with the remainder vesting on
March 31, 2001. We also, in March 2000, granted Mr. Cohen options to purchase an
additional 240,000 shares of common stock at a purchase price of $6.67 per
share, which options vested upon grant. If (1) Mr. Cohen is terminated following
a sale or a change in control of our company or (2) if Mr. Cohen chooses to
terminate his employment because he is no longer serving in a senior executive
capacity or because Robert LoCascio is no longer our President or Chief
Executive Officer, we must pay him the salary and the amount of commissions that
he would have earned for a period of four months after the date of termination
had we not terminated him, reduced by any amount he earns as a result of his
employment by any business in that four-month period. In addition, any options
which would have vested on the first vesting date following the date of
termination as a result of a change in control will vest immediately upon such
termination. Pursuant to the agreement, for a period of one year from the date
of termination of Mr. Cohen's employment, he may not directly or indirectly
compete with us, including, but not limited to, being employed by any business
which competes with us, or otherwise acting in a manner intended to advance an
interest of a competitor of ours in a way that will or may injure an interest of
ours.
On January 3, 2000, we entered into a three-year employment agreement with
James L. Reagan, our Chief Technology Officer. We will pay Mr. Reagan a fixed
annual base salary of $165,000, plus an annual discretionary bonus, of which
$20,000 was paid upon commencement of his employment. In addition, Mr. Reagan
received a starting bonus of $20,000. Mr. Reagan is also eligible under the
agreement to receive a long-term incentive award, determined by our board,
consisting of options to purchase common stock, with the initial award of
options to purchase up to 300,000 shares of common stock at a purchase price of
$2.00 per share. These options will begin vesting on January 1, 2001 in four
equal annual installments. If, within 24 months after a change in control of our
company, we terminate Mr. Reagan without cause, we will pay him a lump sum
amount equal to two-thirds of his annual base salary. In addition, any options
which would have vested within 24 months after such termination will vest
immediately. Pursuant to the agreement, for a period of one year from the date
of termination of Mr. Reagan's
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<PAGE>
employment, he may not directly or indirectly compete with us including, but not
limited to, being employed by any business which competes with us, or otherwise
acting in a manner intended to advance an interest of a competitor of ours in a
way that will or may injure an interest of ours.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for all services
rendered to us in all capacities during 1999 by our Chief Executive Officer and
our most highly compensated executive officers, other than our Chief Executive
Officer, who earned more than $100,000 in 1999 and who served as executive
officers at the end of 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------- ---------------------
SALARY BONUS SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION ($) ($) OPTIONS (#)
- --------------------------- -------- -------- ---------------------
<S> <C> <C> <C>
Robert P. LoCascio...................................... 108,000 50,000 --
Chief Executive Officer
Timothy E. Bixby(1)..................................... 73,231 -- 300,000
Chief Financial Officer
Scott E. Cohen(2)....................................... 138,250 -- 588,960
Executive Vice President,
Sales/Client Services
</TABLE>
- ----------------------------
(1) Mr. Bixby became our Chief Financial Officer in June 1999. His annualized
salary for 1999 was $140,000.
(2) Mr. Cohen became our Executive Vice President in March 1999. His annualized
salary for 1999 was $185,000.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding exercisable and
unexercisable stock options granted to each of the named executive officers in
the last fiscal year. No stock appreciation rights were granted to the named
executive officers during the year ended December 31, 1999. Potential realizable
values are computed by (1) multiplying the number of shares of common stock
subject to a given option by the assumed market value on the date of grant,
(2) assuming that the aggregate stock value derived from that calculation
compounds annually for the entire term of the option and (3) subtracting from
that result the aggregate option exercise price.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
-----------------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR TERM (2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ------------------------------------
NAME GRANTED (#) YEAR (%) ($/SH) DATE 0% ($) 5% ($) 10% ($)
- ---- ------------ ----------- ----------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert P. LoCascio... -- -- -- -- -- -- --
Timothy E. Bixby..... 202,500 6.7 0.67 June 23, 2009 35,100 142,075 306,196
97,500 3.2 2.00 October 25, 2009 21,450 157,574 366,416
Scott E. Cohen....... 588,960 19.4 0.80 March 31, 2004 -- 70,041 211,771
</TABLE>
- --------------------------------
(1) Each option represents the right to purchase one share of common stock.
Mr. Bixby's 202,500 options which expire on June 23, 2009 vested 25% on
January 1, 2000 and will vest an additional 25% on each anniversary thereof.
Mr. Bixby's 97,500 options which expire on October 25, 2009 will vest 25% on
July 1, 2000 and will vest an additional 25% on each anniversary thereof.
Mr. Cohen's options will vest 50% on March 31, 2000 and 50% on March 31,
2001.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by rules of the Securities and Exchange Commission and do not represent our
estimate or projection of our future common stock prices. These amounts
represent assumed rates of appreciation in the value of our common stock
from the assumed fair market value on the date of grant. The assumed fair
market values on the dates of grant relevant to this table were $0.72 per
share for options granted between January 21, 1999 and May 3, 1999, $0.84
per share for options granted between May 4, 1999 and July 18, 1999 and
$2.22 per share for options granted between July 19, 1999 and October 25,
1999. Actual gains, if any, on stock option exercises are dependent on the
future performance of our common stock. The amounts reflected in the table
may not necessarily be achieved. See "Risk Factors."
AGGREGATED OPTION EXERCISES IN THE YEAR
ENDED DECEMBER 31, 1999 AND YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1999 by each of the named executive officers. No
options were exercised during fiscal 1999 by any of the named executive
officers. The value of the unexercised in-the-money options at December 31, 1999
is based on the assumed fair market value of our common stock at December 31,
1999, less the exercise price of the option, multiplied by the number of shares
underlying the options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1999 (#) AT DECEMBER 31, 1999 ($) (1)
----------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- ---------------- ----------- ------------------
<S> <C> <C> <C> <C>
Robert P. LoCascio................. -- -- -- --
Timothy E. Bixby................... -- 202,500 -- 2,700,000
-- 97,500 -- 1,170,000
Scott E. Cohen..................... -- 588,960 -- 7,774,272
</TABLE>
- --------------------------
(1) There was no public trading market for our common stock as of December 31,
1999. The value of unexercised in-the-money options has been calculated
using an assumed value of $14.00 per share, the mid-point of the range set
forth on the cover page of this prospectus.
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<PAGE>
2000 STOCK INCENTIVE PLAN
We intend to adopt the 2000 Stock Incentive Plan (the "2000 Plan"), which is
intended to serve as the successor equity incentive program to our Stock Option
and Restricted Stock Purchase Plan (the "1998 Plan"). The 2000 Plan will become
effective upon its adoption by our board of directors and ratification by our
stockholders prior to the date of this offering.
10,000,000 shares of common stock have been authorized for issuance under
the 2000 Plan. This share reserve consists of the shares which were available
for issuance under the 1998 Plan on the effective date of the 2000 Plan plus an
additional increase of approximately 4,150,000 shares. The share reserve will
automatically be increased on the first trading day of January each calendar
year, beginning in January 2001, by a number of shares equal to 3% of the total
number of shares of common stock outstanding on the last trading day of the
immediately preceding calendar year, but no such annual increase will exceed
1,500,000 shares. However, in no event may any one participant in the 2000 Plan
receive option grants or direct stock issuances for more than 500,000 shares in
the aggregate per calendar year.
Outstanding options under the 1998 Plan will be incorporated into the 2000
Plan upon the date of this offering, and no further option grants will be made
under that plan. The incorporated options will continue to be governed by their
existing terms, unless the compensation committee extends one or more features
of the 2000 Plan to those options. However, except as otherwise noted below, the
outstanding options under the 1998 Plan contain substantially the same terms and
conditions summarized below for the discretionary option grant program under the
2000 Plan.
The 2000 Plan has five separate programs:
- the discretionary option grant program under which eligible individuals
in our employ or service (including officers, non-employee board members
and consultants) may be granted options to purchase shares of our common
stock;
- the stock issuance program under which such individuals may be issued
shares of common stock directly, through the purchase of such shares or
as a bonus tied to the performance of services;
- the salary investment option grant program under which executive officers
and other highly compensated employees may elect to apply a portion of
their base salary to the acquisition of special below-market stock option
grants;
- the automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members; and
- the director fee option grant program under which non-employee Board
members may elect to apply a portion of their retainer fee to the
acquisition of special below-market stock option grants.
The discretionary option grant and stock issuance programs will be
administered by our compensation committee. This committee will determine which
eligible individuals are to receive option grants or stock issuances, the time
or times when such option grants or stock issuances are to be made, the number
of shares subject to each such grant or issuance, the exercise or purchase price
for each such grant or issuance (which may be less than, equal to or greater
than the fair market value of the shares), the status of any granted option as
either an incentive stock option or a non-statutory stock option under the
federal tax laws, the vesting schedule to be in effect for the option grant or
stock issuance and the maximum term for which any granted option is to remain
outstanding. The committee will also select the executive officers and other
highly compensated employees who may participate in the salary investment option
grant program in
57
<PAGE>
the event that program is activated for one or more calendar years. Neither the
compensation committee nor the board will exercise any administrative discretion
with respect to option grants made under the salary investment option grant
program or under the automatic option grant program or director fee option grant
program for the non-employee board members.
The exercise price for the options may be paid in cash or in shares of our
common stock valued at fair market value on the exercise date. The option may
also be exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the compensation committee may allow a participant to pay
the option exercise price or direct issue price (and any associated withholding
taxes incurred in connection with the acquisition of shares) with a
full-recourse, interest-bearing promissory note.
In the event that we are acquired, whether by merger or asset sale or
board-approved sale by our stockholders of more than 50% of our voting stock,
each outstanding option under the discretionary option grant program which is
not to be assumed by the successor corporation or otherwise continued will
automatically accelerate in full, and all unvested shares under the
discretionary option grant and stock issuance programs will immediately vest,
except to the extent the repurchase rights with respect to those shares are to
be assigned to the successor corporation or otherwise continued in effect. The
compensation committee may grant options and issue shares which will accelerate
(i) in the acquisition even if the options are assumed and repurchase rights
assigned, (ii) in connection with a hostile change in control (effected through
a successful tender offer for more than 50% of our outstanding voting stock or
by proxy contest for the election of board members) or (iii) upon a termination
of the individual's service following a change in control or hostile take-over.
In the event of an acquisition of our company (by merger or asset sale),
options currently outstanding under the 1998 Plan will be assumed by the
successor corporation. Such options are not by their terms subject to
acceleration in connection with any other change in control or hostile
take-over.
Stock appreciation rights may be issued under the discretionary option grant
program which will provide the holders with the election to surrender their
outstanding options for an appreciation distribution from us equal to the fair
market value of the vested shares subject to the surrendered option less the
aggregate exercise price payable for such shares. Such appreciation distribution
may be made in cash or in shares of common stock. There are currently no
outstanding stock appreciation rights under the 1998 Plan.
The compensation committee has the authority to cancel outstanding options
under the discretionary option grant program (including options incorporated
from the 1998 Plan) in return for the grant of new options for the same or
different number of option shares with an exercise price per share based upon
the fair market value of our common stock on the new grant date.
In the event our compensation committee elects to activate the salary
investment option grant program for one or more calendar years, each of our
executive officers and other highly compensated employees selected for
participation may elect to reduce his or her base salary for that calendar year
by a specified dollar amount not less than $5,000 nor more than $50,000. In
return, the individual will automatically be granted, on the first trading day
in the calendar year for which the salary reduction is to be in effect, a
non-statutory option to purchase that number of shares of common stock
determined by dividing the salary reduction amount by two-thirds of the fair
market value per share of our common stock on the grant date. The option
exercise price will be equal to one-third of the fair market value of the option
shares on the grant date. As a result, the fair market value of the option
shares on the grant date less the exercise price payable for those shares will
be equal to the salary reduction amount. The option will become exercisable in a
series of 12 equal monthly installments over the calendar year for which the
salary reduction
58
<PAGE>
is to be in effect and will be subject to full and immediate vesting in the
event of an acquisition or change in control of the company.
Under the automatic option grant program, each individual who first joins
the board after the date of this offering as a non-employee board member will
automatically be granted an option for 15,000 shares of our common stock at the
time of his or her commencement of board service, provided such individual has
not been in our prior employ. In addition, on the date of each of our annual
stockholders' meeting held after the date of this offering, each individual who
is to continue to serve as a non-employee Board member after such meeting will
receive an option grant to purchase 5,000 shares of common stock. Each automatic
grant will have an exercise price equal to the fair market value per share of
our common stock on the grant date and will have a maximum term of 10 years,
subject to earlier termination following the optionee's cessation of board
service. Each option will be immediately exercisable, subject to our right to
repurchase any unvested shares, at the original exercise price, at the time of
the board member's cessation of service. Each 15,000-share option grant will
vest, and the repurchase right will lapse, in a series of three equal successive
annual installments upon the optionee's completion of each year of Board service
over the three-year period measured from the grant date. Each 5,000-share option
grant will vest, and the repurchase right will lapse, upon the optionee's
completion of one year of Board service measured from the grant date. However,
each such outstanding option will immediately vest upon a change in control, a
hostile takeover or the death or disability of the optionee while serving as a
Board member.
If the director fee option grant program is put into effect in the future,
then each non-employee board member may elect to apply all or a portion of any
cash retainer fee for the year to the acquisition of a below-market option
grant. The option grant will automatically be made on the first trading day in
January in the year for which the non-employee board member would otherwise be
paid the cash retainer fee in the absence of his or her election. The option
will have an exercise price per share equal to one-third of the fair market
value of the option shares on the grant date, and the number of shares subject
to the option will be determined by dividing the amount of the retainer fee
applied to the program by two-thirds of the fair market value per share of
common stock on the grant date. As a result, the fair market value of the option
shares on the grant date less the exercise price payable for those shares will
be equal to the portion of the retainer fee applied to that option. The option
will become exercisable in a series of 12 equal monthly installments over the
calendar year for which the election is in effect. However, the option will
become immediately exercisable for all the option shares upon the death or
disability of the optionee while serving as a board member.
Limited stock appreciation rights will automatically be included as part of
each grant made under the automatic option grant and salary investment option
grant programs and may be granted to one or more officers as part of their
option grants under the discretionary option grant program. Options with such a
limited stock appreciation right may be surrendered to the company upon the
successful completion of a hostile tender offer for more than 50% of our
outstanding voting stock. In return for the surrendered option, the optionee
will be entitled to a cash distribution from us in an amount per surrendered
option share equal to the highest price per share of common stock paid in
connection with the tender offer less the exercise price payable for such share.
The board may amend or modify the 2000 Plan at any time, subject to any
required stockholder approval. The 2000 Plan will terminate no later than March
2010.
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<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
We intend to adopt the 2000 Employee Stock Purchase Plan (the "ESPP"), which
is intended to serve (along with the 2000 Plan) as the successor program to the
1998 Plan. The ESPP will be adopted by our board of directors and ratified by
our stockholders prior to the date of this offering. The ESPP will become
effective immediately upon the execution of the underwriting agreement for this
offering. The ESPP is designed to allow our eligible employees and eligible
employees of our participating subsidiaries to purchase shares of common stock,
at semi-annual intervals, through their periodic payroll deductions. A total of
450,000 shares of our common stock will initially be issued under the ESPP. The
share reserve will automatically increase on the first trading day of January of
each year beginning in January 2001, by 0.50% of the total shares of common
stock outstanding on the last trading day of the immediately preceding calendar
year, but no such annual increase will exceed 150,000 shares. In no event,
however, may any participant purchase more than 1,000 shares, nor may all
participants in the aggregate purchase more than 112,500 shares on any one
semi-annual purchase date.
The ESPP will have a series of successive offering periods, each with a
maximum duration of 24 months. However, the initial offering period will begin
on the day the underwriting agreement is executed in connection with this
offering and will end on the last business day in April 2002. The next offering
period will begin on the first business day in May 2002, and subsequent offering
periods will be set by the compensation committee. Shares will be purchased for
the participants semi-annually (the last business day of October and April each
year) during the offering period. The first purchase date will occur on
October 31, 2000. Should the fair market value of the common stock on any
semi-annual purchase date be less than the fair market value on the first day of
the offering period, then the current offering period will automatically end and
a new offering period will begin, based on the lower fair market value.
Individuals who are eligible employees on the start date of any offering
period may enter the ESPP on that start date or on any subsequent semi-annual
entry date (generally May 1 or November 1 of each year). Individuals who become
eligible employees after the start date of the offering period may join the ESPP
on any subsequent semi-annual entry date within that period.
A participant may contribute up to 15% of his or her cash compensation
through payroll deductions and the accumulated payroll deductions will be
applied to the purchase of shares on the participant's behalf on each
semi-annual purchase date. The purchase price per share will be 85% of the lower
of the fair market value of our common stock on the participant's entry date
into the offering period or the fair market value on the semi-annual purchase
date.
The board may at any time amend or modify the ESPP. The ESPP will terminate
no later than the last business day in March 2010.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
PREFERRED STOCK INVESTMENTS
We issued 2,541,667 shares of series A convertible preferred stock in
January 1999; 1,142,857 shares of series B convertible preferred stock in
May 1999; 5,132,433 shares of series C redeemable convertible preferred stock in
July 1999 and 3,157,895 shares of series D redeemable convertible preferred
stock in January 2000. Substantially all of our shares of convertible preferred
stock have been sold to venture capital funds. The detailed description of the
beneficial ownership within each venture capital fund, and cumulative ownership
information for entities that hold a 5% or more beneficial interest, is
contained in "Principal Stockholders," and the footnotes thereto, to the extent
not described below. Each share of convertible preferred stock will
automatically convert into common stock upon closing of this offering at a
two-for-three ratio.
SERIES A CONVERTIBLE PREFERRED STOCK. We sold 2,500,000 shares of series A
convertible preferred stock in January 1999 at a purchase price per share of
$1.20 for gross proceeds of $3,000,000. In these transactions, we sold:
- 937,500 shares to Dawntreader Fund I LP;
- 937,500 shares to FG-LP, an entity affiliated with FGII;
- 416,667 shares to Sterling Payot Capital, LP; and
- 208,333 shares to an affiliate of Silicon Alley Venture Partners, LLC.
A portion of the series A convertible preferred stock issued to FG-LP was issued
in satisfaction of a promissory note made by us in the amount of $100,000, plus
interest. In addition, we issued 41,667 shares to Silicon Alley Venture
Partners, LLC in exchange for consulting services related to the sale of the
series A convertible preferred stock.
We also issued warrants to these investors at an exercise price of $1.60 per
share. These warrants have a purchase price of $0.003 per warrant, expire in
January 2004 and are exercisable at any time. The expiration date of the
warrants may be accelerated in certain circumstances, if the managing
underwriter of this offering determines that the failure to accelerate the
expiration or exercise of the warrant could adversely affect this offering;
however, we have been informed by Chase Securities Inc. that they do not intend
to do so. These warrants are exercisable for:
- 175,781 shares by Dawntreader Fund I LP;
- 175,781 shares by FG-LP;
- 78,124 shares by Sterling Payot Capital, LP; and
- 39,063 shares by an affiliate of Silicon Alley Venture Partners, LLC.
SERIES B CONVERTIBLE PREFERRED STOCK. We sold 1,142,857 shares of series B
convertible preferred stock in May 1999 at a purchase price per share of $1.40
for gross proceeds of $1,600,000. In these transactions, we sold:
- 892,857 shares to Allen & Company Incorporated;
- 35,714 shares to Alan Braverman; and
- 214,286 shares to Sculley Brothers LLC.
We also issued warrants to these investors at an exercise price of $1.60 per
share. These warrants have a purchase price of $0.003 per warrant, expire in
May 2004 and are exercisable at any time. The expiration date of the warrants
may be accelerated in certain circumstances, if the managing underwriter of this
offering determines that the failure to accelerate the warrant could
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<PAGE>
adversely affect this offering; however, we have been informed by Chase
Securities Inc. that they do not intend to do so. These warrants are exercisable
for:
- 195,313 shares by Allen & Company Incorporated;
- 7,812 shares by Alan Braverman; and
- 46,875 shares by Sculley Brothers LLC.
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK. We sold 5,132,433 shares
of series C redeemable convertible preferred stock in July 1999 at a purchase
price per share of $3.70 for gross proceeds of $18,990,000. In these
transactions, we sold:
- 2,162,162 shares to Highland Capital Partners IV Limited Partnership and
an affiliated entity;
- 608,108 shares to FG-LPC, an entity affiliated with FGII;
- 540,540 shares to Dawntreader Fund I LP;
- 67,568 shares to Allen & Company Incorporated;
- 810,811 shares to The Goldman Sachs Group, Inc. and an affiliated entity;
- 202,703 shares to Sterling Payot Capital, LP;
- 121,622 shares to entities affiliated with Silicon Alley Venture
Partners, LLC;
- 108,108 shares to entities which are affiliates of Chase Securities Inc.;
- 432,432 shares to Access Technology Partners, L.P., a fund of outside
investors that is managed by an affiliate of Chase Securities Inc.;
- 67,568 shares to Henry R. Kravis;
- 8,108 shares to Esther Dyson; and
- 2,703 shares to Mark Lipschultz.
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK. We sold 3,157,895 shares
of series D redeemable convertible preferred stock on January 27, 2000, at a
purchase price per share of $5.70 for gross proceeds of $18,000,000. In these
transactions, we sold:
- 1,754,386 shares to Dell USA, L.P.;
- 350,878 shares to entities affiliated with MSD Capital, L.P.; and
- 1,052,631 shares to NBC Interactive Media, Inc.
OPTION GRANT
In April 1999, we granted options to purchase up to 16,065 shares of common
stock, which vested on July 1, 1999, to Kevin Lavan, a director, for advisory
services rendered prior to his appointment to our board of directors.
SAN FRANCISCO LEASE
Since August 1999, we have leased our San Francisco office space pursuant to
a month-to-month agreement with Sterling Payot Capital LP, one of our investors.
Our monthly payments for rent and shared services are approximately $11,000 and,
to date, we have paid an aggregate of approximately $82,500 under the lease. We
believe that this lease is on terms no less favorable to us than could be
obtained from unaffiliated third parties. We expect to terminate this agreement
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<PAGE>
upon relocation into our new San Francisco offices, which is expected to occur
in the second quarter of 2000.
CHIEF OPERATING OFFICER CONSULTING SERVICES
From April 1999 through January 2000, as we developed our management team,
E. Kirk Shelton acted as our Chief Operating Officer on a consulting basis. For
these services, we granted Mr. Shelton options to purchase our common stock.
Prior to joining us as a consultant, Mr. Shelton was Vice Chairman and a
director of Cendant Corporation from December 1997 through April 1998, and prior
thereto, he was President and Chief Operating Officer of CUC International, Inc.
from May 1991 through December 1997.
REGISTRATION RIGHTS
We have granted registration rights to certain holders of our convertible
preferred stock. See "Description of Capital Stock--Registration Rights."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our outstanding common stock as of March 8, 2000, as adjusted to
reflect the sale of the shares of common stock offered hereby by:
- each person or group of affiliated persons whom we know to beneficially
own 5% or more of the common stock;
- each of our directors;
- each of our named executive officers; and
- all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed
below is c/o LivePerson, Inc., 462 Seventh Avenue, 10th Floor, New York, New
York 10018-7606.
The following table gives effect to the shares of common stock issuable
within 60 days of March 8, 2000 upon the exercise of all options and other
rights beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect to
shares. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all shares beneficially
owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
BEFORE THE ----------------------------------------
HOLDERS OFFERING(1) BEFORE THE OFFERING AFTER THE OFFERING
- ------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Highland Capital Partners IV......... 3,243,243 12.8% 11.1%
Limited Partnership and an
affiliated entity(2)
2 International Place
Boston, Massachusetts 02110
Dell USA, L.P........................ 2,631,579 10.4% 9.0%
c/o Dell Computer Corporation
One Dell Way
Round Rock, Texas 78682
Entities affiliated with FGII(3)..... 2,494,193 9.8% 8.5%
20 Dayton Avenue
Greenwich, Connecticut 06830
Dawntreader Fund I LP(4)............. 2,392,841 9.4% 8.2%
118 West 22nd Street, 11th Floor
New York, New York 10011
Allen & Company Incorporated(5)...... 1,635,950 6.4% 5.5%
711 Fifth Avenue
New York, New York 10022
NBC Interactive Media, Inc........... 1,578,946 6.2% 5.4%
30 Rockefeller Plaza
New York, New York 10112
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
BEFORE THE ----------------------------------------
HOLDERS OFFERING(1) BEFORE THE OFFERING AFTER THE OFFERING
- ------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Robert P. LoCascio................... 6,835,713 27.0% 23.3%
Dean Margolis........................ -- * *
Timothy E. Bixby(6).................. 50,625 * *
Scott E. Cohen(7).................... 534,480 2.1% 1.8%
James L. Reagan...................... -- * *
Wycliffe K. Grousbeck(2)............. 3,243,243 12.8% 11.1%
Edward G. Sim(4)..................... 2,392,841 9.4% 8.2%
Richard L. Fields(5)................. 1,635,950 6.4% 5.5%
Kevin C. Lavan(8).................... 16,065 * *
Directors and Executive Officers as
a Group (9 persons)(9)............... 14,708,917 56.3% 48.8%
</TABLE>
- --------------------------
* Less than one percent.
(1) The table and related footnotes assume the automatic conversion of all of
our outstanding shares of convertible preferred stock at a two-for-three
ratio into common stock upon the closing of this offering and reflect a
three-for-two stock split of shares of our common stock effected on
March 8, 2000. Percentage of beneficial ownership prior to this offering is
based on 25,323,804 shares of common stock outstanding at March 8, 2000.
Percentage of beneficial ownership after this offering is based on
29,323,804 shares of common stock outstanding, which includes the foregoing
plus 4,000,000 shares of common stock to be sold in this offering.
(2) Includes 3,113,513 shares of common stock owned by Highland Capital Partners
IV Limited Partnership ("Highland Capital Partners IV") and 129,730 shares
of common stock owned by Highland Entrepreneurs' Fund IV Limited Partnership
("Highland Entrepreneurs' Fund IV"). Mr. Grousbeck, a member of our board of
directors, is a managing member of Highland Management Partners IV, LLC, the
general partner of Highland Capital Partners IV and is a managing member of
Highland Entrepreneurs' Fund IV LLC, the general partner of Highland
Entrepreneurs' Fund IV. Mr. Grousbeck may be deemed to have beneficial
ownership of the shares owned by Highland Capital Partners IV and Highland
Entrepreneurs' Fund IV and disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest, if any.
(3) Includes 1,406,250 shares of common stock owned by FG-LP and 912,162 shares
of common stock owned by FG-LPC. Also includes 175,781 shares of common
stock issuable upon exercise of warrants owned by FG-LP. FGII is the general
partner of both limited partnerships.
(4) Mr. Sim, a member of our board of directors, is a Managing Director of DT
Advisors LLC, which is the general partner of Dawntreader Fund I LP.
Mr. Sim may be deemed to have beneficial ownership of the shares owned by
Dawntreader Fund I LP and disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest, if any.
(5) Includes 195,313 shares of common stock issuable upon exercise of warrants.
Mr. Fields is a Managing Director of Allen & Company Incorporated ("Allen &
Company"). Mr. Fields does not exercise voting or investment power over, and
disclaims beneficial ownership of, 1,119,177 shares and 148,426 shares
issuable upon exercise of warrants which are held by Allen & Company, other
of its officers and related persons. Allen & Company disclaims
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<PAGE>
beneficial ownership of 503,137 shares and 58,594 shares issuable upon
exercise of warrants which are beneficially owned by certain officers of
Allen & Company and related persons.
(6) Consists of 50,625 shares of common stock issuable upon exercise of options
exercisable within 60 days of March 8, 2000.
(7) Consists of 534,480 shares of common stock issuable upon exercise of options
exercisable within 60 days of March 8, 2000.
(8) Consists of 16,065 shares of common stock issuable upon exercise of options
exercisable within 60 days of March 8, 2000.
(9) Includes 601,170 shares of common stock issuable upon exercise of options
exercisable within 60 days of March 8, 2000.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of our common stock and preferred stock and the
relevant provisions of our amended and restated certificate of incorporation and
amended and restated bylaws to be in effect upon the closing of this offering
are summaries thereof and are qualified by reference to our amended and restated
certificate of incorporation and amended and restated bylaws, copies of which
have been filed with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part.
Upon the closing of our offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, par value $0.001 per share, and 5,000,000
shares of preferred stock, par value $0.001 per share.
COMMON STOCK
As of March 8, 2000, there were 7,361,531 shares of our common stock
outstanding held of record by seven stockholders, without giving effect to the
conversion of our convertible preferred stock. Holders of common stock are
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of a
majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably those dividends, if any, as may be
declared by our board of directors out of funds legally available therefor,
subject to any preferential dividend rights of any outstanding preferred stock.
Upon our liquidation, dissolution or winding up, our common stockholders are
entitled to receive ratably our net assets available, if any, after the payment
of all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of our
common stock are, and the shares offered in this offering will be, when issued
in consideration for payment thereof, fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future.
PREFERRED STOCK
Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Our board of directors will be authorized, without further
stockholder approval, to issue from time to time up to an aggregate of 5,000,000
shares of preferred stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
including sinking fund provisions, redemption price or prices, liquidation
preferences and the number of shares constituting any series or designation of
series. The issuance of preferred stock could decrease the amount of earnings
and assets available for distribution to holders of common stock or adversely
affect the rights and powers, including voting rights, of the holders of common
stock. Such issuance could also have the effect of delaying, deferring or
preventing a change in control of our company. For more information, see
"--Anti-Takeover Effects of Provisions of Delaware Law and Our Certificate of
Incorporation and Bylaws."
OPTIONS
We have 10,000,000 shares of our common stock reserved for issuance, upon
exercise of stock options, under our 2000 Stock Incentive Plan. As of March 8,
2000, there were outstanding
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<PAGE>
options to purchase a total of 5,528,970 shares of common stock, of which
options to purchase approximately 1,467,853 will be exercisable upon the closing
of this offering. Because we intend to file a registration statement on
Form S-8 as soon as practicable following the closing of this offering, any
shares issued upon exercise of these options will be immediately available for
sale in the public market, subject to the terms of lock-up agreements entered
into with the underwriters. For more information, see "Management--2000 Stock
Incentive Plan" and "Shares Eligible for Future Sale." We also have 94,500
shares of our common stock reserved for issuance, upon exercise of an option
granted to a client. For more information, please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."
REGISTRATION RIGHTS
Pursuant to the terms of a registration rights agreement, beginning 180 days
after the effective date of the Registration Statement of which this prospectus
is a part, the holders of 25,824,772 shares of common stock and warrants to
acquire common stock have the right to demand registration of their shares of
common stock under the Securities Act of 1933. We are not required to effect
more than two registrations pursuant to these demand registration rights (unless
we are eligible to file a registration statement on Form S-3, in which case we
may be required to effect up to three registrations). In addition, these holders
are entitled, subject to limitations, to require us to register the common stock
held by them when we register common stock for our own account or for the
account of other stockholders. This type of registration right is known as a
"piggyback" registration right. These registration rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares of common stock held by stockholders with
registration rights to be included in a registration. Generally, we are required
to bear all of the expenses of all of these registrations, except underwriting
discounts and selling commissions. Registration of any shares of common stock
held by security holders with registration rights would result in shares
becoming freely tradable without restriction under the Securities Act of 1933
immediately upon effectiveness of such registration.
LIMITATIONS ON LIABILITY
Our amended and restated certificate of incorporation limits or eliminates
the liability of our directors to us or our stockholders for monetary damage to
the fullest extent permitted by the Delaware General Corporation Law. As
permitted by the Delaware General Corporation Law, our amended and restated
certificate of incorporation provides that our directors shall not be personally
liable to us or our stockholders for monetary damages for a breach of fiduciary
duty as a director, except for liability:
- for any breach of such person's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
- for payment of dividends or approval of stock repurchases or redemptions
that are prohibited by Section 174 of the Delaware General Corporation
Law; and
- for any transaction resulting in receipt by such person of an improper
personal benefit.
Our amended and restated certificate of incorporation also contains
provisions indemnifying our directors and officers to the fullest extent
permitted by the Delaware General Corporation Law. We currently have directors'
and officers' liability insurance to provide our directors and officers with
insurance coverage for losses arising from claims based on breaches of duty,
negligence, errors and other wrongful acts.
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<PAGE>
We have also entered into agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in our
amended and restated certificate of incorporation. We believe that these
agreements are necessary to attract and retain qualified directors and executive
officers.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF
INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless:
- prior to such 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 certain shares); or
- on or subsequent to such date, the business combination is approved by
the board of directors of the corporation and authorized at an annual or
special meeting of stockholders by the affirmative vote of a least 66.67%
of the outstanding voting stock that is not owned by the interested
stockholder.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Except as
otherwise specified in Section 203 of the Delaware General Corporation Law, an
interested stockholder is defined to include (x) any person that owns (or,
within the prior three years, did own) 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the corporation
at any time within three years immediately prior to the date of determination
and (y) the affiliates and associates of any such person. This statute could
prohibit or delay the accomplishment of mergers or other takeover or change in
control attempts with respect to us and, accordingly, may discourage attempts to
acquire us.
In addition, various provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which provisions will be in
effect upon the closing of the offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by stockholders.
STAGGERED BOARD. Our amended and restated certificate of incorporation
provides for division of our board into three classes, with each class as nearly
equal in number as possible. Each class must serve a three-year term. The terms
of each class are staggered so that each term ends in a different year in the
three-year period.
BOARD OF DIRECTORS VACANCIES. Our amended and restated certificate of
incorporation authorizes our board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a stockholder from
removing incumbent directors and simultaneously
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<PAGE>
gaining control of our board of directors by filling the vacancies created by
this removal with its own nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our amended and
restated certificate of incorporation provides that stockholders may not take
action by written consent, but only at duly called annual or special meetings of
stockholders. Our amended and restated bylaws further provide that special
meetings of our stockholders may be called only by the chairman of the board of
directors, our president or at the request of two-thirds of the board of
directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS'
NOMINATIONS. Our amended and restated bylaws provide that stockholders seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide us timely notice thereof in writing. To be timely, a stockholder's
notice must be delivered to or mailed and received at our principal executive
offices, not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the preceding year's annual meeting provided with
respect to the previous year's annual meeting of stockholders; provided,
however, that if no annual meeting of stockholders was held in the previous year
or the date of the annual meeting of stockholders has been changed to be more
than 30 calendar days earlier than or 70 calendar days after this anniversary,
notice by the stockholder, to be timely, must be so received not more than
120 days prior to the annual meeting of stockholders nor later than the later
of:
- 90 days prior to the annual meeting of stockholders; and
- the close of business on the 10th day following the date on which notice
of the date of the meeting is made public.
Our amended and restated bylaws also specify certain requirements as to the
form and content of a stockholders' notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of our
common stock and preferred stock are available for future issuance without
stockholder approval, subject to various limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred stock could make
more difficult or discourage an attempt to obtain control of us by means of a
proxy context, tender offer, merger or otherwise.
Our amended and restated certificate of incorporation requires the
affirmative vote of not less than 66.67% of the outstanding shares of our
capital stock entitled to vote generally in the election of directors
(considered for this purpose as a single class) cast at a meeting of our
stockholders called for that purpose, to repeal, alter, amend or rescind the
provisions in our amended and restated certificate of incorporation relating to:
- directors;
- stockholder meetings;
- limitations on director liability;
- indemnification;
- amendment of our bylaws; or
- business combinations.
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Our amended and restated certificate of incorporation requires the
affirmative vote as specified in the Delaware General Corporation Law to amend
any other provision of our amended and restated certificate of incorporation.
To repeal, alter, amend or rescind our amended and restated bylaws, our
amended and restated certificate incorporation and our amended and restated
bylaws require the affirmative vote of not less than 66.67% of the outstanding
shares of our capital stock entitled to vote generally in the election of
directors (considered for this purpose as a single class) cast at a meeting of
our stockholders called for that purpose, or the affirmative vote of at least
66.67% of our Board of Directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since substantially all outstanding shares of our common stock (other than those
shares offered in this offering) will not be available for sale shortly after
this offering because of certain contractual and legal restrictions on resale
described below, sales of substantial amounts of common stock in the public
market after these restrictions lapse could adversely affect the prevailing
market price and our ability to raise equity capital in the future.
Upon the closing of this offering, we will have outstanding an aggregate of
29,323,804 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act of 1933 unless such shares are
purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act of 1933. The remaining 25,323,804 shares of common stock held by
existing stockholders are "restricted securities" as defined in Rule 144.
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144, Rule 144(k) or
701 under the Securities Act of 1933, which rules are summarized below. The
following table illustrates the shares eligible for sale in the public market:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<C> <S>
4,000,000 After the date of this prospectus, freely tradable shares
sold in this offering and shares saleable under Rule 144(k)
that are not subject to the 180-day lock-up
0 After 90 days from the date of this prospectus, shares
saleable under Rule 144 or Rule 701 that are not subject to
the 180-day lock-up
20,586,962 After 180 days from the date of this prospectus, the 180-day
lock-up is released and these shares are saleable under Rule
144 (subject, in some cases, to volume limitations), Rule
144(k) or Rule 701
4,736,842 After 180 days from the date of this prospectus, restricted
securities that are held for less than one year are not yet
saleable under Rule 144
</TABLE>
LOCK-UP AGREEMENTS
We expect that our directors, executive officers, and substantially all of
our existing stockholders will sign lock-up agreements under which they will
agree that, without the prior written consent of Chase Securities Inc. on behalf
of the underwriters, they will not, during the period ending 180 days after the
date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;
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<PAGE>
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
The restrictions described in the preceding paragraph do not apply to:
- transfers to certain persons or entities of shares of our common stock or
any securities convertible into or exercisable or exchangeable for our
common stock, provided that the transferees agree in writing to be bound
by the foregoing restrictions;
- non-derivative sales in open market transactions of shares of our common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares; and
- non-derivative sales in open market transactions of shares of our common
stock reserved by the underwriters for, and sold at the initial public
offering price to, our directors, employees other than executive
officers, business associates, and their family members.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of
(i) 1% of the number of shares of common stock then outstanding, which will
equal approximately 293,238 shares immediately after the offering, and (ii) the
average weekly trading volume of the common stock on the Nasdaq National Market
during the four calendar weeks preceding the filing of a notice on Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain
manner-of-sale provisions, notice requirements and the availability of current
public information about us.
RULE 144(K)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the 90 days preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding period of any
prior owner other than an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Therefore, unless otherwise contractually
restricted, "144(k)" shares may be sold immediately upon completion of this
offering.
RULE 701
In general, under Rule 701 of the Securities Act of 1933 as currently in
effect, each of our employees, consultants or advisors who purchases shares from
us in connection with a compensatory stock plan or other written agreement is
eligible to resell such shares 90 days after the date of this prospectus in
reliance on Rule 144, but without compliance with certain restrictions,
including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
After this offering, the holders of 25,824,772 shares of our common stock
and warrants to acquire common stock will be entitled to certain rights with
respect to the registration of those shares under the Securities Act of 1933.
For more information, see "Description of Capital Stock--Registration Rights."
After such registration, these shares of our common stock become freely tradable
without restriction under the Securities Act. These sales could have a material
adverse effect on the trading price of our common stock.
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STOCK PLANS AND OTHER OPTIONS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 10,450,000 shares of common stock reserved for
issuance under our
2000 Stock Incentive Plan and our Employee Stock Purchase Plan. We expect this
registration statement to be filed and to become effective as soon as
practicable after the effective date of this offering.
As of March 8, 2000, options to purchase 5,528,970 shares of common stock
were issued and outstanding under our 2000 Plan, of which 1,472,753 are
exercisable within 60 days of March 8, 2000. Upon exercise, the shares
underlying these options will be eligible for sale in the public market from
time to time, subject to vesting provisions, Rule 144 volume limitations
applicable to our affiliates and, in the case of some options, the expiration of
lock-up agreements. In addition, an option to purchase 94,500 shares of common
stock was issued and outstanding outside of our 2000 Plan, which is currently
fully vested and immediately exercisable; however the sale of the shares of
common stock underlying this option is subject to restrictions described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Compensation."
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UNDERWRITING
Chase Securities Inc., Thomas Weisel Partners LLC and PaineWebber
Incorporated are the representatives of the underwriters. Subject to the terms
and conditions of the underwriting agreement, the underwriters named below,
through their representatives, have severally agreed to purchase from LivePerson
the following respective number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Chase Securities Inc........................................
Thomas Weisel Partners LLC..................................
PaineWebber Incorporated....................................
---------
Total..................................................... 4,000,000
=========
</TABLE>
DISCOUNTS AND COMMISSIONS. The underwriting agreement provides that the
obligations of the underwriters are subject to certain conditions precedent,
including the absence of any material adverse change in our business and the
receipt of certain certificates, opinions and letters from us, our counsel and
the independent auditors. The underwriters are committed to purchase all of the
shares of common stock offered by us if they purchase any shares.
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. The underwriting discounts and
commissions were determined through negotiations with the underwriters, and
equal the public offering price per share of common stock, less the amount paid
by the underwriters to us per share of common stock. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' over-allotment
option to purchase additional shares.
UNDERWRITING DISCOUNTS AND COMMISSIONS
<TABLE>
<CAPTION>
WITHOUT OVER- WITH OVER-
ALLOTMENT EXERCISE ALLOTMENT EXERCISE
------------------ ------------------
<S> <C> <C>
Per Share.............................. $ $
Total.................................. $ $
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $1,000,000.
The underwriters propose to offer the shares of common stock directly to the
public at the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at that price less a concession not in excess
of $ per share. The underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the representatives of the underwriters.
The representatives have advised us that the underwriters do not intend to
confirm discretionary sales in excess of 5% of the shares of common stock
offered by this prospectus.
OVER-ALLOTMENT OPTION. We have granted to the underwriters an option,
exercisable no later than 30 days after the date of this prospectus, to purchase
up to 600,000 additional shares of common stock at the initial public offering
price, less the underwriting discount set forth on the cover page of this
prospectus. To the extent that the underwriters exercise this option, each of
75
<PAGE>
the underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of common stock to be purchased by
it shown in the above table bears to the total number of shares of common stock
offered hereby. We will be obligated, pursuant to the option, to sell shares to
the underwriters to the extent the option is exercised. The underwriters may
exercise this option only to cover over-allotments made in connection with the
sale of shares of common stock offered by us.
DELIVERY OF SHARES. The offering of the shares is made for delivery when,
as and if accepted by the underwriters and subject to prior sale and to
withdrawal, cancellation or modification of the offering without notice. The
underwriters reserve the right to reject an order for the purchase of shares in
whole or in part.
INDEMNIFICATION. We have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, and
to contribute to payments the underwriters may be required to make in respect of
these liabilities.
LOCK-UP AGREEMENTS. We expect that we and our directors, executive officers
and substantially all of our existing stockholders will agree that, without the
prior written consent of Chase Securities Inc. on behalf of the underwriters, we
and they will not, during the period ending 180 days after the date of this
prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
The restrictions described in this paragraph do not apply to:
- the sale of shares to the underwriters;
- the issuance of shares of our common stock upon the exercise of an option
or a warrant, or the conversion of a security outstanding on the date of
this prospectus of which the underwriters have been advised in writing;
- the grant of additional options under our 2000 Plan and our ESPP;
- transfers to certain persons or entities of shares of our common stock or
any securities convertible into or exercisable or exchangeable for our
common stock, provided that the transferees agree in writing to be bound
by the foregoing restrictions;
- non-derivative sales in open market transactions by any person other than
us relating to shares of our common stock or other securities acquired in
open market transactions after the completion of the offering of the
shares; and
- non-derivative sales in open market transactions of shares of our common
stock reserved by the underwriters for, and sold at the initial public
offering price to, our directors, employees other than executive
officers, business associates, and their family members.
Without the prior written consent of Chase Securities Inc., any options
granted outside of our 2000 Plan shall not be exercisable during this 180-day
period. In addition, if Chase Securities Inc. agrees to release any of our
stockholders (except any employee or consultant that is not one
76
<PAGE>
of our officers or directors) from the foregoing restrictions prior to the
expiration of the 180-day period referred to above, with respect to all or a
percentage of the shares of our common stock or any securities convertible into
or exercisable or exchangeable for our common stock subject to the foregoing
restrictions, then all of our other stockholders subject to the foregoing
restrictions shall be released from such restrictions to the same extent and on
the same terms and conditions.
STABILIZATION. Certain persons participating in this offering may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the common stock at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the common stock. A syndicate
covering transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created in
connection with the offering. A penalty bid means an arrangement that permits
the underwriters to reclaim a selling concession from a syndicate member in
connection with the offering when shares of common stock sold by the syndicate
member are purchased in syndicate covering transactions. Such transactions may
be effected on the Nasdaq National Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
DETERMINATION OF OFFERING PRICE. Prior to this offering, there has been no
public market for our common stock. The initial public offering price for the
common stock will be determined by negotiations among us and the
representatives. Among the factors to be considered in determining the initial
public offering price will be prevailing market and economic conditions, our
revenue and earnings, market valuations of other companies engaged in activities
similar to our business operations, and our management. The estimated initial
public offering price range set forth on the cover of this preliminary
prospectus is subject to change as a result of market conditions or other
factors.
RESERVED SHARES. At our request, the underwriters have reserved up to
400,000 shares of common stock for sale at the initial public offering price to
our directors, officers, employees, business associates, and their family
members. The number of shares of common stock available for sale to the general
public will be reduced if such persons purchase the reserved shares. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered hereby.
UNDERWRITER'S BENEFICIAL OWNERSHIP. Chase Securities Inc. may be deemed to
have beneficial ownership of an aggregate of 108,108 shares of our series C
redeemable convertible preferred stock. Additionally, Access Technology
Partners, L.P., a fund of outside investors that is managed by an affiliate of
Chase Securities Inc., owns 432,432 shares of series C redeemable convertible
preferred stock. All shares of convertible preferred stock issued by us,
including the series C redeemable convertible preferred stock, will
automatically convert into shares of common stock upon completion of this
offering, at a two-for-three ratio. Upon such conversion, Chase Securities Inc.
may be deemed to have beneficial ownership of 0.6% of the shares of common stock
outstanding.
NEW UNDERWRITER. Thomas Weisel Partners LLC, one of the representatives of
the underwriters, was organized and registered as a broker-dealer in
December 1998. Since December 1998, Thomas Weisel Partners has been named as a
lead or co-manager of 131 filed public offerings of equity securities, of which
99 have been completed, and has acted as a syndicate member in an additional 69
public offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or controlling
persons, except with respect to its contractual relationship with us under the
underwriting agreement entered into in connection with this offering.
77
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Brobeck, Phleger & Harrison LLP, New York, New York. A partner of Brobeck,
Phleger & Harrison LLP is the brother of our Chief Operating Officer. Certain
legal matters in connection with the offering will be passed upon for the
underwriters by Davis Polk & Wardwell.
EXPERTS
The financial statements of LivePerson, Inc. as of December 31, 1998 and
1999 and for each of the years in the three-year period ended December 31, 1999
have been included in this prospectus and elsewhere in the registration
statement in reliance upon the report of KPMG LLP, independent accountants,
appearing elsewhere herein and upon the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits and schedules thereto) under the
Securities Act of 1933 with respect to the common stock to be sold in this
offering. This prospectus does not contain all of the information set forth in
this registration statement. For further information about us and the shares of
common stock to be sold in the offering, please refer to the registration
statement and the exhibits and schedules thereto. Statements contained in this
prospectus about the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the registration statement. To have a complete understanding of
any such document, you should read the entire document filed as an exhibit.
You may read and copy all or any portion of the registration statement or
any other document we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C., 20549. You can
request copies of these documents upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our Securities and Exchange Commission filings, including the
registration statement, are also available to you on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
As a result of this offering, we will become subject to the Securities
Exchange Act of 1934, as amended, and, in accordance with the requirements of
this Act, will file periodic reports, proxy statements and other information
with the Securities and Exchange Commission.
We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements and make available quarterly reports for the
first three quarters of each year containing unaudited consolidated financial
information.
78
<PAGE>
LIVEPERSON, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report .............................. F-2
Balance Sheets as of December 31, 1998 and 1999 ........... F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999 ..................................... F-4
Statements of Stockholders' Deficit for the years ended
December 31, 1997, 1998 and 1999 ........................ F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999 ..................................... F-6
Notes to Financial Statements ............................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
LivePerson, Inc.:
We have audited the accompanying balance sheets of LivePerson, Inc. as of
December 31, 1998 and 1999, and the related statements of operations,
stockholders' deficit, and cash flows for each of the years in the three-year
period 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LivePerson, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/KPMG LLP
-------------------------------------------------------
New York, New York
March 9, 2000
F-2
<PAGE>
LIVEPERSON, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, (SEE NOTE 1(B))
----------------------------- DECEMBER 31,
1998 1999 1999
------------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $107 $14,944 $32,844
Accounts receivable, less allowance for doubtful
accounts of $15, and $85, as of December 31, 1998 and
1999 and $85 pro forma................................ 10 465 465
Prepaid expenses and other current assets............... -- 597 597
Due from officer........................................ 25 -- --
---- ------- -------
Total current assets................................ 142 16,006 33,906
Property and equipment, net................................. -- 2,457 2,457
Security deposits........................................... -- 487 487
Deferred offering costs..................................... -- 140 140
Deferred costs, net......................................... -- 199 199
---- ------- -------
Total assets........................................ $142 $19,289 $37,189
==== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................ $ 17 $ 1,776 $ 1,776
Accrued expenses........................................ 55 689 689
Note payable............................................ 100 -- --
Deferred revenue........................................ -- 161 161
---- ------- -------
Total current liabilities........................... 172 2,626 2,626
---- ------- -------
Commitments and contingencies
Series C redeemable convertible preferred stock, $.001 par
value; 5,132,433 shares authorized, issued and outstanding
actual; no shares issued and outstanding pro forma, with
an aggregate liquidation preference of $18,990............ -- 18,990 --
Series D redeemable convertible preferred stock, $.001 par
value; no shares authorized, issued and outstanding actual
and pro forma............................................. -- -- --
Stockholders' equity (deficit):
Series A convertible preferred stock, $.001 par value;
2,541,667 shares authorized, issued and outstanding
actual; no shares issued and outstanding pro forma,
with an aggregate liquidation preference of $3,000.... -- 3 --
Series B convertible preferred stock $.001 par value;
1,142,857 shares authorized, issued and outstanding
actual; no shares issued and outstanding pro forma,
with an aggregate liquidation preference of $1,600.... -- 1 --
Common stock, $0.001 par value; 100,000,000 shares
authorized; 7,092,000 shares issued and outstanding
actual; 25,054,273 shares issued and outstanding pro
forma................................................. 7 7 25
Additional paid-in capital.............................. 19 5,928 42,804
Deferred compensation................................... -- (402) (402)
Accumulated deficit..................................... (56) (7,864) (7,864)
---- ------- -------
Total stockholders' equity (deficit)................ (30) (2,327) 34,563
---- ------- -------
Total liabilities and stockholders' equity
(deficit)......................................... $142 $19,289 $37,189
==== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
LIVEPERSON, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Revenue:
Service revenue................................... $ -- $ 1 $ 600
Programming revenue............................... 245 378 39
---------- ---------- -----------
Total revenue................................. 245 379 639
---------- ---------- -----------
Operating expenses:
Cost of revenue................................... 121 70 856
Product development............................... -- 93 1,637
Sales and marketing............................... -- 33 3,987
General and administrative........................ 130 178 1,706
Non-cash compensation............................. -- 25 734
---------- ---------- -----------
Total operating expenses...................... 251 399 8,920
---------- ---------- -----------
Loss from operations.................................. (6) (20) (8,281)
---------- ---------- -----------
Other income (expense):
Interest income................................... -- -- 474
Interest expense.................................. -- -- (1)
---------- ---------- -----------
Total other income (expense), net............. -- -- 473
---------- ---------- -----------
Net loss.............................................. $ (6) $ (20) $ (7,808)
========== ========== ===========
Basic and diluted net loss per share.................. $ 0.00 $ 0.00 $ (1.10)
========== ========== ===========
Weighted average shares outstanding used in basic and
diluted net loss per share calculation.............. 7,092,000 7,092,000 7,092,000
========== ========== ===========
Pro forma basic and diluted net loss per share........ $ (0.50)
===========
Weighted average shares outstanding used in pro forma
basic and diluted net loss per share calculation.... 15,465,304
===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
LIVEPERSON, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SERIES A PREFERRED SERIES B PREFERRED
STOCK STOCK COMMON STOCK ADDITIONAL
-------------------- -------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- -------- --------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996............ -- $ -- -- $ -- 7,092,000 $ 7 $ (6)
Net loss................................ -- -- -- -- -- -- --
--------- ---- --------- ---- --------- ---- ------
Balance at December 31, 1997............ -- -- -- -- 7,092,000 7 (6)
Issuance of stock options in lieu of
payment for services.................. -- -- -- -- -- -- 25
Net loss................................ -- -- -- -- -- -- --
--------- ---- --------- ---- --------- ---- ------
Balance at December 31, 1998............ -- -- -- -- 7,092,000 7 19
Issuance of stock options in lieu of
payment for services.................. -- -- -- -- -- -- 474
Issuance of stock options to employees
below fair market value............... -- -- -- -- -- -- 576
Amortization of deferred compensation... -- -- -- -- -- -- --
Issuance of stock options to a client... -- -- -- -- -- -- 235
Issuance of Class A preferred stock and
warrants.............................. 2,416,667 3 -- -- -- -- 2,899
Issuance of Class A preferred stock in
lieu of payment for services.......... 41,667 -- -- -- -- -- 50
Conversion of note payable into shares
of Class A preferred stock............ 83,333 -- -- -- -- -- 100
Issuance of Class B preferred stock and
warrants, net of $15 issuance costs... -- -- 1,142,857 1 -- -- 1,585
Offering costs in connection with Series
C redeemable preferred stock.......... -- -- -- -- -- -- (10)
Net loss................................ -- -- -- -- -- -- --
--------- ---- --------- ---- --------- ---- ------
Balance at December 31, 1999............ 2,541,667 $ 3 1,142,857 $ 1 7,092,000 $ 7 $5,928
========= ==== ========= ==== ========= ==== ======
<CAPTION>
DEFERRED ACCUMULATED
COMPENSATION DEFICIT TOTAL
------------ ----------- -------------
<S> <C> <C> <C>
Balance at December 31, 1996............ $ -- $ (30) $ (29)
Net loss................................ -- (6) (6)
----- ------- -------
Balance at December 31, 1997............ -- (36) (35)
Issuance of stock options in lieu of
payment for services.................. -- -- 25
Net loss................................ -- (20) (20)
----- ------- -------
Balance at December 31, 1998............ -- (56) (30)
Issuance of stock options in lieu of
payment for services.................. -- 474
Issuance of stock options to employees
below fair market value............... (576) -- --
Amortization of deferred compensation... 174 -- 174
Issuance of stock options to a client... -- -- 235
Issuance of Class A preferred stock and
warrants.............................. -- -- 2,902
Issuance of Class A preferred stock in
lieu of payment for services.......... -- -- 50
Conversion of note payable into shares
of Class A preferred stock............ -- -- 100
Issuance of Class B preferred stock and
warrants, net of $15 issuance costs... -- -- 1,586
Offering costs in connection with Series
C redeemable preferred stock.......... -- -- (10)
Net loss................................ -- (7,808) (7,808)
----- ------- -------
Balance at December 31, 1999............ $(402) $(7,864) $(2,327)
===== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
LIVEPERSON, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (6) $ (20) $(7,808)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Non-cash compensation............................... -- 25 734
Depreciation........................................ -- -- 98
Provision for doubtful accounts..................... -- 15 85
Changes in operating assets and liabilities:
Accounts receivable..................................... (17) (8) (540)
Prepaid expenses and other current assets............... -- -- (597)
Security deposits....................................... -- -- (487)
Accounts payable........................................ 40 (23) 1,759
Accrued expenses........................................ 25 30 634
Deferred revenue........................................ -- -- 161
------ ----- -------
Net cash provided by (used in) operating
activities.......................................... 42 19 (5,961)
------ ----- -------
Cash flows from investing activities:
Purchases of property and equipment..................... -- -- (2,555)
------ ----- -------
Net cash used in investing activities............... -- -- (2,555)
------ ----- -------
Cash flows from financing activities:
Net proceeds from issuance of Class A, B and C preferred
stock and warrants..................................... -- -- 23,468
Proceeds from issuance of note payable.................. -- 100 --
Due to (from) officer................................... (34) (22) 25
Deferred offering costs................................. -- -- (140)
------ ----- -------
Net cash provided by (used in) financing
activities.......................................... (34) 78 23,353
------ ----- -------
Net increase in cash and cash equivalents........... 8 97 14,837
Cash and cash equivalents at the beginning of the
period................................................. 2 10 107
------ ----- -------
Cash and cash equivalents at the end of the period...... $ 10 $ 107 $14,944
====== ===== =======
</TABLE>
Supplemental disclosure of non-cash information:
The Company did not pay interest or income taxes for any period presented.
Non-cash financing activities:
During the year ended December 31, 1999, the Company issued 83,333 shares
of its Series A preferred stock at $1.20 per share in settlement of a $100
note payable. This transaction resulted in a non-cash financing activity of
$100.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-6
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(A) SUMMARY OF OPERATIONS
LivePerson, Inc. (the "Company" or "LivePerson"), was incorporated in the
State of Delaware in 1995 under the name of Sybarite Interactive, Inc. The
Company, which commenced operations in 1996, changed its name to Live Person,
Inc. in January 1999 and to LivePerson, Inc. in March 2000. The Company offers
the LivePerson service, which facilitates real-time sales and customer service
for companies doing business on the Internet.
The Company generates revenues from the sale of the LivePerson service.
Prior to November 1998, when the LivePerson service was introduced, the Company
provided services primarily related to Web-based community programming and media
design.
(B) INITIAL PUBLIC OFFERING AND PRO FORMA BALANCE SHEET--UNAUDITED
In January 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit the Company to sell shares of its common stock in connection with a
proposed initial public offering ("IPO").
If the IPO is consummated under the terms presently anticipated, upon the
closing of the proposed IPO, each of the then outstanding shares of the
Company's convertible preferred stock will automatically convert, at a
two-for-three ratio, into 17,962,273 shares of common stock.
The accompanying pro forma balance sheet as of December 31, 1999 gives
effect to:
- the issuance of 3,157,895 shares of Series D redeemable convertible
preferred stock at $5.70 per share during January 2000 for net proceeds
of approximately $17.9 million; and
- the automatic conversion of 2,541,667, 1,142,857, 5,132,433 and 3,157,895
shares of Series A, B, C and D convertible preferred stock, respectively,
representing all outstanding shares of convertible preferred stock, into
17,962,273 shares of common stock upon the closing of this offering.
(C) USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(D) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid securities, with original maturities
of three months or less when acquired, to be cash equivalents.
F-7
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets, generally ranging from three to seven years.
(F) IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. To date, no
impairment has occurred.
(G) INCOME TAXES
Income taxes are accounted for under the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in results of operations in the period that
the tax change occurs. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
(H) REVENUE RECOGNITION
Prior to November 1998, when the LivePerson service was introduced, the
Company generated revenue from services primarily related to Web-based community
programming and media design. Revenues from such services are recognized upon
completion of the project provided that no significant Company obligations
remain and collection of the resulting receivable is probable.
During 1998, the Company began offering the LivePerson service. The
LivePerson service facilitates real-time sales and customer service for
companies doing business on the Internet. The Company charges an initial
non-refundable set-up fee as well as a monthly fee for each operator access
account ("seat") using the LivePerson service.
The initial set-up fee principally represents customer service, training and
other administrative costs related to the deployment of the LivePerson service.
Such fees are recorded as deferred revenue and recognized over a period of
24 months, representing the Company's
F-8
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
current estimate of the expected term of a client relationship. This estimate
may change in the future.
The Company also records revenue based upon a monthly fee charged for each
seat using the LivePerson service provided that no significant Company
obligations remain and collection of the resulting receivable is probable. The
Company recognizes monthly service revenue fees as services are provided. The
Company's service agreements typically have no termination date and are
terminable by either party upon 30 to 90 days' notice without penalty. The
Company does not charge an additional set-up fee if an existing client adds more
seats.
(I) PRODUCT DEVELOPMENT COSTS
The Company accounts for product development costs in accordance with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," under which certain software development costs incurred
subsequent to the establishment of technological feasibility are capitalized and
amortized over the estimated lives of the related products. Technological
feasibility is established upon completion of a working model. To date,
completion of a working model of the Company's products and general release have
substantially coincided. As a result, the Company has not capitalized any
software development costs since such costs have not been significant. Through
December 31, 1999, all development costs have been charged to product
development expense in the accompanying statements of operations.
(J) ADVERTISING COSTS
The Company expenses the cost of advertising and promoting its services as
incurred. Such costs totaled approximately $0, $1 and $1,935 for the years
ending December 31, 1997, 1998 and 1999, respectively.
(K) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents, accounts
receivable, accounts payable and note payable. At December 31, 1998 and 1999,
the fair value of these instruments approximated their financial statement
carrying amount because of the short-term maturity of these instruments. The
Company has not experienced any significant credit loss to date. In 1997, two
customers accounted for all of the Company's accounts receivable, and revenue
from the Company's three largest customers accounted for 86% of the Company's
revenue. Two customers accounted for 80% of the Company's accounts receivable in
1998. No single customer accounted for or exceeded 10% of either revenue or
accounts receivable in 1999.
(L) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based
F-9
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Compensation," which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to continue to apply the provisions
of Accounting Principle Board ("APB") Opinion No. 25 and provide pro forma net
earnings (loss) disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
(M) BASIC AND DILUTED NET LOSS PER SHARE
The Company calculates earnings per share in accordance with the provisions
of SFAS No. 128, "Earnings Per Share", and the Securities and Exchange
Commission Staff Accounting Bulletin No. 98. Under SFAS No. 128, basic EPS
excludes dilution for common stock equivalents and is computed by dividing
income or loss available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock and resulted in the issuance of
common stock. Diluted net loss per share is equal to basic loss per share since
all common stock equivalents are anti-dilutive for each of the periods
presented.
Diluted net loss per common share for the year ended December 31, 1998 and
1999, does not include the effects of options to purchase 197,100 and 3,612,345
shares of common stock, respectively, 0 and 718,749 common stock warrants,
respectively, and 0 and 13,225,431 shares of Series A, Series B and Series C
convertible preferred stock on an "as if" converted basis, respectively, as the
effect of their inclusion is anti-dilutive during each period. There were no
dilutive securities outstanding in 1997.
The pro forma net loss per share for the year ended December 31, 1999, is
computed by dividing the net loss by the sum of the weighted average number of
shares of common stock outstanding and the shares resulting from the automatic
conversion of all of our outstanding convertible preferred stock, totalling
13,225,431, as if such conversion occurred at the date of original issuance
during 1999. The number of pro forma weighted average shares used in computing
basic and diluted net loss per share is as follows:
<TABLE>
<S> <C>
Actual weighted average shares outstanding.................. 7,092,000
Series A Convertible Preferred Stock........................ 3,655,821
Series B Convertible Preferred Stock........................ 1,089,628
Series C Convertible Preferred Stock........................ 3,627,855
----------
Weighted average shares outstanding used in pro forma basic
and diluted net loss per share calculation................ 15,465,304
==========
</TABLE>
F-10
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(N) STOCK SPLIT
Effective January 20, 1999, the Company authorized and implemented a
10-for-1 stock split in the form of a common stock dividend. Accordingly, all
share and per share information in the accompanying financial statements have
been retroactively restated to reflect the effect of the stock split.
Effective March 8, 2000, the Company authorized and implemented a 3-for-2
split of shares of the Company's common stock in the form of a common stock
dividend. Accordingly, all common share and per common share information,
warrants and options, in the accompanying financial statements has been
retroactively restated to reflect the effect of the stock split.
(O) COMPREHENSIVE LOSS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" in 1998. SFAS No. 130
requires the Company to report in its financial statements, in addition to its
net income (loss), comprehensive income (loss), which includes all changes in
equity during a period from non-owner sources including, as applicable, foreign
currency items, minimum pension liability adjustments and unrealized gains and
losses on certain investments in debt and equity securities. There were no
differences between the Company's comprehensive loss and its net loss for all
periods presented.
(P) SEGMENT REPORTING
During 1998, the Company adopted the provisions of SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 establishes annual and interim reporting standards for operating
segments of a company. SFAS No. 131 requires disclosures of selected
segment-related financial information about products, major customers, and
geographic areas. The Company is organized in a single operating segment for
purposes of making operating decisions and assessing performance. The chief
operating decision maker evaluates performance, makes operating decisions, and
allocates resources based on financial data consistent with the presentation in
the accompanying financial statements.
The Company's revenues have been earned primarily from customers in the
United States. In addition, all significant operations and assets are based in
the United States. No customer accounted for or exceeded more than 10% of
revenues for the years ended December 31, 1998 and 1999.
(R) RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-Up Activities," which provides guidance on the financial reporting of
start-up costs. SOP 98-5 requires costs of start-up activities and organization
costs to be expensed as incurred. SOP 98-5 was adopted by the Company on
January 1, 1999. As the Company had not capitalized such costs,
F-11
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the adoption of SOP 98-5 did not have an impact on the consolidated financial
statements of the Company.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 provides guidance for
determining whether computer software is internal-use software and on accounting
for the proceeds of computer software originally developed or obtained for
internal use and then subsequently sold to the public. It also provides guidance
on capitalization of the costs incurred for computer software developed or
obtained for internal use. The Company adopted SOP 98-1 in the first quarter of
1999, the effect of which did not have a material effect on the financial
statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. Subsequently, the FASB
issued SFAS No. 137 which deferred the effective date of SFAS No. 133. SFAS
No. 137 is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company has not yet analyzed the impact of this pronouncement
on its financial statements.
(2) BALANCE SHEET COMPONENTS
Property and equipment is stated at cost and is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
Computer equipment and software............................. $2,367
Furniture and equipment..................................... 188
------
2,555
Less accumulated depreciation............................... 98
------
Total................................................... $2,457
======
</TABLE>
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
-------- --------
<S> <C> <C>
Professional services and consulting fees................... $ 55 $554
Sales commissions........................................... -- 68
Other....................................................... -- 67
---- ----
Total................................................... $ 55 $689
==== ====
</TABLE>
F-12
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(2) BALANCE SHEET COMPONENTS (CONTINUED)
Prepaid expenses and other current assets at December 31, 1999 principally
included prepayments for various advertising and promotional activities.
(3) NOTE PAYABLE
On December 17, 1998, the Company received a $100 loan from a venture
capital firm bearing interest at 8% due on February 1, 1999. Interest expense on
the note payable amounted to less than $1 for the year ended December 31, 1998.
The loan was converted into 83,333 shares of Series A convertible preferred
stock as part of the issuance of Series A preferred stock in January 1999 (see
note 4).
(4) CAPITALIZATION
The Company had 30,000,000 shares of common stock authorized and 9,000,000
shares of preferred stock authorized as of December 31, 1999. On January 27,
2000, the Company increased the number of its authorized shares of common stock
to 35,000,000 and the number of its authorized shares of preferred stock to
12,274,852. On March 8, 2000, the Company increased the number of its authorized
shares of common stock to 100,000,000.
In January 1999, the Company completed a private placement of 2,500,000
shares of Series A Convertible Preferred Stock ("Series A") with 468,749 common
stock warrants at an offering price of $1.20 per Series A share and $0.001 per
warrant, on a pre-split basis. Total proceeds amounted to $2,902. The warrants
are exercisable at a price of $2.40 per common share and have a term of
5 years. None of these warrants have been exercised. As part of the Series A
private placement, a $100 note payable was converted into 83,333 shares of
Series A preferred stock.
In January 1999, the Company issued an additional 41,667 shares of Series A
preferred stock to a financial advisor in exchange for services. The Company
recorded compensation expense of $50 in connection with the issuance of the
shares at $1.20 per share.
In May 1999, the Company completed a private placement of 1,142,857 shares
of Series B Convertible Preferred Stock ("Series B") with 250,000 common stock
warrants at an offering price of $1.40 per Series B share and $0.001 per
warrant, on a pre-split basis. The warrants are exercisable at a price of $1.60
per common share and have a term of 5 years. None of these warrants have been
exercised. Total proceeds, net of offering costs of $15, amounted to $1,586.
The managing underwriter of the Company's IPO can request the Company to
accelerate the expiration of the Series A and Series B warrants to the day
immediately preceding the date on which the Company's registration statement is
declared effective by the SEC. The Company has been informed by the managing
underwriter that it does not intend to do so.
In July 1999, the Company completed a private placement of 5,132,433 shares
of Series C Redeemable Convertible preferred stock ("Series C") at $3.70 per
share. Total proceeds, net of offering costs of $10, amounted to $18,980. Such
stock is redeemable at $3.70 per share at the
F-13
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(4) CAPITALIZATION (CONTINUED)
option of the holder. 33% of such shares are subject to mandatory redeemption
beginning on July 19, 2004, an additional 17% on July 19, 2005 and the remaining
50% on July 19, 2006.
In January 2000, LivePerson issued an aggregate of 3,157,895 shares of
Series D Redeemable Convertible preferred stock ("Series D") at $5.70 per share.
Total proceeds, net of offering costs of $100, amounted to $17,900.
Each share of common stock and Series A, Series B, Series C and Series D
preferred stock has one vote per share. In the event of any liquidation or
winding up of the Company, holders of the Series A, Series B, Series C, and
Series D preferred stock will be entitled, (ranking in preference among
preferred stockholders in the reverse order of issuance), in preference to the
holders of the common stock, to an amount equal to the applicable purchase price
per share plus any accrued but unpaid dividends.
If the IPO is consummated, upon the closing, 2,541,667, 1,142,857, 5,132,433
and 3,157,895 shares of Series A, Series B, Series C and Series D convertible
preferred stock, respectively, representing all of the outstanding shares of the
convertible preferred stock, shall automatically convert at a two-for-three
ratio into 17,962,273 shares of common stock.
(5) STOCK OPTIONS
During 1998, the Company established the Stock Option and Restricted Stock
Purchase Plan (the "1998 Plan"). Under the 1998 Plan, the Board of Directors may
issue incentive stock options or nonqualified stock options to purchase up to
5,850,000 common shares.
F-14
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(5) STOCK OPTIONS (CONTINUED)
A summary of the Company's stock option activity and weighted average
exercise prices is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options outstanding at December 31, 1997.................... -- --
Options granted............................................. 197,100 $0.67
Options cancelled........................................... -- --
--------- -----
Options outstanding at December 31, 1998.................... 197,100 $0.67
Options granted............................................. 3,496,245 $1.37
Options cancelled........................................... (81,000) $0.94
--------- -----
Options outstanding at December 31, 1999.................... 3,612,345 $1.33
========= =====
Options exercisable at December 31, 1998.................... -- --
Options exercisable at December 31, 1999.................... 479,960 $1.09
========= =====
</TABLE>
F-15
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(5) STOCK OPTIONS (CONTINUED)
The Company applies APB No. 25 and related interpretations in accounting for
its stock option grants to employees. Accordingly, except as mentioned below, no
compensation expense has been recognized relating to these stock option grants.
Had compensation cost for the Company's stock option grants been determined
based on the fair value at the grant date for awards consistent with the method
of SFAS No. 123, the Company's net loss for each year is presented below. The
Company did not have any employee stock options outstanding prior to January 1,
1998.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Net loss:
As reported.......................................... $ (20) $ (7,808)
====== ========
Pro forma............................................ $ (28) $(10,290)
====== ========
Basic and diluted net loss per share:
As reported.......................................... $ 0.00 $ (1.10)
====== ========
Pro forma............................................ $(0.01) $ (1.45)
====== ========
</TABLE>
The resulting effect on the pro forma net loss disclosed for the years ended
December 31, 1998 and 1999 is not likely to be representative of the effects on
the net loss on a pro forma basis in future years, because the pro forma results
include the impact of only one period of grants and related vesting, while
subsequent years will include additional grants and vesting.
The per share weighted average fair value of stock options granted during
1998 and 1999, was $0.26 and $1.40, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in 1998
and 1999: dividend yield of zero percent for both years, risk-free interest
rates of 5.4 and 6.0%, respectively and expected life of 5 years for both years.
As permitted under the provisions of SFAS No. 123 and based on the historical
lack of a public market for the Company's stock, no factor for volatility has
been reflected in the option pricing calculation. No employee stock options were
granted in 1997.
During December 1998, the Company granted options to purchase 93,750 shares
of common stock at an exercise price of $0.67 per share, the then fair market
value of the Company's common stock, to a consultant for services performed.
These options are exercisable for a period of 5 years. The Company recorded an
expense of $25 in connection with the issuance of the fully vested options using
a Black-Scholes pricing model using a volatility factor of 40%.
During April 1999, the Company granted options to purchase an aggregate of
64,260 shares of common stock at an exercise price of $0.67 per share, to four
consultants for services performed. These options are exercisable for a period
of 10 years. The Company recorded an
F-16
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(5) STOCK OPTIONS (CONTINUED)
expense of $29 in connection with the issuance of the fully vested options using
a Black-Scholes pricing model using a volatility factor of 40% and a deemed fair
value of $1.08 per share.
During May 1999, the Company issued an option to purchase 94,500 shares of
common stock at an exercise price of $1.60 per share to a client in connection
with an agreement by the Company to provide services to the client for a
two-year period. This option originally provided that it would vest in or before
May 2001 if the client met certain defined revenue targets and was exercisable
for a period of 3 years from the date of grant. The Company accounted for this
option in accordance with Emerging Issues Task Force Abstract No. 96-18,
"Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services." Pursuant to
EITF-96-18, the Company valued the option at each balance sheet date using a
Black-Scholes pricing model using a volatility factor of 40%, a $1.60 per share
exercise price and the then fair value of the Company's common stock as of each
balance sheet date. The $235 value ascribed to the option reflects the market
value at December 31, 1999 and has been recorded as deferred cost. This cost is
being ratably amortized over the two-year contract period, as the Company
believes that the achievement of the revenue targets is probable. The value
ascribed to this option was adjusted at each balance sheet date to bring the
total charge recognized and amortized up to the then current fair value. The
Company has amortized $36 of the deferred costs as of December 31, 1999. In
February 2000, the Company amended the option agreement with the client whereby
the option became fully vested and immediately exercisable. However, the client
is precluded from selling the underlying common stock until the earlier of five
years or, if certain revenue targets are met, by May 19, 2001. The value of the
option at the time the agreement was amended was $1.1 million which will be
ratably amortized over the remaining service period of approximately 18 months.
During June 1999, the Company granted options to purchase 150,000 shares of
common stock to an advisor at an exercise price of $0.67 per share. These
options are exercisable for a period of 10 years. The Company has recorded
compensation expense of $83 using the Black-Scholes pricing model with a
volatility factor of 40% and a deemed fair value of $0.84 per share.
In December 1999, the Company recorded compensation expense of approximately
$362 in connection with the options granted to an advisor to purchase 150,000
shares of common stock at an exercise price of $2.00 for services performed.
These options are exercisable for a period of 10 years. The fair value of the
options was determined using a Black-Scholes pricing model with a volatility
factor of 40% and a deemed fair value of $3.33 per share.
During 1999, the Company granted stock options to purchase 3,496,245 shares
of common stock to employees at a weighted average exercise price of $1.37,
certain of which were granted at less than the deemed fair value of the common
stock at the date of grant. For the year ended December 31, 1999, the Company
recorded deferred compensation of approximately $576 in connection with these
options. This amount is presented as deferred compensation within the financial
statements and will be amortized over the vesting period, typically three to
four years, of the applicable options. The Company amortized $174 of deferred
compensation for the year
F-17
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(5) STOCK OPTIONS (CONTINUED)
ended December 1999. The Company expects to amortize the following amounts of
deferred compensation relating to options granted in 1999 as follows: 2000-$252;
2001-$98; 2002-$45; and 2003-$7.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------------------------------------- ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- -------------- --------------------------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.67 197,100 7.43 $0.67 -- --
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------------------------- -----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- -------------- --------------------------- ---------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
$0.67 1,241,010 8.95 $0.67 329,960 $0.67
$0.80 588,960 4.24 $0.80 -- --
$1.60 94,500 2.38 $1.60 -- --
$2.00 1,687,875 9.79 $2.00 150,000 2.00
--------------------------- ----- ------- -----
3,612,345 $1.33 479,960 $1.09
=========================== ===== ======= =====
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases facilities and certain equipment under agreements
accounted for as operating leases. These leases generally require the Company to
pay all executory costs such as maintenance and insurance. Rental expense for
operating leases for the years ending December 31, 1997, 1998 and 1999 were
approximately $14, $26 and $311, respectively. One of the leases is with a
related party and payments thereunder aggregated approximately $50 in 1999.
F-18
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under operating leases (with initial or
remaining lease terms in excess of one year) are as follows:
<TABLE>
<CAPTION>
OPERATING
YEAR ENDING DECEMBER 31, LEASES
- ------------------------ ---------
<S> <C>
2000.................................................... $1,084
2001.................................................... 1,014
2002.................................................... 1,034
2003.................................................... 1,054
2004.................................................... 1,094
Thereafter.............................................. 1,972
------
Total minimum lease payments........................ $7,252
======
</TABLE>
In the first quarter of 2000, the Company entered into two additional leases
for office space. The lease for the Company's San Francisco office space,
entered into in February 2000, provides for annual aggregate payments of
$275,000. The security deposit for this lease is approximately $300. In February
2000, the Company entered into a sublease for approximately 8,000 square feet in
New York City expiring in September 2000, providing for annual aggregate
payments of $238,000. In March 2000, the Company entered into a lease for an
aggregate of approximately 83,500 square feet on two floors at a location in New
York City. The lease with respect to one floor, consisting of approximately
40,500 square feet, commences in June 2000, at a rent of approximately
$1.4 million per year in the first three years, $1.5 million per year in years
four through seven and $1.6 million per year in years eight through ten. The
related security deposit is $2.0 million for the first three years, $1.3 million
for years four through seven and $670,000 for years eight through ten. The other
floor consists of approximately 43,000 square feet, and the lease term relating
to that floor commences in August 2001, at a rent of approximately $1.5 million
per year in the first three years, $1.6 million per year in years four through
seven and $1.7 million per year in years eight through ten. The related security
deposit is $2.2 million for the first three years, $1.5 million for years four
through seven and $747,000 for years eight through ten. At our option, we may
provide the security deposit by a letter of credit.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with 5 senior employees which provide
for severance benefits among other items. In the event these agreements are
terminated, the Company may be liable for severance payments of up to $703 of
salary payable during the year following termination.
(7) INCOME TAXES
The Company has adopted the cash method of accounting for income tax
purposes. There is no provision for federal, state or local income taxes for any
periods presented, since the Company
F-19
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(7) INCOME TAXES (CONTINUED)
has incurred losses since inception. At December 31, 1999, the Company had
approximately $5.6 million of federal net operating loss carryforwards available
to offset future taxable income. Such carryforwards expire in various years
through 2019. The Company has recorded a full valuation allowance against its
deferred tax assets since management believes that, after considering all the
available objective evidence, it is not more likely than not that these assets
will be realized. The tax effect of temporary differences that give rise to
significant portions of federal deferred tax assets principally consists of the
Company's net operating loss carryforwards.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), the utilization of net operating loss carryforwards may be limited
under the change in stock ownership rules of the Code. The Company has not yet
determined whether the IPO will result in an ownership change.
The effects of temporary differences and tax loss carryforwards that give
rise to significant portions of federal deferred tax assets and deferred tax
liabilities at December 31, 1998 and 1999 are presented below.
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards...................... $ -- $2,177
Differences due to cash method vs. accrual method of
Accounting........................................... 25 674
Non-cash compensation.................................. -- 290
------ ------
Gross deferred tax assets.......................... 25 3,141
Less: valuation allowance.......................... (20) (3,132)
------ ------
Net deferred tax assets............................ 5 9
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation......................................... (5) (9)
Other.................................................. -- --
------ ------
Gross deferred tax liabilities..................... (5) (9)
------ ------
$ -- $ --
====== ======
</TABLE>
F-20
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(8) VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED BALANCE
AT TO COSTS AT END
BEGINNING AND DEDUCTIONS/ OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
For the year ended December 31, 1997:
Allowance for doubtful accounts............... $ -- $ -- $ -- $ --
==== ==== ==== ====
For the year ended December 31, 1998:
Allowance for doubtful accounts............... $ -- $ 15 $ -- $ 15
==== ==== ==== ====
For the year ended December 31, 1999:
Allowance for doubtful accounts............... $ 15 $ 85 $(15) $ 85
==== ==== ==== ====
</TABLE>
(9) SUBSEQUENT EVENTS--UNAUDITED
Upon the closing of this offering, the Company intends to authorize the
issuance of 5,000,000 shares of preferred stock.
The Company intends to establish a successor to the 1998 Plan, the 2000
Stock Incentive Plan (the "2000 Plan"). Under the 2000 Plan, the options which
had been outstanding under the 1998 Plan will be incorporated into the 2000 Plan
and the Company will increase the number of options available under the plan by
approximately 4,150,000 options effectively authorizing 10,000,000 options in
the aggregate. These options will have 10 year terms.
The Company intends to adopt the 2000 Employee Stock Purchase Plan with
450,000 shares of common stock initially reserved for issuance.
For the period from January 1, 2000 through March 8, 2000, the Company
granted stock options to purchase 2,105,250 shares of common stock,
respectively, to employees at a weighted average exercise price of $3.81. The
deemed fair value of the Company's common stock ranged from $3.33 to $13.00 per
share during such period. For the period from January 1, 2000 through March 8,
2000, the Company recorded deferred compensation of approximately $13,134, in
connection with the grant of certain options to employees, representing the
difference between the deemed fair value of its common stock as of the date of
grant for accounting purposes and the exercise price of the related options.
This amount will be presented as deferred compensation in the financial
statements and will be amortized over the vesting period, typically three to
four years, of the applicable options. The Company expects to amortize the
following amounts of deferred compensation relating to options granted from
January 1, 2000 through March 8, 2000 as follows: 2000-$8,747; 2001-$2,604;
2002-$1,329; and 2003-$454. During the period from January 1, 2000 through
March 8, 2000, 93,750 stock options were exercised at an exercise price of $0.67
per share and 375 options were cancelled at an exercise price of $0.67 per
share.
F-21
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(9) SUBSEQUENT EVENTS--UNAUDITED (CONTINUED)
During the period from January 1, 2000 through March 8, 2000, 175,781
warrants to purchase common stock at an exercise price of $1.60 per share were
exercised.
F-22
<PAGE>
INSIDE BACK COVER
- -Centered on the upper third of the page is the following bold, large size text:
"These are some of the sites experiencing the impact of [LivePerson logo]"
- -The bottom half of the page contains the following client logos:
[ShopNow.com logo] [Miadora logo] [LookSmart logo]
[Intuit logo] [EarthLink logo] [ditech.com logo]
[nbd.com logo] [Playboy.com logo] [iQVC logo] [ScreamingMedia logo]
<PAGE>
4,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
------------------
CHASE H&Q
THOMAS WEISEL PARTNERS LLC
PAINEWEBBER INCORPORATED
---------------------
, 2000
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT
A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN THAT JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS
PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNTIED STATES ARE REQUIRED TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND THE
DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), 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 DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses, other than
the underwriting discounts and commissions, payable by the registrant in
connection with the sale of the common stock being registered.
<TABLE>
<CAPTION>
AMOUNT TO BE PAID
-----------------
<S> <C>
SEC registration fee...................................... $ 18,216
NASD filing fee........................................... 7,400
Nasdaq National Market listing fee........................ 95,000
Legal fees and expenses................................... 400,000
Accounting fees and expenses.............................. 200,000
Printing and engraving expenses........................... 200,000
Blue Sky fees and expenses................................ 5,000
Transfer agent and registrar fees and expenses............ 5,000
Miscellaneous............................................. 69,384
----------
Total................................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's amended and restated certificate of incorporation in effect
as of the date hereof, and the registrant's amended and restated certificate of
incorporation to be in effect upon the closing of this offering (the
"Certificate") provide that, except to the extent prohibited by the Delaware
General Corporation Law, as amended (the "DGCL"), the registrant's directors
shall not be personally liable to the registrant or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for any breach of the
director's duty of loyalty to the registrant or its stockholders, for acts or
omissions not in good faith or which involve intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are prohibited by the DGCL. This provision also does not affect
the directors' responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws. The registrant has
obtained liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The Certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL
and provides that the registrant shall,
II-1
<PAGE>
to the fullest extent permitted by the DGCL, fully indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was, or has agreed
to become, a director or officer of the registrant, or is or was serving at the
request of the registrant as a director, officer or trustee of or, in a similar
capacity with, another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity, against all expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by or on behalf of such person in connection with such
action, suit or proceeding and any appeal therefrom.
We have also entered into agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in the
Certificate. We believe that these agreements are necessary to attract and
retain qualified directors and executive officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate or the aforementioned
indemnification agreements. The registrant is not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
All information in this section relating to common stock, warrants and
options reflects a three-for-two stock split of shares of the registrant's
common stock effected on March 8, 2000. All information in this section relating
to shares of convertible preferred stock reflects the actual shares issued,
which will convert at a two-for-three ratio into shares of common stock upon the
closing of this offering.
In the preceding three years, the registrant has issued the following
securities that were not registered under the Securities Act of 1933, as amended
(the "Act"):
COMMON STOCK. In January 1999, in order to effect a 10-for-1 stock split,
the registrant issued an aggregate of 6,382,800 shares of common stock, par
value $0.001 per share ("Common Stock") to Robert P. LoCascio and Robert
Olender, then the holders of Common Stock. On January 28, 2000, the registrant
issued 93,750 shares of Common Stock to Silicon Alley Venture Partners, LLC
pursuant to an option to purchase shares of Common Stock, at an aggregate price
of $62,500. On February 29, 2000, the registrant issued 175,781 shares of Common
Stock to Dawntrader Fund I LP pursuant to an exercise of a warrant to purchase
shares of Common Stock, at an aggregate price of $281,250. All such issuances
were made under the exemption from registration provided by Section 4(2) of the
Act.
CONVERTIBLE PREFERRED STOCK. The registrant issued an aggregate of
17,962,273 shares of convertible preferred stock, par value $0.001 per share,
consisting of (i) 2,500,000 shares of series A convertible preferred stock in
January 1999 at a purchase price per share of $1.20 for gross proceeds of
$3,000,000 to Dawntreader Fund I LP, FG-LP, Sterling Payot Capital, LP, and SAVP
Sidecar I LLC; (ii) 41,667 shares of series A convertible preferred stock in
January 1999 in exchange for consulting services provided to the Registrant by
Silicon Alley Venture Partners, LLC in the amount of $50,000; (iii) 1,142,857
shares of series B convertible preferred stock in May 1999 at a purchase price
per share of $1.40 for gross proceeds of $1,600,000 to Allen & Company
Incorporated, Alan Braverman, and Sculley Brothers LLC; (iv) 5,132,433 shares of
series C redeemable convertible preferred stock in July 1999 at a purchase price
per share of $3.70 for gross proceeds of $18,990,000 to Highland Capital
Partners IV Limited Partnership, Highland Entrepreneurs' Fund IV Limited
Partnership, FG-LPC, Dawntreader Fund I LP, Allen & Company Incorporated, The
Goldman Sachs Group, Inc., Stone Street Fund 1999, L.P.,
II-2
<PAGE>
Sterling Payot Capital, LP, SAVP Sidecar I-B, LLC, Silicon Alley Ventures, L.P.,
Hambrecht & Quist California, Hambrecht & Quist Employee Venture Fund, L.P. II,
Access Technology Partners Brokers Fund, L.P., Access Technology Partners, L.P.,
Henry R. Kravis, Esther Dyson, and Mark Lipschultz; and (v) 3,157,895 shares of
series D redeemable convertible preferred stock in January 2000 at a purchase
price per share of $5.70 for gross proceeds of $18,000,000 to Dell USA, L.P.,
Austin I, LLC, Van Eyck Partners, LLC, Striped Marlin Investments, LLC, MSD
EC I, LLC, and NBC Interactive Media, Inc. A portion of the series A convertible
preferred stock issued to FG-LP was issued in satisfaction of a promissory note
made by the registrant in the amount of $100,000, plus interest. All such
issuances were made under the exemption from registration provided under
Section 4(2) of the Act.
WARRANTS. Since its inception, the registrant issued warrants exercisable
for an aggregate of 718,749 shares of Common Stock consisting of (i) warrants
issued in January 1999 exercisable for 468,749 shares of Common Stock, at a
purchase price per warrant of $0.003, for gross proceeds of $1,562.50, to
Dawntreader Fund I LP, FG-LP, Sterling Payot Capital, LP, and SAVP Sidecar I
LLC, which are presently exercisable at an exercise price per share of $1.60 and
which expire in January 2004; and (ii) warrants issued in May 1999 exercisable
for 250,000 shares of Common Stock, at a purchase price per warrant of $0.003,
for gross proceeds of $833, to Allen & Company Incorporated, Alan Braverman, and
Sculley Brothers LLC, which are presently exercisable at an exercise price per
share of $1.60 and which expire in May 2004. The expiration date of the warrants
listed in (i) and (ii) may be accelerated in certain circumstances, if the
managing underwriter of the registrant's initial public offering determines that
the failure to accelerate the expiration or exercise of the warrants could
adversely affect the offering; however, the registrant has been informed by
Chase Securities Inc. that they do not intend to do so. All such issuances were
made under the exemption from registration provided under Section 4(2) of the
Act.
OPTIONS. Of the options granted by the registrant pursuant to the
registrant's 2000 Stock Incentive Plan and 2000 Employee Stock Purchase Plan,
successors to the registrant's 1998 Plan, options to purchase 81,000 shares of
Common Stock were cancelled in 1999 and options to purchase a total of 5,528,970
shares of Common Stock at a weighted average exercise price of $2.28 per share
remain outstanding at March 8, 2000. For a more detailed description of the
registrant's option plans, see "Management--2000 Stock Incentive Plan" and
"Management--2000 Employee Stock Purchase Plan." All such grants were made under
the exemptions from registration provided under Rule 701 and Section 4(2) of the
Act.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1** Third Amended and Restated Certificate of Incorporation
3.2 Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering
3.3** Bylaws
3.4 Form of Amended and Restated Bylaws to be in effect upon the
closing of this offering
3.5 Certificate of Amendment to Third Amended and Restated
Certificate of Incorporation
4.1* Specimen Common Stock certificate
4.2 Second Amended and Restated Registration Rights Agreement
4.3 See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for further
provisions defining the rights of holders of common stock of
the registrant
5.1 Opinion of Brobeck, Phleger & Harrison LLP
10.1** Employment Agreement between LivePerson, Inc. and Robert P.
LoCascio
10.2 Employment Agreement between LivePerson, Inc. and Dean
Margolis
10.3** Employment Agreement between LivePerson, Inc. and Timothy E.
Bixby
10.4** Employment Agreement between LivePerson, Inc. and Scott E.
Cohen
10.5** Employment Agreement between LivePerson, Inc. and James L.
Reagan
10.6* 2000 Stock Incentive Plan
10.7* 2000 Employee Stock Purchase Plan
10.8 Agreement of Lease between Vornado 330 West 34th Street
L.L.C. as Landlord and LivePerson, Inc. as Tenant
23.1 Consent of KPMG LLP
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1)
24.1** Powers of Attorney (See Signature Page)
27.1 Financial Data Schedule
</TABLE>
- --------------------------
* To be filed by amendment.
** Filed previously as an exhibit to the Registration Statement on Form S-1
filed on January 28, 2000.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing 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.
Insofar as indemnification for liabilities arising under 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
II-4
<PAGE>
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 Act, 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 Act, 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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in The
City of New York, State of New York, on this 10th day of March, 2000.
<TABLE>
<S> <C> <C>
LIVEPERSON, INC.
BY: /S/ ROBERT P. LOCASCIO
----------------------------------------------
Robert P. LoCascio
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
President, Chief Executive Officer
/s/ ROBERT P. LOCASCIO and Chairman of the Board of
-------------------------------------- Directors (principal executive March 10, 2000
Robert P. LoCascio officer)
Executive Vice President, Chief
/s/ TIMOTHY E. BIXBY Financial Officer, Secretary and
-------------------------------------- Director (principal financial March 10, 2000
Timothy E. Bixby and accounting officer)
* Director
-------------------------------------- March 10, 2000
Richard L. Fields
* Director
-------------------------------------- March 10, 2000
Wycliffe K. Grousbeck
* Director
-------------------------------------- March 10, 2000
Kevin C. Lavan
* Director
-------------------------------------- March 10, 2000
Edward G. Sim
</TABLE>
<TABLE>
<C> <S> <C> <C>
*By: /s/ TIMOTHY E. BIXBY
------------------------------
Timothy E. Bixby
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1** Third Amended and Restated Certificate of Incorporation
3.2 Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering
3.3** Bylaws
3.4 Form of Amended and Restated Bylaws to be in effect upon the
closing of this offering
3.5 Certificate of Amendment to Third Amended and Restated
Certificate of Incorporation
4.1* Specimen Common Stock certificate
4.2 Second Amended and Restated Registration Rights Agreement
4.3 See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for further
provisions defining the rights of holders of common stock of
the registrant
5.1 Opinion of Brobeck, Phleger & Harrison LLP
10.1** Employment Agreement between LivePerson, Inc. and Robert P.
LoCascio
10.2 Employment Agreement between LivePerson, Inc. and Dean
Margolis
10.3** Employment Agreement between LivePerson, Inc. and Timothy E.
Bixby
10.4** Employment Agreement between LivePerson, Inc. and Scott E.
Cohen
10.5** Employment Agreement between LivePerson, Inc. and James L.
Reagan
10.6* 2000 Stock Incentive Plan
10.7* 2000 Employee Stock Purchase Plan
10.8 Agreement of Lease between Vornado 330 West 34th Street
L.L.C. as Landlord and LivePerson, Inc. as Tenant
23.1 Consent of KPMG LLP
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1)
24.1** Powers of Attorney (See Signature Page)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
** Filed previously as an exhibit to the Registration Statement on Form S-1
filed on January 28, 2000.
<PAGE>
Exhibit 3.2
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
LIVEPERSON, INC.
(Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware)
LivePerson, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: The present name of the Corporation is "LivePerson,
Inc." The name under which the Corporation was originally incorporated was
"Sybarite Interactive, Inc." The date of filing of the original Certificate of
Incorporation of the Corporation with the Secretary of State of the State of
Delaware was November 29, 1995. A Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
January 21, 1999, changing the Corporation's name Live Person, Inc. Amended and
Restated Certificates of Incorporation of the Corporation were filed with the
Secretary of State of the State of Delaware on May 4, 1999, July 19, 1999 and
January 27, 2000. An amendment to the Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
March 8, 2000, changing the Corporation's name to LivePerson, Inc. Pursuant to
Sections 242 and 245 of the General Corporation Law, this Fourth Amended and
Restated Certificate of Incorporation restates, integrates and further amends
the provisions of the Third Amended and Restated Certificate of Incorporation.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Third Amended and Restated Certificate of
Incorporation of the Corporation, declaring said amendment and restatement to be
advisable and in the best interests of the Corporation and its stockholders, and
authorizing the appropriate officers of the Corporation to solicit the consent
of the stockholders of the issued and outstanding Common Stock, par value $.001
per share, and Preferred Stock, par value $.001 per share, voting as a single
class and as separate classes, all in accordance with the applicable provisions
of Sections 228, 242 and 245 of the General Corporation Law.
THIRD: That the resolution setting forth the proposed
amendment and restatement is as follows:
RESOLVED, that the Third Amended and Restated of Certificate
of Incorporation of the Corporation be amended and restated in
its entirety as follows:
<PAGE>
ARTICLE I
NAME
The name of the Corporation is LivePerson, Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, State of Delaware 19801. The name of its
registered agent at such address is Corporation Trust Company.
ARTICLE III
PURPOSE / TERM
The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law. The Corporation is to have perpetual existence.
ARTICLE IV
CAPITAL STOCK
A. CLASSES OF STOCK. The total number of shares of stock which
the Corporation shall have authority to issue is one hundred and five million
(105,000,000), consisting of five million (5,000,000) shares of Preferred Stock,
par value $.001 per share (the "Preferred Stock"), and one hundred million
(100,000,000) shares of Common Stock, par value $.001 per share (the "Common
Stock"). The consideration for the issuance of the shares shall be paid to or
received by the Corporation in full before their issuance and shall not be less
than the par value per share. The number of authorized shares of Common 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 stock
of the Corporation entitled to vote, irrespective of the provisions of Section
242(b)(2) of the General Corporation Law.
B. COMMON STOCK.
(1) GENERAL. All shares of Common Stock will be identical and
will entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of any then outstanding Preferred Stock.
2
<PAGE>
(2) DIVIDENDS. Dividends may be declared and paid on the
Common Stock from funds lawfully available therefor as and when determined by
the Board of Directors and subject to any preferential dividend rights of any
then outstanding Preferred Stock.
(3) DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of
any dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
(4) VOTING RIGHTS. Except as otherwise required by law or this
Fourth Amended and Restated Certificate of Incorporation, each holder of Common
Stock shall have one vote in respect of each share of stock held of record by
such holder on the books of the Corporation for the election of directors and on
all matters submitted to a vote of stockholders of the Corporation. Except as
otherwise required by law or provided herein, holders of Preferred Stock shall
vote together with holders of Common Stock as a single class, subject to any
special or preferential voting rights of any then outstanding Preferred Stock.
There shall be no cumulative voting.
(5) REDEMPTION. The Common Stock is not redeemable.
C. PREFERRED STOCK. The Board of Directors is authorized,
subject to limitations prescribed by law, by the rules of a national securities
exchange or automated quotation system of a registered national securities
association, if applicable, and by the provisions of this ARTICLE IV, to provide
for the issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish, from time-to-time, the number of shares to be included in each such
series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the following
("Preferred Designations"):
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(3) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such voting
rights;
(4) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
3
<PAGE>
(5) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(7) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights or priority, if any, of payment of shares
of that series; and
(8) Any other relative rights, preferences and limitations of
that series.
Dividends on outstanding shares of Preferred Stock shall be
paid or declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the Common Stock with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets available for distribution to
holders of shares of Preferred Stock of all series shall be insufficient to pay
such holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
Except as may be provided by the Board of Directors in a
Preferred Designation or as required by law, shares of any series of Preferred
Stock that have been redeemed or purchased by the Corporation, or, if
convertible or exchangeable, have been converted into or exchanged for shares of
stock of any other class or classes shall have the status of authorized and
unissued shares of Preferred Stock, and may be reissued as a part of the series
of which they were originally a part or may be reclassified and reissued as part
of a new series of Preferred Stock.
D. PREEMPTIVE RIGHTS. No holder of any of the shares of any
class or series of stock or of options, warrants or other rights to purchase
shares of any class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any unissued stock
of any class or series, or any unissued bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock of any
class or series or carrying any right to purchase stock of any class or series;
but any such unissued stock, bonds, certificates or indebtedness, debentures or
other securities convertible into or exchangeable for stock or carrying any
right to purchase stock may be issued pursuant to resolution of the Board of
Directors of the Corporation to such persons, firms, corporations or
associations, whether or not holders thereof, and upon such terms as may be
deemed advisable by the Board of Directors in the exercise of its sole
discretion.
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ARTICLE V
DIRECTORS
A. NUMBER. The number of directors of the Corporation shall be
such number, not less than three (3) nor more than fifteen (15) (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation, voting separately as a class), as shall be set forth from time to
time in the Corporation's Amended and Restated Bylaws (the "Bylaws"); PROVIDED
THAT no action shall be taken to decrease or increase the authorized number of
directors unless at least 66.67% of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the stockholders
called for that purpose approve such decrease or increase. Vacancies in the
Board of Directors of the Corporation, however caused, and newly created
directorships shall be filled by a vote of a majority of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
the class to which the director has been chosen expires and when the director's
successor is elected and qualified.
B. CLASSIFIED BOARD OF DIRECTORS. The Board of Directors shall
be and is divided into three classes: Class I, Class II and Class III, each of
which shall be as nearly equal in number as possible. Each director shall serve
for a term ending on the date of the third annual meeting of stockholders
following the annual meeting at which the director was elected; PROVIDED,
HOWEVER, that each initial director in Class I shall hold office until the
annual meeting of stockholders in 2001; each initial director in Class II shall
hold office until the annual meeting of stockholders in 2002; and each initial
director in Class III shall hold office until the annual meeting of stockholders
in 2003. Notwithstanding the foregoing provisions of this ARTICLE V, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal.
Subject to the provisions of this ARTICLE V, should the number
of directors not be equally divisible by three, the excess director or directors
shall be assigned to Classes I or II as follows: (i) if there shall be an excess
of one directorship over a number equally divisible by three, such extra
directorship shall be classified in Class I; and (ii) if there shall be an
excess of two directorships over a number divisible by three, one shall be
classified in Class I and the other in Class II.
In the event of any increase or decrease in the authorized
number of directors, (1) each director then serving as such shall nevertheless
continue as a director of the class of which he is a member until the expiration
of his current term, or his earlier resignation, removal from office or death,
and (2) the newly created or eliminated directorship resulting from such
increase or decrease shall be appointed by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible.
C. REMOVAL OF DIRECTORS. Notwithstanding any other provisions
of this Fourth Amended and Restated Certificate of Incorporation or the Bylaws,
any director or the entire Board of Directors of the Corporation may be removed,
at any time, but only for cause and by the affirmative vote of the holders of
not less than 66.67% of the outstanding shares of capital
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stock of the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the stockholders
called for that purpose. Notwithstanding the foregoing, whenever the holders of
any one or more series of preferred stock of the Corporation shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the preceding provisions of this ARTICLE V shall not apply with
respect to the director or directors elected by such holders of preferred stock.
D. DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK. During any
period when the holders of any series of Preferred Stock have the right to elect
additional directors as provided for or fixed pursuant to the provisions of
Article IV, then upon commencement and for the duration of the period during
which such right continues (1) the then otherwise total authorized number of
directors of the Corporation shall automatically be increased by such specified
number of directors, and the holders of such Preferred Stock shall be entitled
to elect the additional directors so provided for or fixed pursuant to said
provisions, and (2) each such additional director shall serve until such
director's successor shall have been duly elected and qualified, or until such
director's right to hold such office terminates pursuant to said provisions,
whichever occurs earlier, subject to death, disqualification, resignation or
removal. Except as otherwise provided by the Board of Directors in the
resolution or resolutions establishing such series, whenever the holders of any
series of Preferred Stock having such right to elect additional directors are
divested of such right pursuant to the provisions of such Preferred Stock, the
terms of office of all such additional directors elected by the holders of such
Preferred Stock, or elected to fill any vacancies resulting from death,
resignation, disqualification or removal of such additional directors, shall
forthwith terminate and the total and authorized number of directors of the
Corporation shall be reduced accordingly. Notwithstanding the foregoing,
whenever, pursuant to the provisions of Article IV, the holders of any one or
more series of Preferred Stock shall have the right, voting separately as a
series or together with holders of other such series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of the Corporation's Amended and Restated Certificate of Incorporation (as
then in effect) and the Certificate of Designation applicable thereto.
ARTICLE VI
STOCKHOLDER MEETINGS
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws. The stockholders of the Corporation may
not take any action by written consent in lieu of a meeting.
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ARTICLE VII
LIMITATION OF DIRECTORS' LIABILITY
Except to the extent that the General Corporation Law
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. If the General Corporation Law is amended after approval by the
stockholders of this ARTICLE VII to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended. No amendment to
or repeal of this provision shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
ARTICLE VIII
INDEMNIFICATION
The Corporation may, to the fullest extent permitted by
Section 145 of the General Corporation Law, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by or in the right of the
Corporation or otherwise, by reason of the fact that he is or was, or has agreed
to become, a director or officer of the Corporation, or is or was serving, or
has agreed to serve, at the request of the Corporation, as a director, officer
or trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise (including any employee benefit plan)
(all such persons being referred to hereafter as an "Indemnitee"), or by reason
of any action alleged to have been taken or omitted in such capacity, against
all expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.
Indemnification may include payment by the Corporation of
expenses in defending an action or proceeding in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by the
Indemnitee to repay such payment if it is ultimately determined that such person
is not entitled to indemnification under this ARTICLE VIII, which undertaking
may be accepted without reference to the financial ability of such person to
make such repayment.
The Corporation shall not indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person unless the initiation thereof was approved by the Board of Directors
of the Corporation.
The indemnification rights provided in this ARTICLE VIII (i)
shall not be deemed exclusive of any other rights to which Indemnitees may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and (ii) shall inure to
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the benefit of the heirs, executors and administrators of such persons. The
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this ARTICLE VIII.
Any repeal or modification of the foregoing provisions of this
Article VIII shall not adversely affect any right or protection hereunder of any
Indemnitee in respect of any act or omission occurring prior to the time of such
repeal or modification.
The Corporation may purchase and maintain insurance on behalf
of any person who 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, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of the General
Corporation Law.
In the event the General Corporation Law is amended after the
date hereof to authorize corporate action further limiting or eliminating the
personal liability of directors or officers, then the personal liability of a
director or officer of the Corporation shall be further limited or eliminated to
the fullest extent permitted by the General Corporation Law, as so amended.
ARTICLE IX
AMENDMENT OF BYLAWS
In furtherance of and not in limitation of powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
adopt, repeal, alter, amend and rescind the Bylaws by the affirmative vote of at
least 66.67% of the Board of Directors.
ARTICLE XI
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Fourth Amended and Restated Certificate
of Incorporation, in the manner now or hereafter prescribed by statute and this
Fourth Amended and Restated Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
Notwithstanding the foregoing, the provisions set forth in ARTICLES V, VI, VII,
VIII, IX and this ARTICLE X may not be repealed, altered, amended or rescinded
in any respect unless the same is approved by the affirmative vote of the
holders of not less than 66.67% of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as a single class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting).
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* * *
FOURTH: That said amendments were duly adopted in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law.
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IN WITNESS WHEREOF, this Fourth Amended and Restated
Certificate of Incorporation has been signed by the Chief Executive Officer and
the Secretary of the Corporation this __ day of March, 2000.
/s/ ROBERT P. LOCASCIO
-------------------------------------------
Robert P. LoCascio, Chief Executive Officer
/s/ TIMOTHY E. BIXBY
-------------------------------------------
Timothy E. Bixby, Secretary
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Exhibit 3.4
AMENDED AND RESTATED BY-LAWS OF LIVEPERSON, INC.
ARTICLE I
CERTIFICATE OF INCORPORATION AND BYLAWS
Section 1. These Amended and Restated Bylaws (the "Bylaws") are subject
to the Fourth Amended and Restated Certificate of Incorporation (as it may be
amended and/or restated from time to time, the "Certificate of Incorporation")
of LivePerson, Inc., a Delaware corporation (the "Corporation"). In these
Bylaws, references to law, statutes, the Certificate of Incorporation and Bylaws
mean the law, applicable statutes, the Certificate of Incorporation and these
Bylaws, each as from time to time in effect.
ARTICLE II
OFFICES
Section 1. The registered office of the Corporation in the State of
Delaware shall be at 1013 Centre Road, in the city of Wilmington, County of New
Castle, State of Delaware. The registered agent at such address shall be
Corporation Service Company.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors of the
Corporation (the "Board of Directors") may from time to time determine or the
business of the Corporation may require.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
Board of Directors, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. 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 the meeting, at which they shall elect, by a plurality
vote, the directors to be elected at such meeting, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
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Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make (or cause to be prepared or made), at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may only be called by the Chairman of the Board or the President
and shall be called by the Chairman of the Board, the President or Secretary, at
the request in writing of two-thirds of the Board of Directors.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
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 as originally
notified. If the adjournment is for more than thirty 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 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such 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.
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Section 10. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall, at every meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, the Chairman of the Board may adjourn a meeting of stockholders
from time to time, without notice other than announcement at the meeting. No
notice of the time and place of an adjourned meeting need be given except as
required by law.
Section 12.
A. ANNUAL MEETINGS OF STOCKHOLDERS
1. Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders may
be made at an annual meeting of stockholders only (a) pursuant to the
Corporation's notice of meeting (or any supplement thereto), (b) by or at the
direction of the Board of Directors or (c) by any stockholder of the Corporation
who was a stockholder of record at the time of giving of notice provided for in
this Section 12, who is entitled to vote at the meeting and who complies with
the notice procedures set forth in this Section 12.
2. For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
A.1. of this Section 12, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
ninetieth (90th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to the first anniversary of the date of the
preceding year's annual meeting; PROVIDED, HOWEVER, that if either the date of
the annual meeting is more than thirty (30) days before or more than seventy
(70) days after such anniversary date, notice by the stockholder to be timely
must be so delivered not earlier than the close of business on the one hundred
twentieth (120th) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such annual
meeting or the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
Corporation. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, the text of
the proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to amend
these Bylaws, the language of the proposed amendment), the reasons for
conducting such business at the meeting and any material interest in
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such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, (ii) the class and number of
shares of capital stock of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner, (iii) a representation
that the stockholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to propose such business or nomination, and (iv) a representation
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends (y) to deliver a proxy statement and/or form of proxy to
holders of at least the percentage of the Corporation's outstanding capital
stock required to approve or adopt the proposal or elect the nominee and/or (z)
otherwise to solicit proxies from stockholders in support of such proposal or
nomination. The Corporation may require any proposed nominee to furnish such
other information as it may reasonably require to determine the eligibility of
such proposed nominee to serve as a director of the Corporation.
3. Notwithstanding anything in the second sentence of
paragraph A.2. of this Section 12 to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 12 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive office of the Corporation
not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time notice provided for in
this Section 12 is delivered to the Secretary of the Corporation, who is
entitled to vote at the meeting and upon such election, who complies with the
notice procedures set forth in this Section 12. If the Corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder entitled to vote in
such election of directors may nominate a person or persons (as the case may
be), for election to such position(s) as specified in the Corporation's notice
of meeting, if the stockholder's notice required by paragraph A.2. of this
Section 12 shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the one
hundred twentieth (120) day prior to such special meeting and not later than the
later of (y) the close of business of the ninetieth (90th) day prior to such
special meeting or (z) the close of business of the tenth (10th) day following
the day on which public announcement is first made of the date of
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such special meeting and of the nominees proposed by the Board of Directors to
be elected at such meeting. In no event shall the public announcement of an
adjournment or postponement of a special meeting commence a new time period (or
extend any time period) for the giving of a stockholder's notice as described
above.
C. GENERAL.
1. Only such persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to be elected at an
annual or special meeting of stockholders of the Corporation to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 12. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, the Chairman of the Board shall
have the power and duty (a) to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Section 12 (including
whether the stockholder or beneficial owner, if any, on whose behalf the
nomination or proposal is made solicited (or is part of a group which solicited)
or did not so solicit, as the case may be, proxies in support of such
stockholder's nominee or proposal in compliance with such stockholder's
representation as required by clause (c)(iv) of paragraph A.2. of this Section
12) and (b) if any proposed nomination or business was not made or proposed in
compliance with this Section 12, to declare that such nomination shall be
disregarded or that such proposed business shall not be transacted.
2. For purposes of this Section 12, the term "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 and 15(d) of the Exchange Act.
3. Notwithstanding the foregoing provisions of this Section
12, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section 12 shall be deemed to affect
any rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors pursuant
to any applicable provisions of the Certificate of Incorporation.
Notwithstanding any other provision of law, the Certificate of
Incorporation or these Bylaws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least 66.67% of the votes which all the stockholders would be entitled to cast
at any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Section 12.
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ARTICLE IV
DIRECTORS
GENERAL
Section 1. The number of directors which shall constitute the
whole Board shall be determined by resolution of the Board of Directors or by
the stockholders at the annual meeting of the stockholders, except as provided
in Section 2 of this Article. The Board shall be divided into three classes as
nearly equal in number as possible. The members of each class shall be elected
for a term of three years and until their successors are elected and qualified.
The Board of Directors shall be classified in accordance with the provisions of
the Corporation's Certificate of Incorporation. Directors need not be
stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by the
affirmative vote of not less than 66.67% of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election at which such director's class
is to be elected and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Delaware Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
(10%) of the total number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 3. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time be
determined by the Board of Directors. Members of the Board of Directors may
participate in regular or special meetings by means of conference telephone or
similar communications equipment by which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person.
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Section 6. Special meetings of the Board may be called by the
Corporation's Chairman of the Board, Chief Executive Officer or President on not
less than two (2) days' notice to each director by mail or not less than twenty
four (24) hours' notice to each director, either personally or by facsimile;
special meetings shall be called by the Corporation's Chairman of the Board,
Chief Executive Officer, President or Secretary in like manner and on like
notice on the written request of two directors, unless the Board consists of
only one director, in which case special meetings shall be called by the
Corporation's Chairman of the Board, Chief Executive Officer, President or
Secretary in like manner and on like notice on the written request of the sole
director.
Section 7. At all meetings of the Board a majority of the
directors fixed by Section 1 of this Article shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 8. 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, or 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 committee.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one 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 a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, 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
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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;
but no such committee shall have the power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these Bylaws; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors and
may, but is not required to, adopt a written charter setting forth the matters
to be determined by such committee, the scope of the responsibilities of such
committee, and the means by which such committee carries out such
responsibilities.
Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 13. Any director or the entire Board of Directors may
be removed only in accordance with the provisions of the Certificate of
Incorporation.
ARTICLE V
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the Certificate of Incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at the address appearing on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telecopy.
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Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the Certificate of Incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
OFFICERS
Section 1. The officers of the Corporation shall be chosen by
the Board of Directors and shall consist of a Chief Executive Officer, Chief
Financial Officer, President, Treasurer and a Secretary. The Board of Directors
may elect from among its members a Chairman of the Board and a Vice Chairman of
the Board. The Board of Directors may also choose one or more Vice-Presidents,
Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person, unless the Certificate of Incorporation or these Bylaws
otherwise provide.
Section 2. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a Chief Executive Officer, a
President, a Treasurer, and a Secretary and may choose Vice-Presidents.
Section 3. The Board of Directors may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors or a committee thereof.
Section 5. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at
all meetings of the Board of Directors and of the stockholders at which such
individual shall be present. Such individual shall have and may exercise such
powers as are, from time to time, assigned to him by the Board of Directors and
as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the
Vice Chairman of the Board, if any, shall preside at all meetings of the Board
of Directors and of the stockholders at which such individual shall be present.
Such individual shall have and may exercise such powers as are, from time to
time, assigned to him by the Board of Directors and as may be provided by law.
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CHIEF EXECUTIVE OFFICER
Section 8. The Chief Executive Officer shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 9. The Chief Executive Officer shall have the power to
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be otherwise
signed and executed, and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to another officer or agent of the
Corporation.
THE PRESIDENT
Section 10.
The President shall conduct general and active management of
the business of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect, subject, however, to the right
of the Board of Directors to delegate any specific powers, except such as may be
by statute exclusively conferred on the President, to any other officer or
officers of the Corporation. The President shall have the general power and
duties of supervision and management usually vested in the office of President
of a corporation. In the absence of the Chairman and Vice Chairman of the Board
of Directors, the President shall preside at all meetings of the stockholders
and the Board of Directors.
The President shall have the power to execute bonds, mortgages
and other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to another officer or agent of the Corporation.
THE VICE-PRESIDENTS
Section 11. In the absence of the President or in the event of
his inability or refusal to act, the Vice-President, if any, (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice-Presidents shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 12. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. Such individual shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors,
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and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision such individual shall be. Such
individual shall have custody of the corporate seal of the Corporation and he,
or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his signature
or by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature.
Section 13. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 14. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors.
Section 15. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the Corporation.
Section 16. If required by the Board of Directors, such
individual shall give the Corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 17. The Assistant Treasurer, or if there shall be more
than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
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ARTICLE VII
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the Corporation 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, or the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; PROVIDED THAT, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may
be 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 such
individual were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
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Section 4. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. 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 not be 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. 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.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
thinks proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purposes as the Board of Directors shall think conducive to the
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interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall end on
December 31, unless otherwise fixed by resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal
having inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
TRANSACTIONS WITH INTERESTED PARTIES
Section 6. No contract or transaction between the Corporation
and one or more of the directors or officers, or between the Corporation and any
other corporation, partnership, or other entity in which one or more of the
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because such
director or officer is present at or participates in the meeting of the Board of
Directors or a committee of the Board of Directors which authorizes the contract
or transaction or solely because his, her or their votes are counted for such
purpose, if:
A. 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 vote of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
B. 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
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C. 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 of the Board of Directors 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.
ARTICLE IX
AMENDMENTS
These Bylaws may be repealed, altered, amended or rescinded by
the stockholders of the Corporation by vote of not less than 66.67% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting). In addition, in accordance with the
Certificate of Incorporation, the Board of Directors may repeal, alter, amend or
rescind these Bylaws by the affirmative vote of at least 66.67% of the Board of
Directors.
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Exhibit 3.5
CERTIFICATE OF AMENDMENT
TO THE
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
LIVE PERSON, INC.
(Pursuant to Sections 228 and 242 of the
General Corporation Law of the State of Delaware)
Live Person, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"DGCL"),
DOES HEREBY CERTIFY:
FIRST: That the name of the Corporation is Live Person, Inc. The
Corporation was originally incorporated in Delaware under the name Sybarite
Interactive Inc., and the date of filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was November
29, 1995.
SECOND: That this Certificate of Amendment to the Third Amended and
Restated Certificate of Incorporation was duly adopted, in accordance with
Sections 228 and 242 of the DGCL.
THIRD: That Article FIRST of the Third Amended and Restated Certificate
of Incorporation, stating the name of the Corporation, is hereby amended to read
as herein set forth in full:
"FIRST. The name of the Corporation is LivePerson, Inc."
FOURTH: That the first paragraph of Article FOURTH of the Third Amended
and Restated Certificate of Incorporation, stating the total number of shares of
capital stock which the Corporation is authorized to issue, is hereby deleted
and the following text replaced in lieu thereof:
"The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 112,274,852 shares, which shall be
comprised of 100,000,000 shares of Common Stock, par value $.001 per
share (the "Common Stock"), and 12,274,852 shares of Preferred Stock,
par value $.001 per share (the "Preferred Stock"), of which (i)
2,541,667 shares are designated as Series A Convertible Preferred Stock
(the "Series A Preferred Stock"), (ii) 1,142,857 shares are designated
as Series B Convertible Preferred Stock (the "Series B Preferred
Stock"), (iii) 5,132,433 shares are designated as Series C Convertible
Preferred Stock (the "Series C Preferred Stock"), (iv) 3,157,895 shares
are designated as Series D Convertible Preferred Stock (the "Series D
Preferred Stock" and together with the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock, the "Series
Preferred Stock"), and (v) 300,000 shares shall be undesignated."
<PAGE>
FIFTH: That the foregoing amendments have been duly adopted in
accordance with the provisions of Section 242 of the DGCL.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Amendment to the Third Amended
and Restated Certificate of Incorporation of Live Person, Inc. has been signed
by a duly authorized officer of the Corporation on this 8th day of March,
2000.
----------------------------------------------
Name: Robert P. LoCascio
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT 4.2
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is being
entered into and is effective as of this 27th day of January, 2000, by and among
LIVE PERSON, INC., Delaware corporation (the "Company"), the several persons and
entities named on the signature pages hereto as INVESTORS (the "Investors") and
ROBERT LOCASCIO (the "Founder").
WHEREAS, the Founder is the holder of 4,557,142 shares of Common Stock,
$0.001 par value ("Common Stock"), of the Company; and
WHEREAS, certain of the Investors (the "Series A Investors") are the
holders of an aggregate of 2,541,667 shares (the "Series A Shares") of Series A
Convertible Preferred Stock, $0.001 par value ("Series A Preferred Stock"), of
the Company, and warrants to purchase up to 312,500 shares of Common Stock (the
"January 1999 Warrant Shares"); and
WHEREAS, certain of the Investors (the "Series B Investors") are the
holders of an aggregate of 1,142,857 shares (the "Series B Shares") of Series B
Convertible Preferred Stock, $0.001 par value (the "Series B Preferred Stock"),
of the Company, and warrants to purchase up to 166,667 shares of Common Stock
(the "May 1999 Warrant Shares" and, together with the January 1999 Warrant
Shares, the "Warrant Shares"); and
WHEREAS, certain of the Investors (the "Series C Investors" and,
together with the Series A Investors and the Series B Investors, the "Existing
Investors"), are the holders of an aggregate of an aggregate of 5,132,433 shares
(the "Series C Shares") of Series C Convertible Preferred Stock, $0.001 par
value (the "Series C Preferred Stock"), of the Company; and
WHEREAS, the Existing Investors and the Founder were granted certain
registration rights under an Amended and Restated Registration Rights Agreement
dated as of July 19, 1999, (the "Existing Agreement"); and
WHEREAS, pursuant to a Series D Convertible Preferred Stock Purchase
Agreement dated as of the date hereof (the "Series D Purchase Agreement"), among
the Company and the persons named therein as Purchasers (the "New Investors"
and, together with the Existing Investors, the "Investors"), the Company will
issue and sell up to an aggregate of 3,157,895 shares (the "Series D Shares"
and, collectively with the Series A Shares, the Series B Shares and the Series C
Shares, the "Preferred Shares") of Series D Convertible Preferred Stock, $0.001
par value (the "Series D Preferred Stock" and, collectively with Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the
"Preferred Stock"), of the Company; and
WHEREAS, in order to induce the New Investors to consummate the
transactions contemplated by the Purchase Agreement, and in order to merge and
consolidate herein the provisions of the Existing Agreement, the parties hereto
desire to amend and restate the Existing Agreement in its entirety and to
provide for such additional terms hereinafter set forth;
<PAGE>
NOW, THEREFORE, in consideration of the mutual premises and of the
covenants and obligations hereinafter set forth, and intending to be legally
bound hereby, the parties hereto agree that the Existing Agreement is hereby
amended and restated in its entirety to read as follows:
1. CERTAIN DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the following meanings:
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute then in effect, and a
reference to a particular section thereof shall be deemed to include a
reference to the comparable section, if any, of any such similar
federal statute.
"FOUNDER'S STOCK" shall mean all shares of Common Stock which
are held on the date hereof or may be issued in the future to the
Founder.
"HOLDER" shall mean the Founder, the Investors and any
permitted transferees thereof to whom Registrable Securities are
transferred so long as such person holds such Registrable Securities.
"INVESTORS' STOCK" shall mean the Preferred Shares, the shares
of Common Stock held by the Investors or issued upon conversion of the
Preferred Shares, the Warrant Shares and any other shares of Common
Stock or other capital stock issued to or acquired by the Investors,
including, without limitation, as a result of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events
relating to any such shares.
"PREFERRED SHARES" shall have the meaning ascribed to such
term in the Recitals to this Agreement.
"QUALIFIED PUBLIC OFFERING" shall mean an initial public
offering of the Company's Common Stock underwritten on a firm
commitment basis by a "nationally recognized" (as determined below)
underwriter pursuant to an effective registration statement under the
Securities Act of 1933, as amended, (i) which raises gross proceeds to
the Company of at least $20,000,000 and (ii) in which such Common Stock
is sold at a price per share (prior to underwriters' commissions and
expenses) of at least $11.10 (as adjusted for stock splits, stock
dividends, combinations and the like). For purposes of this Agreement,
in order to determine if an underwriter is "nationally recognized," the
adequacy of such underwriter's national presence shall be determined by
the Company's Board of Directors.
"REGISTRABLE SECURITIES" shall mean (i) the Founder's Stock
and (ii) the Investors' Stock, provided, however, that the only class
of securities that the Company shall be required to register shall be
Common Stock. As to any particular Registrable Securities, once issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities
shall have become effective under the Securities Act in accordance with
the terms hereof, regardless of whether such securities are actually
sold pursuant to such registration statement (provided that such
registration
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statement remains effective for at least 180 days (which 180-day period
shall be extended on a day-per-day basis to the extent of any
suspension in the Holder's ability to sell pursuant to clause (iv) of
Section 6), (ii) such securities can be sold in the public market
pursuant to Rule 144 of the Securities Act, without regard to volume or
manner-of-sale limitations, (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law
then in force (and the Holder thereof shall have received an opinion of
independent counsel for the Holder reasonably satisfactory to the
Company to the foregoing effects), or (iv) they shall have ceased to be
outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance with this Agreement,
including, without limitation, (i) all SEC and National Association of
Securities Dealers, Inc. or relevant stock exchange registration,
listing and filing fees, (ii) all fees and expenses of complying with
securities or blue sky laws (including reasonable fees and
disbursements of counsel for the Company, the underwriters or the
Holders in connection with blue sky qualifications of the Registrable
Securities), (iii) all printing, messenger, telephone and delivery
expenses and transfer taxes, (iv) the fees and disbursements of counsel
for the Company and of its independent public accountants, including
the expenses of any special audits and/or cold comfort letters required
by or incident to such performance and compliance, (v) the reasonable
fees and disbursements of one law firm retained in connection with each
such registration by the Holders of Registrable Securities being
registered and selected by the Holders of a majority of the Registrable
Securities being sold, and (vi) any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting discounts and commissions of underwriters,
agents or dealers relating to the distribution of the Registrable
Securities, if any.
"SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act or
the Exchange Act or any similar federal statutes then in effect.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall be deemed to include a reference
to the comparable section, if any, of any such similar federal statute.
"STOCKHOLDERS' AGREEMENT" shall mean the Third Amended and
Restated Stockholders' Agreement dated as of January 27, 2000, by and
among the Company and the persons named therein as Stockholders, as the
same may be amended from time to time.
"THEN OUTSTANDING" shall be determined by the number of shares
of Common Stock outstanding which are, and the number of shares of
Common Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
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"WARRANT SHARES" shall have the meaning ascribed to such term
in the Recitals to this Agreement.
2. DEMAND REGISTRATION.
(a) If the Company shall receive, at any time after the earlier of (x)
January 27, 2003 and (y) that date that is 180 days following the effective date
of the first registration statement on Form S-1 filed by the Company with the
SEC registering the initial public offering of the Company's Common Stock (the
"IPO"), a written request that the Company file a registration statement under
the Securities Act from the Holders of not less than thirty-three and one-third
percent (33-1/3%) of the Investors' Stock Then Outstanding, the Company shall
use its best efforts to file, within ninety (90) days of receipt of such written
request and subject to the limitations of Section 2(b), a registration statement
and to have the registration statement declared effective by the SEC as soon as
reasonably practicable after filing. Notwithstanding the foregoing, the Company
shall, within fifteen (15) days of the receipt of such written request, give
written notice of such request to the other Holders, which Holders may elect to
have their Registrable Securities included in the offering. The Company shall
not, pursuant to this Section 2(a), (i) be obligated to effect more than two (2)
registrations for the Investors or (ii) prepare such registration statement
unless the anticipated aggregate net cash proceeds resulting from such
registration to the Initiating Holders (as defined below) are expected to exceed
$1,000,000; provided, however, that a registration shall not be counted as a
registration under this Section 2 (x) until such time as the registration
statement has been declared effective by the SEC, and (y) such registration
statement shall include at least thirty percent (30%) of the Registrable
Securities other than Founder's Stock for which such registration has been
requested, unless the Initiating Holders withdraw their request for such
registration and elect not to pay the Registration Expenses therefor; provided
further that if the Initiating Holders withdraw their request for registration
during a deferral period under Section 2(c) hereof, the Company shall pay the
Registration Expenses therefor, and such expenses shall not be debited against
Registration Expense allotments for ensuing registrations hereunder, and such
withdrawal request shall not be counted towards the number of demand
registration permitted hereunder. The Initiating Holders shall select the
underwriter, subject to the approval of the Company, which approval shall not be
unreasonably withheld or delayed, for an offering made pursuant to this Section
2.
(b) Notwithstanding any other provision of this Section 2, if the
contemplated distribution pursuant to this Section 2 shall be by means of an
underwriting and if the underwriter advises the holders of Investors' Stock
initiating the registration request hereunder ("INITIATING HOLDER(S)") that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holder(s) 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, first, to the Holders of Registrable Securities
other than the Founder's Stock, pro rata based on the number of shares of the
Registrable Securities set forth in the requests made pursuant to Section 2(a)
and then to the extent, if any, advised by the managing underwriter, among all
Holders of Founder's Stock requesting registration hereunder, in proportion (as
nearly as practicable) to the amount of Registrable Securities of the Company
owned by each such other Holder.
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(c) 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 good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 90 days after receipt
of the request of the Initiating Holders. During any such deferral period, the
Initiating Holders may withdraw their request, in which case the Initiating
Holders will not have been deemed to have made a request for registration under
this Section 2.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 2:
(i) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
registration statement filed by the Company (other than a registration statement
on Form S-4, Form S-8 or a "universal shelf registration" on Form S-3 or any
successor form); provided that the Company is actively employing in good faith
all reasonable efforts to cause such registration statement to become effective,
and further provided that such right to defer such filing shall not be exercised
by the Company more than once in any twelve month period; or
(ii) If the Initiating Holder(s) is able to dispose of all of
its remaining shares of Registrable Securities during a three-month period under
Rule 144 promulgated under the Securities Act.
3. FORM S-3 REGISTRATION.
(a) If at any time (1) the Company shall receive from any Holder or
Holders of Investors' Stock a written request or requests that the Company
effect a registration of all or any portion of the Investors' Stock on Form S-3
or any successor thereto, (2) the reasonably anticipated proceeds therefrom
shall be at least $1,500,000 and (3) the Company is a registrant entitled to use
Form S-3 or any successor thereto to register such shares, the Company will:
(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other holders of any shares
of Registrable Securities; and
(ii) use its reasonable best efforts to effect, as soon as
reasonably practicable, such registration (including, without limitation, the
execution of an undertaking to file post effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other government requirements or regulations) as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities,
of any Holder or Holders of Registrable Securities joining in such request as
are specified in a written request given within thirty (30) days after receipt
of such written notice from the Company.
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(b) Notwithstanding any other provision of this Section 3, if the
contemplated distribution pursuant to this Section 3 shall be by means of an
underwriting and if the underwriter advises the holders of Investors' Stock
initiating the registration request hereunder ("INITIATING HOLDER(S)") that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holder(s) 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, first, to the Holders of Registrable Securities
other than the Founder's Stock, pro rata based on the number of shares of the
Registrable Securities set forth in the requests made pursuant to Section 3(a)
and then to the extent, if any, advised by the managing underwriter, among all
Holders of Founder's Stock requesting registration hereunder, in proportion (as
nearly as practicable) to the amount of Registrable Securities of the Company
owned by each such other Holder.
(c) The Company shall not, pursuant to Section 3(a), be obligated to
(i) effect more than three (3) such registrations for the Investors, or (ii)
effect more than one such registration per 180-day period; provided, however,
that a registration shall not be counted as a registration under this Section 3
unless such registration statement shall include at least thirty percent (30%)
of the Registrable Securities other than Founder's Stock for which such
registration has been requested; and further provided, that if the Initiating
Holders withdraw their request for registration during a deferral period under
Section 3(c) hereof, the Company shall pay the Registration Expenses therefor,
and such expenses shall not be debited against Registration Expense allotments
for ensuing registrations hereunder, and such withdrawal request shall not be
counted towards the number of S-3 registration permitted hereunder.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 3, a
certificate signed by the President of the Company stating that in good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 90 days after receipt
of the request of the Initiating Holders. During any such deferral period, the
Initiating Holders may withdraw their request, in which case the Initiating
Holders will not have been deemed to have made a request for registration under
this Section 3.
4. INCIDENTAL REGISTRATION. If at any time the Company proposes to
register any of its equity securities under the Securities Act (other than (i) a
"universal shelf" registration on Form S-3, or a registration on Form S-4 or
Form S-8, or any similar or successor forms, (ii) a registration of securities
in a Rule 145 transaction, (iii) with respect to an offering that is reasonably
anticipated to be a Qualified Public Offering or (iv) with respect to an
employee benefit plan), whether or not for sale for its own account, it will
promptly give written notice to all Holders of Registrable Securities of its
intention to do so at least 30 days prior to the filing date. If the
registration for which the Company gives notice is a registered public offering
involving an underwriting, the Company shall advise the Holders as part of the
written notice. Upon the written request of any such Holder made within twenty
(20) days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities, which the
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Company has been so requested to register by the Holders thereof, to the extent
required to permit the disposition (in accordance with such intended methods
thereof) of the Registrable Securities so to be registered ("INCIDENTAL
REGISTRATION"); PROVIDED that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register the securities giving rise to the
Holder's Incidental Registration rights hereunder, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and thereupon shall be relieved of its obligation to
register any Registrable Securities in connection with such registration,
provided that the foregoing shall not affect the obligations of the Company
under Sections 2 or 3. The Company shall select the underwriter for an offering
made pursuant to this Section 4. All Holders requesting registration in such
offering shall be eligible to distribute their securities through such
underwriting, subject to compliance with the provisions of Sections 2, 3 and 7
of this Agreement. If a registration pursuant to this Section 4 involves an
underwritten offering and the managing underwriter advises the Company in that,
in its opinion, marketing factors require a limitation on the number of shares
to be underwritten, then (i) the securities of the Company held by holders other
than the Holders shall be excluded from such registration and underwriting to
the extent deemed advisable by the managing underwriter, and (ii) if a further
limitation on the number of shares is required, then the number of shares of
Registrable Securities that may be included in the underwriting shall be subject
to reduction, first, among the holders of Founder's Stock pro rata based on the
relative amount of Registrable Securities for which registration has been
requested by such Holders, and second, among the remaining requesting Holders
pro rata based on the relative amount of Registrable Securities for which
registration has been requested by a Holder, provided, however, that in the case
that such further limitation shall be imposed in connection with an underwritten
offering other than a Qualified IPO, the number of shares of Registrable
Securities other than Founder's Stock for which registration has been requested
by the Holder(s) in such underwriting shall not be reduced to less than thirty
percent (30%) of the aggregate number of shares to be included in such
underwritten offering. Any Holder disapproving of the terms of any such
underwriting may elect to withdraw from it by written notice to the Company and
the underwriter.
5. EXPENSES. The Company has agreed that the Registration Expenses in
each registration under Sections 2, 3 and 4 hereof shall be borne by the
Company; PROVIDED that, subject to Section 2(a), in the event a registration
requested by the Initiating Holders pursuant to Section 2(a) is withdrawn at the
request of such Holders, and if the Initiating Holders elect not to have such
registration counted as a registration under Section 2(a), the Initiating
Holders shall pay the Registration Expenses of such registration pro rata in
accordance with the number of Registrable Securities included in such
registration.
6. REGISTRATION PROCEDURES. Whenever the Company effects or causes the
registration of the Registrable Securities under the Securities Act as provided
in this Agreement, the Company will use its reasonable best efforts to permit
the sale of such Registrable Securities in accordance with the intended method
or methods of distribution thereof, and will:
(a) prepare (and afford counsel for the selling Holders of Registrable
Securities reasonable opportunity to review and comment thereon) and file with
the SEC a registration
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statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective as soon as commercially
reasonable;
(b) amend or supplement (and afford counsel for the selling Holders of
Registrable Securities reasonable opportunity to review and comment thereon)
such registration statement and the prospectus contained therein from time to
time to the extent necessary to comply with the Securities Act (including the
anti-fraud provisions thereof) and applicable state securities as may be
necessary to keep such registration statement effective until the earlier of (x)
the date on which securities registered pursuant to such registration statement
have been disposed of and (y) the 180th day following the effectiveness of such
registration statement (which 180-day period shall be extended on a day-per-day
basis to the extent of any suspension in the Holder's ability to sell pursuant
to clause (iv) of Section 6);
(c) furnish to the Holders (i) notices of declaration of effectiveness
issued by the SEC with respect to such filed registration statements, (ii)
notices of suspension or withdrawal by the Company of any registration statement
pursuant to which Registrable Securities are to be registered, and (iii) such
reasonable number of the copies of registration statements and the prospectus
included therein or any amendments or supplements thereto, and other documents
incident thereto as may be reasonably requested from time to time;
(d) use its best efforts to register or qualify (and keep effective
such registration or qualification) such Registrable Securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions within the United States as may be reasonably required to permit
the Holders to sell the Registrable Securities or as the Holders shall
reasonably request, PROVIDED that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this subsection (d), it would
not be obligated to be so qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction; and PROVIDED, FURTHER, that this subsection (d) shall not be
construed to require the Company to register as a broker-dealer in any
jurisdiction any third person to whom or through whom a Holder proposes to sell
Registrable Securities;
(e) as expeditiously as possible, cause all such Registrable Securities
to be listed on each securities exchange or automated quotation system on which
similar securities issued by the Company are then listed;
(f) promptly provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(g) promptly make available for inspection by the Holders, any managing
underwriter participating in any disposition pursuant to such registration
statement, and any attorney or accountant or other agent retained by any such
underwriter or selected by the Holders, all financial and other records,
pertinent corporate documents and properties of the Company and cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
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(h) as expeditiously as possible following the effectiveness of such
registration statement, notify each seller of such Registrable Securities of any
request by the Commission for the amending or supplementing of such registration
statement or prospectus; and
(i) obtain opinions of counsel to the Company addressed to the
underwriters covering the matters customarily covered in underwritten offerings,
and obtain a "cold comfort" letter or letters and updates thereof from the
Company's independent public accountants (to the extent then permitted under
applicable professional guidelines and standards) in customary form and covering
matters of the type customarily covered in underwritten offerings, in each case
as the underwriters or the Holder shall request; and make available for
inspection by the Holders, by any underwriter participating in any disposition
to be effected pursuant to such registration statement and by any attorney,
accountant, or other agent retained by the Holders or any such underwriter, such
pertinent corporate documents and properties of the Company as may be reasonably
requested.
In connection with each registration hereunder, as a condition to the
right to sell under any registration statement (i) the selling Holders of
Registrable Securities will furnish to the Company in writing such information
with respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with federal and applicable
state securities laws; (ii) any such Holder of Registrable Securities will enter
into a written agreement with the underwriters and the Company in such form and
containing such provisions as are customary in the securities business for such
an arrangement between major underwriters and companies of the Company's size
and investment stature, and, if requested by the managing underwriter in
connection with an underwritten public offering, such Holder of Registrable
Securities will use its reasonable best efforts to cause its counsel to give any
opinion customarily given, in connection with secondary distributions under
similar circumstances PROVIDED that such underwriting agreement shall not
provide for indemnification or contribution obligations on the part of the
Holders materially greater than the obligations of the Holders set forth in
Section 7; (iii) during such time as any such Holder of Registrable Securities
may be engaged in a distribution of such stock, such Holder of Registrable
Securities will comply with all applicable laws and, to the extent required by
such laws, will, among other things (A) not engage in any stabilization activity
in connection with the securities of the Company in contravention of such rules,
(B) distribute the Registrable Securities owned by such Holder solely in the
manner described in applicable registration statement or as otherwise permitted
by law, (C) cause to be furnished to each agent or broker-dealer to or through
whom the Registrable Securities owned by such Holder may be offered, or to the
offeree if an offer is made directly by such holder, such copies of the
applicable prospectus (as amended and supplemented to such date) and the
documents incorporated by reference therein as may be required by such agent,
broker-dealer or offeree, provided that the Company shall have provided such
holder of Registrable Securities with an adequate number of copies thereof and
(D) not bid for or purchase any securities of the Company or attempt to induce
any person to purchase any securities of the Company; and (iv) on notice from
the Company of the happening of any event that requires the suspension by
Holders of Registrable Securities of the distribution of any of Registrable
Securities, then such Holder will cease offering or distributing the Registrable
Securities until the Company notifies such Holder that the offering and
distribution of the Registrable Securities may recommence. The Company shall not
exercise its rights under Section 6(i)(iv) for a period
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in excess of 120 days in any twelve-month period.
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of
any securities of the Company under the Securities Act pursuant to Sections 2, 3
or 4 herein, the Company will, and it hereby does, indemnify and hold harmless,
to the fullest extent permitted by law, the sellers of any Registrable
Securities covered by such registration statement, its directors and officers or
general and limited partners (and directors and officers thereof), each person
who participates as an underwriter in the offering or sale of such securities
and each other person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, against any and all losses, claims,
damages or liabilities, joint or several, and expenses (including legal,
accounting and other expenses incurred in connection with investigation,
preparation or defense of any of the foregoing, and including any amounts paid
in any settlement effected with the Company's consent) to which such seller, any
such director or officer or general or limited partner or any such underwriter
or controlling person may become subject under the Securities Act, the Exchange
Act, common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or supplemental
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director, officer, general
or limited partner, underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
preparing for and defending any such loss, claim, liability, damages, action or
proceeding from time to time as such expenses are incurred; PROVIDED that the
Company shall not be liable in any such case to any such person, to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or supplemental prospectus in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such seller or underwriter specifically stating that it is for use
in the preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, general or limited partner, underwriter or controlling person
and shall survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY SELLERS OF REGISTRABLE SECURITIES. Each seller
of Registrable Securities will, severally and not jointly, if Registrable
Securities held by such seller are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless (in the same manner and to the same extent as set forth in subsection
(a) of this Section 7) the Company, its directors and officers signing the
registration statement and each person who participates as an underwriter in the
offering or sale of such securities and their respective controlling persons
with respect to any untrue statement or alleged untrue statement of a material
fact in or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading from
such registration statement, any preliminary, final or supplemental prospectus
contained therein, or any amendment or supplement, if such statement or alleged
statement or omission or alleged
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omission was made in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller
specifically stating that it is for use in the final or supplemental prospectus
or amendment or supplement; PROVIDED in no event shall the liability of any
seller of Registrable Securities be greater in amount than the amount of net
proceeds received by such seller upon such sale. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any other prospective sellers or any of their respective
directors, officers or controlling Persons and shall survive the transfer of
such securities by such sellers.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; PROVIDED that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment (which is based on the written opinion of its counsel) a conflict of
interest between such indemnified and indemnifying parties exists in respect of
such claim, the indemnifying party will be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof. If in an indemnified party's reasonable judgment (which is
based on the written opinion of its counsel) a conflict of interest between the
indemnified and indemnifying parties exists in respect of a claim or if the
indemnifying party refuses or fails to participate in and to assume the defense
of any action brought against an indemnified party, the indemnified party may
assume the defense of such claim or action with counsel of its choosing at the
expense of the indemnifying party which shall not relieve the indemnifying party
of its obligations under the preceding paragraphs of this Section 7. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in or pursuant to
this Section 7 is due in accordance with the terms hereof but is held by a court
to be unavailable or unenforceable in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified person, shall contribute to the
amount paid or payable by such indemnified person as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified person on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party on the one hand and of the indemnified person on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement
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of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
person by such person's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
section were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above. In no event shall the liability of any selling seller of Registrable
Securities be greater in amount than the amount of net proceeds received by such
seller of Registrable Securities upon such sale, and the Company shall be liable
and responsible for any amount in excess of such proceeds; PROVIDED, HOWEVER,
that 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. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
section, notify such party or parties from whom contribution may be sought, but
the omission so to notify such party or parties from whom contribution may be
sought shall not relieve such party from any other obligation it or they may
have thereunder or otherwise under this section. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its prior written consent, which consent shall not be unreasonably
withheld.
8. NOTICE OF PROPOSED TRANSFER; LEGEND.
(a) Prior to any proposed transfer of any share of Registrable
Securities (other than under the circumstances described in Section 2, 3 or 4
hereof) so long as the certificates representing Registrable Securities are
required to bear the legends set forth in the Stockholders' Agreement, and in
addition to any requirement or restriction on transfer set forth in the
Stockholders' Agreement, the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company (it being agreed that Kalow, Springut & Bressler LLP shall be
satisfactory) to the effect that the proposed transfer of the Registrable
Securities may be effected without registration under the Securities Act and
appropriate action necessary for compliance with the Securities Act and any
applicable state, local or foreign law has been taken, whereupon the holder of
such Registrable Securities may transfer such Registrable Securities, in
accordance with the terms of its notice. Notwithstanding the foregoing, no such
opinion or other documentation shall be required if such notice shall cover (i)
a transfer of Registrable Securities by a partnership or corporation to an
affiliate of such partnership or corporation, or (ii) a distribution by a
partnership to its partners or by a limited liability company to its members or
by any other legal entity to its beneficial owners. The term "affiliate" of a
person or entity or "affiliated with" a specified person or entity means any
person or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
person or entity specified. The term "control" means the possession, directly or
indirectly, alone or in concert with others, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
ownership of securities, by contract, or otherwise.
12
<PAGE>
(b) Each certificate of Registrable Securities, as the case may be,
transferred as above shall bear the legends substantially set forth in the
Stockholders' Agreement unless (i) such transfer is to the public in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act.
9. LOCKUP AGREEMENT. Each Holder, during the period of duration (up to,
but not exceeding, one hundred eighty (180) days) specified by the Company and
the managing underwriter of an underwritten public offering of Common Stock or
other securities of the Company (the "Lockup Period"), following the effective
date of a registration statement of the Company filed under the Securities Act,
will not, to the extent requested by the Company and such underwriter, without
the consent of the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in such
registration. The Holders' agreement under the preceding sentence, however,
shall be subject to the following conditions:
(a) that all directors, officers and executive-level employees of the
Company and all holders of more than three percent (3%) of the then outstanding
capital stock of the Company shall have agreed to comparable restrictions,
(b) if the managing underwriter releases from the lockup restrictions
described in this Section 9, any stockholder of the Company (except any employee
or consultant of the Company that is not an officer, director or executive)
prior to the expiration of the Lockup Period with respect to all or a percentage
of the Common Stock held by such stockholder, all other stockholders of the
Company subject to the lockup shall be released from such lockup restrictions to
the same extent and on the same terms and conditions, and
(c) the registrations with respect to which such restrictions shall be
applicable shall be (A) the IPO, and (B) any other underwritten public offering
in which such Holder shall have agreed to sell Registrable Securities.
Notwithstanding anything herein to the contrary, this agreement shall not
restrict Goldman, Sachs & Co. or Allen & Company Incorporated and their
respective affiliates from engaging in any brokerage, investment advisory,
financial advisory, anti-raid advisory, merger advisory, financing, asset
management, trading, market making, arbitrage and other similar activities
conducted in the ordinary course of its or its affiliates' business, so long as
such activities are not conducted with respect to any Registrable Securities.
10. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed delivered (i) two
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid or (ii) one business day after being sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery, in each case to the intended recipient at the address specified below
its respective signature hereto, if to an Investor, at his or its address
specified on Schedule I hereto.
13
<PAGE>
Any party may give any written notice, request, consent or other
written communication under this Agreement using any other means (including,
without limitation, personal delivery, messenger service, telecopy, first class
mail or electronic mail), but no such notice, request, consent or other
communication shall be deemed to have been duly given unless and until it is
actually received by the party for whom it is intended. Any party may change the
address to which notices, requests, consents or other communications hereunder
are to be delivered by giving the other parties notice in the manner set forth
in this Section.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings between them or any of them
with respect to such subject matter (including, without limitation, the Existing
Agreement). The parties hereto, being all the parties to the Existing Agreement,
hereby acknowledge and agree that this Agreement constitutes a valid amendment
and restatement of the Existing Agreement, in accordance with Section 12 hereof.
12. AMENDMENTS, WAIVERS, ETC. Neither this Agreement nor any provision
hereof may be waived, modified, amended or terminated, nor may the Company grant
registration rights that conflict in any way with the registration rights
granted hereunder, except by a written agreement signed by each of the parties
hereto, PROVIDED, HOWEVER, that Investors holding at least sixty percent (60%)
of the Investors' Stock may effect any such waiver, modification, amendment or
termination on behalf of all holders of Investors' Stock, which shall then be
binding on all such holders of Investors' Stock, and holders of at least sixty
percent (60%) of the Founder's Stock may effect any such waiver, modification,
amendment or termination on behalf of all holders of Founder's Stock, which
shall then be binding on all such holders of Founder's Stock; PROVIDED FURTHER,
that without the consent of the Company and holders of ninety percent (90%) of
the Investors' Stock Then Outstanding, no amendment or addition to this
Agreement may be made which alters the stated requisite percentage of holdings
of Investors' Stock Then Outstanding to request a registration under Section
2(a) above or alters the provisions of this Section 12 affecting the holders of
Investors' Stock. Notwithstanding the foregoing, if any waiver, modification,
amendment or termination shall directly apply to any holder or holders of
Investors' Stock or Founder's Stock, as the case may be, hereunder in a
different fashion than all other holders of Investors' Stock or Founder's Stock,
as the case may be, the written agreement of each holder of Registrable
Securities Stock so adversely affected shall additionally be required.
13. RULE 144 REPORTING.
(a) The Company shall make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after the 90th day after its initial registration statement
is declared effective by the Commission.
(b) The Company shall use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents as the Commission
may prescribe under Section 13(a) or 15(d) of the Exchange Act at any time after
the Company has become subject to such reporting requirements of the Exchange
Act.
(c) The Company shall furnish to any holder of Registrable Securities
upon request (i) a written statement by the Company as to its compliance with
the reporting requirements of
14
<PAGE>
Rule 144 and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Company, and (iii) such other reports
and documents of the Company as such holder may reasonably request to avail
itself of any similar rule or regulation of the Commission allowing it to sell
any such securities without registration.
14. GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by, and construed and enforced in accordance with the laws of the State
of New York without giving effect to the conflicts of laws principles thereof
and, except as otherwise provided herein, shall be binding upon, and shall inure
to the benefit of, the heirs, personal representatives, executors,
administrators, successors and assigns of the parties.
15. SEVERABILITY. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
16. PRONOUNS. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
17. CAPTIONS. Captions are for convenience only and are not deemed to
be part of this Agreement.
19. COUNTERPARTS; FACSIMILE. This 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. This Agreement may be
executed by facsimile signature.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
COMPANY:
LIVE PERSON, INC.
By: _____________________________
Name:
Title:
FOUNDER:
____________________________________
Robert LoCascio
INVESTORS:
DAWNTREADER FUND I LP
By: DT Advisors LLC, General Partner
By: _____________________________
Name: Edward Sim
Title: Senior Vice President
FG-LP
By: _____________________________
Name:
Title:
FG-LPC
By: _____________________________
Name:
Title:
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
STERLING PAYOT CAPITAL, LP
By: _____________________________
Name:
Title:
SAVP SIDECAR I LLC
By: _____________________________
Name:
Title:
ALLEN & COMPANY INCORPORATED
By: _____________________________
Name:
Title:
SCULLEY BROTHERS LLC
By: _____________________________
Name:
Title:
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
SILICON ALLEY VENTURE PARTNERS, LLC
By: _____________________________
Name:
Title:
____________________________________
HENRY R. KRAVIS
____________________________________
MARC LIPSCHULTZ
____________________________________
ESTHER DYSON
____________________________________
ALAN BRAVERMAN
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
HIGHLAND CAPITAL PARTNERS IV
LIMITED PARTNERSHIP
By: Highland Management Partners IV
Limited Partnership
Its General Partner
By: ______________________________________
General Partner
HIGHLAND ENTREPRENEURS' FUND IV
LIMITED PARTNERSHIP
By: Highland Entrepreneurs' Fund IV LLC,
Its General Partner
By: ______________________________________
Member
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
HAMBRECHT & QUIST CALIFORNIA
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
HAMBRECHT & QUIST EMPLOYEE VENTURE FUND,
L.P. II
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: General Partner
By: ____________________________________
Title: ____________________________________
ACCESS TECHNOLOGY PARTNERS, L.P.
By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
Its: General Partner
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: Managing Member
By: ____________________________________
Title: ____________________________________
ACCESS TECHNOLOGY PARTNERS BROKERS FUND, L.P.
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: General Partner
By: ____________________________________
Title: ____________________________________
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
THE GOLDMAN SACHS GROUP, INC.
By: ____________________________________
Name:
Title:
STONE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp.,
its general partner
By: ____________________________________
Name:
Title:
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
SILICON ALLEY VENTURES, L.P.
By:_________________________
General Partner
SAVP SIDECAR I-B, LLC
By:_________________________
Member
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
DELL USA, L.P.
By: Del. Gen. P. Corp., its General Partner
By: ___________________________________
Name:
Title:
AUSTIN I, LLC
By: ___________________________________
Name:
Title:
VAN EYCK PARTNERS, LLC
By: ___________________________________
Name:
Title:
STRIPED MARLIN INVESTMENTS, LLC
By: ___________________________________
Name:
Title:
MSD EC I, LLC
By: ___________________________________
Name:
Title:
NBC INTERACTIVE MEDIA, INC.
By: ___________________________________
Name:
Title:
SIGNATURE PAGE FOR LIVEPERSON, INC. SECOND AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT
<PAGE>
SCHEDULE I
Dawntreader Fund I LP
118 West 22nd Street
11th Floor
New York, NY 10011
Attn: Ed Sim
Fax no. (212) 337-1257
FG-LP
FG-LPC
20 Dayton Avenue
Greenwich, Connecticut 06830
Attn: Kathleen Shepphird
Fax no. (203) 661-1331
Sterling Payot Capital, LP
222 Sutter Street, 8th Floor
San Francisco, CA 94108
Attn: Josh Huffard
Fax no. (415) 274-4545
SAVP Sidecar I LLC
SAVP Sidecar I-B LLC
Silicon Alley Venture Partners, LLC
Silicon Alley Ventures, L.P.
c/o the Scion Group
1010 Northern Blvd., Suite 310
Great Neck, New York 11021
Attn: Steve Brotman
Fax no. (212) 898-9044
Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attn: Mr. Richard Fields
Sculley Brothers LLC
90 Park Avenue
New York, New York 10016
Attn: Mr. Arthur Sculley
<PAGE>
Henry R. Kravis
c/o KKR
9 West 57th Street
New York, New York 10019
Marc Lipschultz
c/o KKR
9 West 57th Street
New York, New York 10019
Esther Dyson
104 Fifth Avenue, 20th Floor
New York, New York 10011
Alan Braverman
16 Cardinal Drive
Princeton Junction, NJ 08550
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership
c/o Highland Capital Partners
Two International Place
Boston, MA 02110
Attention: Wycliffe K. Grousbeck
Fax: 617-531-1550
Hambrecht & Quist California
Access Technology Partners, L.P.
Access Technology Partners Brokers Fund, L.P.
Hambrecht & Quist Employee Venture Fund II, L.P.
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attention: Chris Montano
Fax: (415) 439-3818
The Goldman Sachs Group, L.P.
Stone Street Fund 1999, L.P.
85 Broad Street, 19th Floor
New York, NY 10004
Attention: Eve Gerriets
Fax: 212-357-5505
<PAGE>
Dell USA, L.P.
Paul Legris
Dell Ventures
c/o Dell Computer Corporation
Mail Stop 8066
One Dell Way
Round Rock, TX 78682
With a copy to:
Thomas H. Welch, Jr.
VP and Deputy General Counsel
Legal Dept.
Dell Computer Corporation
Mail Stop 8033
One Dell Way
Round Rock, TX 78682
Austin I, LLC
Van Eyck Partners, LLC
Striped Marlin Investments, LLC
MSD EC I, LLC
c/o MSD Capital, L.P.
780 Third Avenue, 43rd Floor
New York NY 10017
Attn: Marc R. Lisker
NBC Interactive Media, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attn: Martin J. Yudkovitz
<PAGE>
Exhibit 5.1
[Brobeck, Phleger & Harrison LLP letterhead]
March 10, 2000
LivePerson, Inc.
462 Seventh Avenue
10th Floor
New York, NY 10018-7606
Re: LivePerson, Inc. Registration Statement on Form S-1
for 4,600,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to LivePerson, Inc., a Delaware
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 4,600,000 shares of the Company's Common Stock (the
"Shares") pursuant to the Company's Registration Statement on Form S-1 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
This opinion is being furnished in accordance with the
requirements of Item 16(a) of Form S-1 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the issuance and
sale of the Shares. Based on such review, we are of the opinion that the Shares
have been duly authorized, and if, as and when issued in accordance with the
Registration Statement and the related prospectus (as amended and supplemented
through the date of issuance) will be legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus which is part of the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the Act,
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder, or Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
<PAGE>
whether by implication or otherwise, as to any other matters relating to the
Company or the Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Agreement made effective as of January 28, 2000 by and between LivePerson,
Inc. (the "Company"), a Delaware corporation, and Dean Margolis, ("Executive").
Whereas the Company wishes to retain the services of the Executive for the
period and upon the terms of this Agreement and the Executive wishes to serve in
the employ of the Company on a full time basis for the period and upon the terms
and conditions provided in this Agreement,
Now therefore, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
SECTION 1
EMPLOYMENT
The company agrees to employ the Executive and the Executive agrees to be
employed by the Company, for the Period of Employment as provided in Paragraph
III A below and upon the terms and conditions provided in the Agreement.
SECTION II
POSITION AND RESPONSIBILITIES
During the Period of Employment the Executive agrees to serve as Chief Operating
Officer of the Company, reporting to either the Chief Executive Officer,
Chairman or President of the Company.
SECTION III
TERMS AND DUTIES
A. PERIOD OF EMPLOYMENT
The period of the Executive's employment under this Agreement will commence as
of the effective date above and shall continue for 3 years unless terminated as
provided in this agreement.
B. DUTIES
During the Period of Employment and except for illness, incapacity or any
reasonable vacation periods in any calendar year, the Executive shall devote his
business time, attention and skill exclusively to the business and affairs of
the Company except for serving on boards, including charities, so long as
Executive's efforts do not interfere with his employment obligations hereunder.
<PAGE>
SECTION IV
A. COMPENSATION
For all services rendered by the Executive in any capacity during the Period of
Employment, the Executive shall be compensated as follows:
i. BASE SALARY
The Company shall pay the Executive a fixed Base Salary at the rate of not less
than $175,000 per year. Base salary shall be payable according to the customary
payroll practices of the Company.
ii. ANNUAL INCENTIVE AWARDS
The Executive will be eligible for discretionary annual incentive compensation
awards or bonuses. The initial bonus target will be $40,000.
iii. LONG TERM INCENTIVE AWARDS
The Executive will be eligible for discretionary stock option awards as may be
awarded by the Board of Directors. The initial option award will be 340,000
options with a)$5.00 exercise price; b) 10 year term; c) 25% annual vesting
beginning on 7/1/00.
B. ADDITIONAL BENEFITS
In addition, the Executive will be entitled to participate in all employee
benefit plans which any salaried employees are eligible to participate in.
Nothing in this Agreement will preclude the Company from amending or terminating
any of the plans applicable to salaried employees as long as such amendment or
termination is applicable to all salaried employees. The Executive will be
entitled to three weeks vacation annually. All accrued vacation may be carried
over for use in subsequent years provided that no more than two weeks may be
carried over into a subsequent year.
SECTION V
BUSINESS EXPENSES
Upon presentation of appropriate documentation, the Company will reimburse the
Executive for all reasonable travel and other expenses incurred by the Executive
in connection with the performance of his duties and obligations under this
Agreement.
SECTION VI
DISABILITY
In the event of disability of the Executive during the Period of Employment the
Company will continue to pay the Executive according to the compensation
provisions of this Agreement during the period of his disability. However, in
the event the Executive is disabled and unable to perform his duties for a
continuous period of 120 days or more, the Company may terminate the employment
of the Executive 120 days after the commencement of the Executive's disability
and all unvested stock options held by the Executive which would have vested
during the 12 months following such termination shall be deemed vested on the
date of such termination and shall remain exercisable until the applicable
expiration dates contained in the applicable stock option agreements pursuant to
which such options were granted. In addition, normal compensation will cease
except for earned but unpaid Base Salary, accrued unused
<PAGE>
vacation pay and pro-rata bonus. The Company will also continue all of the
benefits described in this Agreement or subsequently provided to the Executive
for 12 months subsequent to such termination.
SECTION VII
DEATH
In the event of death of the Executive during the Period of Employment the
Company's obligation to make payments under this Agreement shall cease as of the
date of death, except for earned but unpaid Base Salary, accrued unused vacation
and pro-rata bonus All unvested options held by the executive which would have
vested during the 12 months following the death shall be deemed vested on the
date of death consistent with the Executive's stock option agreement, a copy of
which is attached hereto. The Company will also continue the benefits described
in this Agreement for 12 months subsequent to such termination.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. Prior to April 27, 2000, in the event the Executive's employment terminates
due to either a Without Cause Termination or a Constructive Discharge, as
defined later in this agreement, the Executive will be entitled to the
immediate vesting of 34,000 options at an exercise price of $5.00.
Additionally, the Executive shall be entitled to all other benefits in this
paragraph A. If, after April 27, 2000, the Executive's employment terminates
due to either a Without Cause Termination or a Constructive Discharge, as
defined later in this Agreement, the Company will continue to pay the
Executive his Base Salary for a period of 4 months following such
Termination or Constructive Discharge. Earned but unpaid Base Salary will be
paid in a lump sum at such time. The benefits described in this Agreement
will continue for 4 months. In the event of any such Without Cause
Termination or Constructive Discharge, any unvested stock options held by
the Executive which would have vested on either 7/1/00 or 7/1/01 shall
continue to vest under their original vesting schedule and shall remain
exercisable for the full ten year term contained in the applicable stock
option agreements pursuant to which such options were granted..
B. If the Executive's employment terminates due to a Termination for Cause, as
defined later in this Agreement, earned but unpaid Base Salary will be paid
on a pro-rated basis for the year in which the termination occurs. Earned
but unpaid incentive awards for any prior years shall be payable in full,
but no other payments will be made or benefits provided by the Company.
C. Upon termination of the Executive's employment other than for reasons due to
death, disability, or pursuant to Paragraph A of this Section and Section
XI, the Period of Employment and the Company's obligation to make payments
under this Agreement will cease as of the date of the termination except as
expressly defined in this Agreement.
D. For this Agreement the following terms have the following meanings:
i. "Termination for Cause" means termination of the Executive's employment
by the Company upon a good faith determination by the Company, by
written notice to the Executive specifying the event relied upon for
such termination, due to the Executive's serious, willful misconduct or
gross negligence with respect to his duties under this Agreement
(including but not limited to conviction for a felony or a common law
fraud)
<PAGE>
which has resulted in economic damage to the Company and which is not
cured (if such is capable of being cured) within 30 days after written
notice thereof to the Executive.
ii. "Without Cause Termination" means termination of the Executive's
employment by the Company other than due to death, disability,
expiration of the Period of Employment or Termination for Cause.
iii. Constructive Discharge" means termination of the Executive's employment
by the Executive due to a failure of the Company to fulfill its
obligations under this agreement in any material respect including any
reduction of the Executive's compensation or other material change by
the Company in the functions, duties or responsibilities of the position
which would materially reduce the responsibility or scope of the
position. The Executive will provide the Company a written notice which
describes the circumstances being relied upon for termination with
respect to the Agreement. The Company will have 30 days to remedy the
situation prior to the Termination for Constructive Discharge
SECTION IX
OTHER DUTIES OF THE EXECUTIVE DURING AND
AFTER THE PERIOD OF EMPLOYMENT
A. The Executive will with reasonable notice during, or after the Period of
Employment furnish information as may be in his possession and cooperate
with the Company as may be reasonably requested in connection with any
claims or legal action in which the Company is or may become a party. In the
event the Executive is requested to participate in assisting the Company
after the termination of the Executive's employment, the Executive shall be
paid a daily rate of $1000 per day plus reasonable expenses and attorney's
fees.
B. The Executive recognizes and acknowledges that all information pertaining to
the software, business, clients, customers or other relationship of the
Company is confidential and is a unique and valuable asset of the Company.
Access to and knowledge of this information are essential to the performance
of the Executive's duties under this Agreement. The Executive will not
during the Period of Employment or after, except to the extent reasonably
necessary in performance of the duties under this Agreement, give to any
person, firm, governmental agency or other entity any information concerning
the affairs, business, clients, or customers of the Company except as
required by law. The Executive will not make use of this type of information
for his own purposes or for the benefit of any person or organization other
than the Company. The Executive will use his best efforts to prevent the
disclosure of this information by others. All records, memoranda, software
or intellectual property whether made by the Executive or otherwise coming
into his possession are confidential and will remain the property of the
Company.
C. During the Period of Employment and for a 12 month period thereafter (the
"Restricted Period") the Executive will not use his status with the Company
to obtain goods or services from another organization on terms that would
not be available to him in the absence of his relationship to the Company.
D. During the Restricted Period, the Executive will not make any statement or
perform any acts intended to or which may have the effect of advancing the
interest of any existing or prospective competitors of the Company or in any
way injuring the interest of the Company.
<PAGE>
E. During the Restricted Period, the Executive, without prior express written
approval by the Chief Executive, will not engage in, or directly or
indirectly own or hold proprietary interest in, manage, operate, or control
or join or participate in the ownership, management, operation or control
of, or furnish any capital to or be connected in any manner with, any party
which directly competes with the business of the Company. For the purposes
of this Agreement, proprietary interest means legal or equitable ownership,
whether through stock holding or otherwise, or an equity interest in a
business, firm or entity or ownership of more than 5% of any class of equity
interest in a publicly-held company and the term "affiliate" shall include
all subsidiaries and licensees of the Company
F. During the Restricted Period, the Executive, without express written
approval from the Chief Executive, will not on behalf of any competitor of
the Company solicit any clients of the Company.
G. During the Restricted Period, the Executive will not solicit or induce any
employee of the Company to terminate their employment with the Company, nor
shall the executive during such period directly or indirectly engage,
employ, compensate or cause or permit any person with which the Executive is
affiliated to engage or employ any employee of the Company.
H. The Company's obligation to make any cash payments after the Period of
Employment shall cease upon any violation of this Section IX. The company
must first provide written notice to the Executive specifying the act which
has violated this Section IX, and if such violation is not cured within 30
days, if capable of being cured, then the Company will inform the Executive
of its termination of its post-employment payments.
I. The period of time during which the provisions of this Section IX shall be
in effect shall be extended by the length of time during which the Executive
is in breach of this section.
J. The Executive agrees that the restrictions contained in this section IX are
an essential element of the compensation the Executive is granted hereunder
and but for the Executive's agreement to comply with such restrictions, the
Company would not have entered into this Agreement.
SECTION X
INDEMNIFICATION, LITIGATION
A. The Company will indemnify the Executive to the fullest extent permitted by
the laws of Delaware in effect at that time, or the certificate of
incorporation and by-laws of the Company, whichever affords the greater
protection to the Executive.
B. In the event of litigation or other proceeding between the Company and the
Executive with respect to the subject matter of this Agreement, the Company
shall reimburse the Executive for all reasonable costs and expenses related
to the litigation or proceeding, including attorney's fees and expenses,
provided that the litigation or proceeding results in either settlement
requiring the Company to make a payment to the Executive or judgement in
favor of the Executive.
SECTION XI
CHANGE IN CONTROL
In the event there is a Change in Control of the ownership of the Company, and
within 24 months of such Change in Control, the Executive's employment
terminates due to either a Without Cause Termination or a Constructive
Discharge, then the Company shall pay to the Executive a lump sum amount equal
to 50% of his Annual Base Salary as in effect at the time of such termination.
In addition, a) any unvested stock
<PAGE>
options granted to the Executive prior to termination will be fully vested upon
termination and shall remain exercisable for the full ten year term contained in
the applicable stock options agreements pursuant to which such stock options
were granted; and b) the benefits described in this Agreement will be continued
for six months from the date of termination.
In the event there is a Change of Control of the ownership of the Company, and
the Executive terminates his employment, then any stock options that would have
vested in the 12 months following such termination shall continue to vest under
the original vesting schedule and and shall remain exercisable for the full ten
year term contained in the applicable stock options agreements pursuant to which
such stock options were granted.
A "Change in Control" shall be deemed to have occurred if (i) a tender offer
shall be made and consummated for 50.1% or more of the outstanding voting
securities of the Company (ii) the Company shall be merged or consolidated with
another company and as a result less than 50% of the outstanding voting
securities of the surviving corporation shall be owned in the aggregate by the
former shareholders of the Company, (iii) the Company shall sell substantially
all of its assets to another company which is not a subsidiary of the Company,
or (iv) a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3)
of the Securities Act of 1934 shall acquire 51% or more of the outstanding
voting securities of the Company.
SECTION XII
WITHHOLDING TAXES
The company may directly or indirectly withhold from any payments under this
Agreement all federal, state, city or other taxes that shall be required
pursuant to any law or governmental regulation.
SECTION XIII
EFFECTIVE PRIOR AGREEMENTS
This Agreement contains the entire understanding between the Company and the
Executive with respect to the subject matter. Where there are different
provision between this Agreement and any stock option agreements made between
the Executive and the Company, the terms of this Agreement shall prevail.
SECTION XIV
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations of the
Company hereunder. Upon such a consolidation, merger or sale of assets the term
"Company" as used will mean the other corporation and this Agreement shall
continue in full force and effect.
SECTION XV
NO OTHER AGREEMENTS
The Executive represents that he is not bound by any other employment agreement
or other covenants that would restrict him from entering into this agreement.
<PAGE>
SECTION XVI
MODIFICATION
This Agreement may not be modified or amended except in writing signed by the
parties. No term or condition of this Agreement will be deemed to have been
waived except in writing by the party charged with the waiver. A waiver shall
operate only as to the specific term or condition waived and will not constitute
a waiver for the future or act on anything other than that which is specifically
waived.
SECTION XVII
GOVERNING LAW
This Agreement has been executed and delivered in the State of New York and its
validity, interpretation, performance and enforcement shall be governed by the
laws of that state.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the date
just above written.
LivePerson, Inc.
- ------------------------------------------------------
Tim Bixby, Chief Financial Officer
- ------------------------------------------------------
Dean Margolis
<PAGE>
Exhibit 10.8
AGREEMENT OF LEASE, made as of the 8th day of March, 2000, between
Landlord and Tenant.
W I T N E S S E T H:
-------------------
The parties hereto, for themselves, their legal representatives,
successors and assigns, hereby covenant as follows.
DEFINITIONS
"AAA" shall have the meaning set forth in Section 37.7 hereof.
"ACM" shall have the meaning set forth in Section 3.6 hereof.
"Affiliate" shall mean a Person which shall (1) Control, (2) be under the
Control of, or (3) be under common Control with, the Person in question.
"Alterations" shall mean alterations, installations, improvements,
additions or other physical changes (other than carpeting, painting, wall
coverings, floor coverings and decorations) in or about the Premises.
"Applicable Area" shall have the meaning set forth in Section 41.1 hereof.
"Applicable Initial Alterations" shall mean the Tenth Floor Space Initial
Alterations or the Seventh Floor Space Initial Alterations.
"Applicable Landlord's Work Date" shall mean the day that is one hundred
twenty (120) days after the Commencement Date or the Seventh Floor Space
Commencement Date, as the case may be.
"Applicable Rate" shall mean the lesser of (x) two (2) percentage points
above the then current Base Rate, and (y) the maximum rate permitted by
applicable law.
"Applicable Rent Commencement Date" shall mean the Tenth Floor Space Rent
Commencement Date or the Seventh Floor Space Rent Commencement Date.
"Applicable Security Amount" shall mean the Tenth Floor Space Security
Amount or the Seventh Floor Space Security Amount.
"Applicable Tenant Fund" shall have the meaning set forth in Section 3.5
hereof.
"Applicable Terms" shall have the meaning set forth in Section 7.8 hereof.
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"Appraiser" shall have the meaning set forth in Section 41.1 hereof.
"Assessed Valuation" shall have the meaning set forth in Section 27.1
hereof.
"Assignment Proceeds" shall have the meaning set forth in Section 12.8
hereof.
"Assignment Statement" shall have the meaning set forth in Section 12.8
hereof.
"Assignment Termination" shall have the meaning set forth in Section 12.8
hereof.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., or any statute
of similar nature and purpose.
"Base Operating Expenses" shall have the meaning set forth in Section 27.1
hereof.
"Base Operating Year" shall have the meaning set forth in Section 27.1
hereof.
"Base Rate" shall mean the rate of interest publicly announced from time
to time by The Chase Manhattan Bank, or its successor, as its "prime lending
rate" (or such other term as may be used by The Chase Manhattan Bank, from time
to time, for the rate presently referred to as its "prime lending rate"), which
rate was 8.50% on January 19, 2000.
"Base Rental Amount" shall have the meaning set forth in Section 41.1
hereof.
"Base Taxes" shall have the meaning set forth in Section 27.1 hereof.
"Broker" shall have the meaning set forth in Article 34 hereof.
"Building" shall mean all the buildings, equipment and other improvements
and appurtenances of every kind and description now located or hereafter
erected, constructed or placed upon the land and any and all alterations, and
replacements thereof, additions thereto and substitutions therefor, known by the
address of 330 West 34th Street, New York, New York.
"Building Systems" shall mean the mechanical, gas, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service systems of the Building.
"Business Days" shall mean all days, excluding Saturdays, Sundays and all
days observed by either the State of New York or the Federal Government and by
the labor unions servicing the Building as legal holidays.
<PAGE>
"Commencement Date" shall have the meaning set forth in Section 1.1
hereof.
"Consumer Price Index" shall mean the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, New York, N.Y. - Northeastern N.J. Area, All Items (1982-84
= 100), or any successor index thereto, appropriately adjusted. In the event
that the Consumer Price Index is converted to a different standard reference
base or otherwise revised, the determination of adjustments provided for herein
shall be made with the use of such conversion factor, formula or table for
converting the Consumer Price Index as may be published by the Bureau of Labor
Statistics or, if said Bureau shall not publish the same, then with the use of
such conversion factor, formula or table as may be published by Prentice-Hall,
Inc., or any other nationally recognized publisher of similar statistical
information. If the Consumer Price Index ceases to be published, and there is no
successor thereto, such other index as Landlord and Tenant shall agree upon in
writing shall be substituted for the Consumer Price Index. If Landlord and
Tenant are unable to agree as to such substituted index, such matter shall be
submitted to the American Arbitration Association or any successor organization
for determination in accordance with the regulations and procedures thereof then
obtaining for commercial arbitration.
"Control" or "control" shall mean direct or indirect ownership of more
than fifty percent (50%) of the outstanding voting stock of a corporation or
other majority equity and control interest if not a corporation and the
possession of power to direct or cause the direction of the management and
policy of such corporation or other entity, whether through the ownership of
voting securities, by statute or according to the provisions of a contract.
"CR&A" shall have the meaning set forth in Section 3.1 hereof.
"Current Year" shall have the meaning set forth in Section 27.4 hereof.
"Deficiency" shall have the meaning set forth in Section 17.2 hereof.
"Escalation Rent" shall mean, individually or collectively, the Tax
Payment and the Operating Payment.
"Event of Default" shall have the meaning set forth in Section 16.1
hereof.
"Excluded Space" shall have the meaning set forth in Section 7.6 hereof.
"Existing Ground Lease" shall mean the Superior Lease described on Exhibit
"A" attached hereto and made a part hereof.
"Expiration Date" shall mean the Fixed Expiration Date or such earlier
date on which the Term shall sooner end pursuant to any of the terms, conditions
or covenants
<PAGE>
of this Lease or pursuant to law.
"Fair Market Rent" shall have the meaning set forth in Section 41.1
hereof.
"Fixed Expiration Date" shall have the meaning set forth in Section 1.1
hereof.
"Fixed Rent" shall have the meaning set forth in Section 1.1 hereof.
"Governmental Authority (Authorities)" shall mean the United States of
America, the State of New York, the City of New York, any political subdivision
thereof and any agency, department, commission, board, bureau or instrumentality
of any of the foregoing, or any quasi-governmental authority, now existing or
hereafter created, having jurisdiction over the Real Property or any portion
thereof.
"HVAC" shall mean heat, ventilation and air conditioning.
"HVAC Systems" shall mean the Building Systems providing HVAC.
"HVAC Units" shall have the meaning set forth in Section 28.2 hereof.
"Indemnitees" shall mean Landlord, the partners or members comprising
Landlord and its and their members, partners, shareholders, officers, directors,
employees, agents and contractors, Lessors and Mortgagees.
"Initial Alterations" shall mean the Alterations to be made by Tenant to
initially prepare the Premises for Tenant's occupancy.
"Landlord", on the date as of which this Lease is made, shall mean Vornado
330 West 34th Street L.L.C., a Delaware limited liability company, having an
office c/o MRC Management LLC, 330 Madison Avenue, New York, New York, but
thereafter, "Landlord" shall mean only the fee owner of the Real Property or if
there shall exist a Superior Lease, the tenant thereunder.
"Landlord's Determination" shall have the meaning set forth in Section
41.1 hereof.
"Landlord's Work" shall have the meaning set forth in Article 19 hereof.
"Lessor(s)" shall mean a lessor under a Superior Lease.
"Letter of Credit" shall have the meaning set forth in Article 31 hereof.
"LivePerson" shall mean LivePerson, Inc., a Delaware corporation, having
an office at 462 Seventh Avenue, New York, New York.
"LivePerson Party" shall mean LivePerson or an Affiliate of LivePerson.
<PAGE>
"Long Lead Work" shall mean any item which is not customarily a stock item
and must be specially manufactured, fabricated or installed or is of such an
unusual, delicate or fragile nature that there is a substantial risk that
(i) there will be a material delay in its manufacture, fabrication,
delivery or installation, or
(ii) after delivery, such item will need to be reshipped or
redelivered or repaired
so that the item in question cannot be completed when the standard items are
completed even though the item of Long Lead Work in question is (1) ordered
together with the other items required and (2) installed or performed (after the
manufacture or fabrication thereof) in the order and sequence that such Long
Lead Work and other items are normally installed or performed in accordance with
good construction practice. In addition, "Long Lead Work" shall include any
component of work which in accordance with good construction practice should be
completed after the completion of any item of work in the nature of the items
described in the immediately preceding sentence.
"Major Sublease" shall mean a sublease, between Tenant, as sublessor, and
a third party, as sublessee, which (i) Tenant enters into in accordance with the
provisions of Article 12 hereof, (ii) demises to the sublessee not less than the
entire rentable area of the Tenth Floor Space or not less than the entire
rentable area of the Seventh Floor Space, as the case may be, and (iii) expires
no earlier than the day immediately preceding the Fixed Expiration Date.
"Major Sublease Fair Market Rent" shall have the meaning set forth in
Section 7.8 hereof.
"Mortgage(s)" shall mean any trust indenture or mortgage which may now or
hereafter affect the Real Property, the Building or any Superior Lease and the
leasehold interest created thereby, and all renewals, extensions, supplements,
amendments, modifications, consolidations and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"Mortgagee(s)" shall mean any trustee, mortgagee or holder of a Mortgage.
"Mutual Determination" shall have the meaning set forth in Section 41.1
hereof.
"Nondisturbance Agreement" shall have the meaning set forth in Section 7.1
hereof.
"Operating Expenses" shall have the meaning set forth in Section 27.1
hereof.
<PAGE>
"Operating Payment" shall have the meaning set forth in Section 27.4
hereof.
"Operating Statement" shall have the meaning set forth in Section 27.1
hereof.
"Operating Year" shall have the meaning set forth in Section 27.1 hereof.
"Operation of the Property" shall mean the maintenance, repair and
management of the Real Property and the curbs, sidewalks and areas adjacent
thereto.
"Overtime Periods" shall have the meaning set forth in Section 28.3
hereof.
"Parties" shall have the meaning set forth in Section 37.2 hereof.
"Partner" or "partner" shall mean any partner of Tenant, any employee of a
professional corporation which is a partner comprising Tenant, and any
shareholder of Tenant if Tenant shall become a professional corporation.
"Partnership Tenant" shall have the meaning set forth in Article 29
hereof.
"Person(s) or person(s)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"Premises" shall mean, subject to the provisions of Section 14.4 hereof,
the Tenth Floor Space and, as of the Seventh Floor Space Commencement Date, the
Seventh Floor Space.
"Qualified Specialty Alterations" shall have the meaning set forth in
Section 3.1 hereof.
"Real Property" shall mean the Building, together with the plot of land
upon which it stands.
"Recapture Space" shall have the meaning set forth in Section 12.6 hereof.
"Recapture Statement" shall have the meaning set forth in Section 12.6
hereof.
"Recapture Sublease" shall have the meaning set forth in Section 12.6
hereof.
"Recapture Termination" shall have the meaning set forth in Section 12.6
hereof.
"Recognition Agreement" shall have the meaning set forth in Section 7.7
hereof.
"Recognition Effective Date" shall have the meaning set forth in Section
7.8 hereof.
<PAGE>
"Related Costs" shall have the meaning set forth in Section 3.5 hereof.
"Related Entity" shall have the meaning set forth in Section 12.4 hereof.
"Rental" shall mean and be deemed to include Fixed Rent, Escalation Rent,
all additional rent and any other sums payable by Tenant hereunder.
"Rental Value" shall have the meaning set forth in Section 41.1 hereof.
"Rent Notice" shall have the meaning set forth in Section 41.1 hereof.
"Rent Per Square Foot" shall have the meaning set forth in Section 12.7
hereof.
"Required Amount" shall have the meaning set forth in Section 3.5 hereof.
"Requirements" shall mean all present and future laws, rules, orders,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, of all Governmental Authorities now existing
or hereafter created, and of any and all of their departments and bureaus, and
of any applicable fire rating bureau, or other body exercising similar
functions, affecting the Real Property or any portion thereof, or any street,
avenue or sidewalk comprising a part of or in front thereof or any vault in or
under the same, or requiring removal of any encroachment, or affecting the
maintenance, use or occupation of the Real Property or any portion thereof.
"Risers" shall have the meaning set forth in Section 3.7 hereof.
"Rules and Regulations" shall mean the rules and regulations annexed
hereto and made a part hereof as Schedule A, and Exhibit "D" and such other and
further rules and regulations as Landlord or Landlord's agents may from time to
time adopt on such notice to be given as Landlord may elect, subject to Tenant's
right to dispute the reasonableness thereof as provided in Article 8 hereof.
"Satellite Dish" shall have the meaning set forth in Section 39.1 hereof.
"Seventh Anniversary Date" shall have the meaning set forth in Section 1.1
hereof.
"Seventh Floor Space" shall mean the entire rentable area of the seventh
(7th) floor of the Building as set forth on the floor plan attached as Exhibit
"B" and made a part thereof.
"Seventh Floor Space Commencement Date" shall mean, subject to Article 22
hereof, March 1, 2001.
"Seventh Floor Space Factor" shall mean Forty-Two Thousand Nine Hundred
<PAGE>
Thirty- Two (42,932) (if the Seventh Floor Space Commencement Date has
occurred).
"Seventh Floor Space Initial Alterations" shall mean the Initial
Alterations to initially prepare the Seventh Floor Space for Tenant's occupancy.
"Seventh Floor Space Landlord's Work" shall have the meaning set forth in
Section 19.1 hereof.
"Seventh Floor Space Rent Commencement Date" shall mean subject to Article
22 and Section 19.2 hereof the earlier to occur of (x) August 1, 2001, and (y)
the date that Tenant initially occupies the Seventh Floor Space for the conduct
of business.
"Seventh Floor Space Security Amount" shall mean:
(i) Two Million Two Hundred Twenty-Five Thousand and 00/100 Dollars
($2,225,000.00) in respect of the period of time commencing on the Seventh
Floor Space Commencement Date and ending on the day immediately prior to
the fourth (4th) anniversary of the Commencement Date;
(ii) One Million Four Hundred Ninety-Three Thousand Three Hundred
Thirty-Three and 00/100 ($1,493,333.00) in respect of the period of time
commencing on the fourth (4th) anniversary of the Commencement Date and
ending on the day immediately prior to the seventh (7th) anniversary of
the Commencement Date; and
(iii) Seven Hundred Forty-Six Thousand Six Hundred Sixty-Six and
00/100 Dollars ($746,666.00) in respect of the period of time commencing
on the seventh (7th) anniversary of the Commencement Date and ending on
the Expiration Date.
"Seventh Floor Space Share" shall mean Six and Eight Thousand Fifty-Five
ten-thousandths percent (6.8055%).
"Seventh Floor Space Tenant Fund" shall have the meaning set forth in
Section 3.5 hereof.
"Space Factor" shall mean the Tenth Floor Space Factor and the Seventh
Floor Space Factor (if the Seventh Floor Space Commencement Date has occurred).
"Specialty Alterations" shall mean Alterations consisting of kitchens (but
not a "dwyer unit" or kitchenette), executive bathrooms, raised computer floors,
computer installations, vaults, libraries, internal staircases, dumbwaiters,
pneumatic tubes, vertical and horizontal transportation systems, the Satellite
Dish and other Alterations of a similar character.
"Sublease Expenses" shall have the meaning set forth in Section 12.7
hereof.
<PAGE>
"Sublease Profit" shall have the meaning set forth in Section 12.7 hereof.
"Sublease Rent" shall have the meaning set forth in Section 12.7 hereof.
"Sublease Rent Per Square Foot" shall have the meaning set forth in
Section 12.7 hereof.
"Substantial Completion" or "Substantially Completed" or words of similar
import shall mean that Landlord's Work has been substantially completed, it
being agreed that Landlord's Work shall be deemed substantially complete
notwithstanding the fact that (a) minor or insubstantial details of construction
or demolition and/or mechanical adjustment and/or decorative items remain to be
performed, and (b) any Long Lead Work remains to be performed.
"Superior Lease(s)" shall mean all ground or underlying leases of the Real
Property or the Building and all renewals, extensions, supplements, amendments
and modifications thereof.
"Taxes" shall have the meaning set forth in Section 27.1 hereof.
"Tax Payment" shall have the meaning set forth in Section 27.2 hereof.
"Tax Statement" shall have the meaning set forth in Section 27.1 hereof.
"Tax Year" shall have the meaning set forth in Section 27.1 hereof.
"Tenant" on the date as of which this Lease is made, shall mean LivePerson
but thereafter "Tenant" shall mean only the tenant under this Lease at the time
in question; provided, however, that the originally named tenant and any
assignee of this Lease shall not be released from liability hereunder in the
event of any assignment of this Lease.
"Tenant Signs" shall have the meaning set forth in Article 40 hereof.
"Tenant Statement" shall have the meaning set forth in Section 12.6
hereof.
"Tenant's Determination" shall have the meaning set forth in Section 41.1
hereof.
"Tenant's Property" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings, decorations
and other items of personal property.
"Tenant's Share" shall mean the Tenth Floor Space Share plus the Seventh
Floor Space Share.
<PAGE>
"Tentative Monthly Escalation Charge" shall have the meaning set forth in
Section 27.4 hereof.
"Tenth Floor Space" shall mean the entire rentable area of the tenth
(10th) floor of the Building as set forth on the floor plan attached as Exhibit
"C" and made a part hereof.
"Tenth Floor Space Factor" shall mean Forty Thousand Five Hundred
Twenty-Seven (40,527).
"Tenth Floor Space Initial Alterations" shall mean the Initial Alterations
to initially prepare the Tenth Floor Space for Tenant's occupancy.
"Tenth Floor Space Landlord's Work" shall have the meaning set forth in
Section 19.1 hereof.
"Tenth Floor Space Rent Commencement Date" shall mean subject to Section
19.2 hereof the earlier to occur of (x) June 1, 2000, and (y) the date that
Tenant initially occupies the Tenth Floor Space for the conduct of business.
"Tenth Floor Space Security Amount" shall mean:
(i) Two Million and 00/100 Dollars ($2,000,000.00) in respect of the
period of time commencing on the Commencement Date and ending on the day
immediately prior to the fourth (4th ) anniversary of the Commencement
Date;
(ii) One Million Three Hundred Forty Thousand and 00/100 Dollars
($1,340,000.00) in respect of the period of time commencing on the fourth
(4th) anniversary of the Commencement Date and ending on the day
immediately prior to the seventh (7th) anniversary of the Commencement
Date; and
(iii) Six Hundred Seventy Thousand and 00/100 Dollars ($670,000.00)
in respect of the period of time commencing on the seventh (7th)
anniversary of the Commencement Date and ending on the Expiration Date.
"Tenth Floor Space Share" shall mean Six and Four Thousand Two Hundred
Forty-Two ten-thousandths percent (6.4242%).
"Tenth Floor Space Tenant Fund" shall have the meaning set forth in
Section 3.5 hereof.
"Term" shall mean a term which shall commence on the Commencement Date and
shall expire on the Expiration Date.
<PAGE>
"Termination Date" shall have the meaning set forth in Article 22 hereof.
"Third Anniversary Date" shall have the meaning set forth in Section 1.1
hereof.
"Unavoidable Delays" shall have the meaning set forth in Article 25
hereof.
"Work" shall have the meaning set forth in Section 14.5 hereof.
<PAGE>
ARTICLE 1
DEMISE, PREMISES, TERM, RENT
Section 1.1. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Tenth Floor Space for the Term to commence on the date hereof (the
"Commencement Date") and to end on the day (the "Fixed Expiration Date") that is
the last day of the month in which occurs the tenth (10th) anniversary of the
Commencement Date at an annual rent (the "Fixed Rent") of:
(1) One Million Three Hundred Seventy-Seven Thousand Nine Hundred
Eighteen and 00/100 Dollars ($1,377,918.00) for the period commencing on
the Tenth Floor Space Rent Commencement Date and ending on the day
immediately prior to the day that is the third (3rd) anniversary of the
Commencement Date (the day that is the third (3rd) anniversary of the
Commencement Date being referred to herein as the "Third Anniversary
Date"), payable in equal monthly installments of One Hundred Fourteen
Thousand Eight Hundred Twenty-Six and 50/100 Dollars ($114,826.50);
(2) One Million Four Hundred Ninety-Nine Thousand Four Hundred
Ninety- Nine and 00/100 Dollars ($1,499,499.00) for the period commencing
on the Third Anniversary Date and ending on the day immediately prior to
the day that is the seventh (7th) anniversary of the Commencement Date
(the day that is the seventh (7th) anniversary of the Commencement Date
being referred to herein as the "Seventh Anniversary Date"), payable in
equal monthly installments of One Hundred Twenty-Four Thousand Nine
Hundred Fifty-Eight and 25/100 Dollars ($124,958.25); and
(3) One Million Six Hundred Twenty-One Thousand Eighty and 00/100
Dollars ($1,621,080.00) for the period commencing on the Seventh
Anniversary Date and ending on the Fixed Expiration Date, payable in equal
monthly installments of One Hundred Thirty-Five Thousand Ninety and 00/100
Dollars ($135,090.00).
Section 1.2. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Seventh Floor Space for a term commencing on the Seventh Floor
Space Commencement Date and ending on the Fixed Expiration Date at a Fixed Rent
of:
(1) One Million Four Hundred Fifty-Nine Thousand Six Hundred Eighty-
Eight and 00/100 Dollars ($1,459,688.00) for the period commencing on the
Seventh Floor Space Rent Commencement Date and ending on the day
immediately prior to the Third Anniversary Date, payable in equal monthly
installments of One Hundred Twenty-One Thousand Six Hundred Forty and
67/100 Dollars ($121,640.67);
<PAGE>
(2) One Million Five Hundred Eighty-Eight Thousand Four Hundred
Eighty Four and 00/100 Dollars ($1,588,484.00) for the period commencing
on the Third Anniversary Date and ending on the day immediately prior to
the Seventh Anniversary Date, payable in equal monthly installments of One
Hundred Thirty-Two Thousand Three Hundred Seventy-Three and 67/100 Dollars
($132,373.67); and
(3) One Million Seven Hundred Seventeen Thousand Two Hundred Eighty
and 00/100 Dollars ($1,717,280.00) for the period commencing on the
Seventh Anniversary Date and ending on the Fixed Expiration Date, payable
in equal monthly installments of One Hundred Forty-Three Thousand One
Hundred Six and 67/100 Dollars ($143,106.67).
Section 1.3. Tenant agrees to pay the Fixed Rent in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance, on the first (1st) day of each calendar month during the Term
commencing on the Rent Commencement Date, at the office of Landlord or such
other place as Landlord may designate, without any set-off, offset, abatement or
deduction whatsoever except as expressly set forth herein, except that Tenant
shall pay the first full monthly installment on the execution hereof.
ARTICLE 2
USE AND OCCUPANCY
Section 2.1. Tenant shall use and occupy the Premises as general and
executive offices, uses incidental thereto and for no other purpose.
Section 2.2. (A) Tenant shall not use the Premises or any part thereof, or
permit the Premises or any part thereof to be used, (1) for the business of
photographic, multilith or multigraph reproductions or offset printing, except
in connection with, either directly or indirectly, Tenant's own business and/or
activities, (2) for a banking, trust company, depository, guarantee or safe
deposit business in either case conducting business with the general public on
an off-the-street retail business, (3) as a savings bank, a savings and loan
association, or as a loan company in either case conducting business with the
general public on an off-the-street retail business, (4) for the sale of
travelers checks, money orders, drafts, foreign exchange or letters of credit or
for the receipt of money for transmission in either case conducting business
with the general public on an off-the-street retail business, (5) as a
stockbroker's or dealer's office or for the underwriting or sale of securities
in either case conducting business with the general public on an off-the-street
retail business, (6) by the United States government, the City or State of New
York, any foreign government, the United Nations or any agency or department of
any of the foregoing or any other Person having sovereign or diplomatic
immunity, (7) as a restaurant or bar or for the sale of
<PAGE>
confectionery, soda or other beverages, sandwiches, ice cream or baked goods or
for the preparation, dispensing or consumption of food or beverages in any
manner whatsoever, except for consumption by Tenant's officers, employees and
business guests, (8) as an employment agency, executive search firm or similar
enterprise, labor union, school, or vocational training center (except for the
training of employees of Tenant, or (9) as a barber shop or beauty salon.
(B) In connection with, and incidental to, Tenant's use of the
Premises for general and executive offices as provided in this Article 2,
Tenant, at its sole cost and expense and upon compliance with all applicable
Requirements, may install a "dwyer" or similar unit in the Premises for the
purpose of warming food for the officers, employees and business guests of
Tenant (but not for use as a public restaurant), provided that Tenant shall
obtain all permits required by any Governmental Authorities for the operation
thereof and such installation shall comply with the provisions of this Lease,
including, without limitation, Article 3 hereof. Tenant may also install, at its
sole cost and expense and subject to and in compliance with the provisions of
Articles 3 and 4 hereof, vending machines for the exclusive use of the officers,
employees and business guests of Tenant, each of which vending machines (if it
dispenses any beverages or other liquids or refrigerates) shall have a
waterproof pan located thereunder, connected to a drain.
ARTICLE 3
ALTERATIONS
Section 3.1. (A) Except as provided in Section 3.4 hereof, Tenant shall
not make any Alterations without Landlord's prior consent. Landlord shall not
unreasonably withhold, condition or delay its consent to any proposed
nonstructural Alterations, provided that such Alterations (i) are not visible
from the ground level outside of the Building, (ii) do not affect in any
material and adverse respect any part of the Building other than the Premises or
require any alterations, installations, improvements, additions or other
physical changes to be performed in or made to any portion of the Building or
the Real Property other than the Premises, (iii) do not affect in any material
and adverse respect any service required to be furnished by Landlord to Tenant
or to any other tenant or occupant of the Building, (iv) do not affect in any
material and adverse respect the proper functioning of any Building System, (v)
do not reduce the value or utility of the Building, and (vi) do not require a
change to the certificate of occupancy for the Building or the Premises.
(B) (1) Prior to making any Alterations, including, without
limitation, the Initial Alterations, Tenant shall (i) submit to Landlord
detailed plans and specifications (including layout, architectural, mechanical
and structural drawings) for each proposed Alteration and shall not commence any
such Alteration without first obtaining Landlord's approval of such plans and
specifications (except with respect to any nonstructural Alteration referred to
in Section 3.4 hereof for which Landlord's
<PAGE>
approval is not required), which, in the case of nonstructural Alterations which
meet the criteria set forth in Section 3.1(A) above, shall not be unreasonably
withheld, conditioned or delayed, (ii) at Tenant's expense, obtain all permits,
approvals and certificates required by any Governmental Authorities, it being
agreed that all filings with Governmental Authorities to obtain such permits,
approvals and certificates shall be made, at Tenant's expense, by a Person
designated by Landlord (it being understood that (x) the Person initially so
designated by Landlord is Charles Rizzo & Associates ("CR&A"), and (y) Tenant
shall not discharge CR&A unless CR&A's fees are not commercially competitive or
Tenant in good faith believes CR&A is not performing its services properly), and
(iii) furnish to Landlord duplicate original policies or certificates thereof of
worker's compensation (covering all persons to be employed by Tenant, and
Tenant's contractors and subcontractors in connection with such Alteration) and
general commercial public liability (including property damage coverage)
insurance in such form, with such companies, for such periods and in such
amounts as Landlord may reasonably approve, naming Landlord and its agents, any
Lessor and any Mortgagee, as additional insureds. Upon completion of such
Alteration, Tenant, at Tenant's expense, shall obtain certificates of final
approval of such Alteration required by any Governmental Authority and shall
furnish Landlord with copies thereof, together with the "as-built" plans and
specifications for such Alterations, it being agreed that all filings with
Governmental Authorities to obtain such permits, approvals and certificates
shall be made, at Tenant's expense, by a Person designated by Landlord (it being
understood that (x) the Person initially so designated by Landlord is CR&A, and
(y) Tenant shall not discharge CR&A unless CR&A's fees are not commercially
competitive or Tenant in good faith believes CR&A is not performing its services
properly). All Alterations shall be made and performed substantially in
accordance with the plans and specifications therefor as approved by Landlord
(unless Landlord's consent to the Alteration is not required), all Requirements,
the Rules and Regulations, and all rules and regulations relating to Alterations
promulgated by Landlord in its reasonable judgment. The rules and regulations
for Alterations that exist as of the date hereof are attached as Exhibit "D" and
made a part hereof. Tenant shall not be required to comply with any new or
revised rule or regulation promulgated by Landlord after the commencement of a
particular Alteration if such new or revised rule or regulation has more than a
de minimis effect on the design or performance of such Alteration. All materials
and equipment to be incorporated in the Premises as a result of any Alterations
or a part thereof shall be first quality and no such materials or equipment
(other than Tenant's Property) shall be subject to any lien, encumbrance,
chattel mortgage or title retention or security agreement. If, as a result of
any Alterations performed by Tenant, including, without limitation, the Initial
Alterations, any alterations, installations, improvements, additions or other
physical changes are required to be performed or made to any portion of the
Building or the Real Property other than the Premises in order to comply with
any Requirement(s), which alterations, installations, improvements, additions or
other physical changes would not otherwise have had to be performed or made
pursuant to applicable Requirement(s) at such time, Landlord, at Tenant's sole
cost and expense, may perform or make such alterations, installations,
improvements, additions or other physical changes and take such actions as
Landlord shall deem reasonably necessary and Tenant, within five (5) days after
demand therefor by Landlord, shall provide Landlord with such security as
Landlord
<PAGE>
shall reasonably require, in an amount equal to the cost of such alterations,
installations, improvements, additions or other physical changes, as reasonably
estimated by Landlord's architect, engineer or contractor. All Alteration(s)
requiring the consent of Landlord shall be performed only under the supervision
of an independent licensed architect approved by Landlord, which approval shall
not be unreasonably withheld, conditioned or delayed. Landlord hereby approves
Tenant's use of Aplusi Design Corp. as Tenant's architect for the Initial
Alterations and Flack & Kurtz Consulting Engineers, LLP as Tenant's mechanical
engineer for the Initial Alterations.
(2) If Landlord shall fail to disapprove Tenant's final plans
and specifications for any Alteration within ten (10) Business Days, or within
five (5) Business Days (with respect to any resubmission of disapproved plans),
after Landlord's receipt thereof (provided in each instance the same shall be of
a scope and scale reasonably susceptible of review in such periods), Landlord
shall be deemed to have approved such plans and specifications. Any disapproval
given by Landlord shall be accompanied by a reasonably detailed statement of the
reasons for such disapproval. Landlord reserves the right (in accordance with
the standards for Landlord's consent set forth in this Article 3) to disapprove
any plans and specifications in part, to reserve approval of items shown thereon
pending its review and approval of other plans and specifications, and to
condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Any review or approval by
Landlord of any plans and/or specifications or any preparation or design of any
plans by Landlord's architect or engineer (or any architect or engineer
designated by Landlord) with respect to any Alteration is solely for Landlord's
benefit, and without any representation or warranty whatsoever to Tenant or any
other Person with respect to the compliance thereof with any Requirements, the
adequacy, correctness or efficiency thereof or otherwise.
(C) Tenant shall be permitted to perform Alterations at any time,
provided that (x) such work shall not materially interfere with or interrupt the
operation and maintenance of the Building or unreasonably interfere with or
interrupt the use and occupancy of the Building by other tenants in the
Building, and (y) Tenant pays to Landlord within thirty (30) days after demand
therefor Landlord's then standard charge for engineers to monitor Tenant's
performance of Alterations, or security guards to monitor the loading dock or
other areas of the Building impacted by Tenant's performance of Alterations, in
either case (i) in respect of any period of time after 6:00 P.M. and prior to
8:00 A.M. on Business Days and at any time on days that are not Business Day,
and (ii) to the extent such engineers or such guards are reasonably required by
Landlord. Otherwise, Alterations shall be performed at such times and in such
manner as Landlord may from time to time reasonably designate. All Tenant's
Property installed by Tenant and all Alterations in and to the Premises which
may be made by Tenant at its own cost and expense prior to and during the Term,
shall remain the property of Tenant. Upon the Expiration Date, Tenant shall
remove Tenant's
<PAGE>
Property from the Premises and, at Tenant's option, Tenant also may remove, at
Tenant's cost and expense, all Alterations made by Tenant to the Premises,
provided, however, in any case, that Tenant shall repair and restore in a good
and workerlike manner to good condition any damage to the Premises or the
Building caused by such removal. Notwithstanding the foregoing, however,
Landlord, upon notice given at least ninety (90) days prior to the Fixed
Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any Specialty Alterations, and to repair and restore in a good and
workerlike manner to good condition any damage to the Premises or the Building
caused by such removal; provided, however, that Tenant shall not be required to
remove any Specialty Alterations that constitute Qualified Specialty
Alterations. Tenant shall have the right to request (simultaneously with
Tenant's submission to Landlord of plans and specifications for such Specialty
Alterations) that Landlord designate that Tenant shall not be required to remove
such Specialty Alteration upon the expiration or earlier termination of the
Term, as aforesaid. Landlord shall have the right to approve or deny any such
request in Landlord's sole discretion. If Tenant makes any such request, and,
together with such request, identifies the provisions of this Section 3.1(C)
requiring Landlord to respond thereto not later than the date that Landlord's
approval of such plans and specifications is deemed to be granted pursuant to
Section 3.1(B)(2) hereof (it being understood that if Landlord does not have the
right to approve such Specialty Alteration under this Article 3, then such date
shall be deemed to be the tenth (10th) Business Day after the date when Tenant
makes such request), and Landlord either approves such request, or fails to
respond to Tenant's aforesaid request on or prior to such date, then Landlord
shall not have the right to require Tenant to remove such Specialty Alteration
upon the expiration or earlier termination of the Term (any such Specialty
Alteration which Tenant shall not be required to remove as aforesaid being
referred to herein as a "Qualified Specialty Alteration"). If the Satellite Dish
does not constitute a Qualified Specialty Alteration, then the removal thereof
at Landlord's option, shall be performed by either Landlord or Tenant, in either
case, at Tenant's sole cost and expense. In addition, upon notice given at least
thirty (30) days prior to the Expiration Date or upon such shorter notice as is
reasonable under the circumstances upon the earlier expiration of the Term,
Landlord may require that any cables, conduits, risers and other similar items
and equipment which pass through portions of the Building and which connect to
the Satellite Dish and which items and equipment do not constitute a Qualified
Specialty Alteration, which Tenant is permitted to install pursuant to the
provisions of Article 39 hereof shall be disconnected, capped and sealed by
Tenant, at its sole cost and expense at the point of connection to the Premises.
(D) (1) All Alterations shall be performed, at Tenant's sole cost
and expense, by Landlord's contractor(s) or by contractors, subcontractors or
mechanics approved by Landlord, which approval solely with respect to general
contractors shall not be unreasonably withheld, conditioned or delayed. Prior to
making an Alteration, at Tenant's request, Landlord shall furnish Tenant with a
list of contractors (it being agreed that any subcontractors on such list shall
charge commercially competitive rates) who
<PAGE>
may perform Alterations to the Premises on behalf of Tenant. If Tenant engages
any contractor set forth on the list, Tenant shall not be required to obtain
Landlord's consent for such contractor unless, prior to the earlier of (a)
entering into a contract with such contractor, and (b) the commencement of work
by such contractor, Landlord shall notify Tenant that such contractor has been
removed from the list. The current list of contractors approved by Landlord is
attached as Exhibit "E" hereto and made a part hereof. If Tenant engages any
contractor set forth on such list, Tenant shall not be required to obtain
Landlord's consent for such contractor unless, prior to the earlier of (a)
entering into a contract with such contractor, and (b) the commencement of work
by such contractor Landlord shall notify Tenant that such contractor has been
removed from such list.
(2) Notwithstanding the foregoing, with respect to any
Alteration affecting any Building System, (i) Tenant shall select a contractor
from a list of approved contractors furnished by Landlord to Tenant (containing
at least three (3) contractors) and (ii) the Alteration shall, at Tenant's cost
and expense, be designed by Tenant's engineer for the relevant Building System
and approved by Landlord's engineer, which approval shall not be unreasonably
withheld, conditioned or delayed (it being agreed that Landlord consents to
Flack & Kurtz Consulting Engineers, LLP as Tenant's engineer to design the
Initial Alterations affecting any Building System).
(E) Any mechanic's lien filed against the Premises or the Real
Property for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant (except as part of Landlord's Work) shall be
discharged by Tenant within thirty (30) days after Tenant shall have received
notice thereof (or such shorter period if required by the terms of any Superior
Lease or Mortgage), at Tenant's expense, by payment or filing the bond required
by law. Tenant shall not, at any time prior to or during the Term, directly or
indirectly employ, or permit the employment of, any contractor, mechanic or
laborer in the Premises, whether in connection with any Alteration or otherwise,
if such employment would interfere or cause any conflict with other contractors,
mechanics or laborers engaged in the construction, maintenance or operation of
the Building by Landlord, Tenant or others, or of any adjacent property owned by
Landlord. In the event of any such interference or conflict, Tenant, upon demand
of Landlord, shall cause all contractors, mechanics or laborers causing such
interference or conflict to leave the Building immediately.
Section 3.2. Tenant shall pay to Landlord or to Landlord's agent, from
time to time, the reasonable out-of-pocket costs incurred by Landlord in
connection with Alterations (including, without limitation, the reasonable
out-of-pocket costs incurred by Landlord in reviewing Tenant's plans and
specifications for a proposed Alteration), upon the submission of Landlord's
receipts and invoices therefor, within thirty (30) days after Landlord's demand
therefor.
Section 3.3. Upon the request of Tenant, Landlord, at Tenant's cost and
expense, shall join in any applications for any permits, approvals or
certificates required
<PAGE>
to be obtained by Tenant in connection with any permitted Alteration (provided
that the provisions of the applicable Requirement shall require that Landlord
join in such application) and shall otherwise cooperate with Tenant in
connection therewith, provided that Landlord shall not be obligated to incur any
cost or expense, including, without limitation, attorneys' fees and
disbursements, or suffer any liability in connection therewith.
Section 3.4. Anything contained in this Lease to the contrary
notwithstanding, Landlord's consent shall not be required with respect to any
nonstructural Alteration, provided that (a) consent for such Alteration is not
required under the terms of any Superior Lease or Mortgage, and (b) such
Alteration (i) is not visible from the ground level outside of the Building,
(ii) does not affect in any material and adverse respect any part of the
Building other than the Premises or require any alterations, installations,
improvements, additions or other physical changes to be performed in or made to
any portion of the Building or the Real Property other than the Premises, (iii)
does not affect in any material and adverse respect any service required to be
furnished by Landlord to any other tenant or occupant of the Building, (iv) does
not affect in any material and adverse respect the proper functioning of any
Building System, (v) does not impair or diminish the value or utility of the
Building, (vi) does not violate the provisions of or require a change to the
certificate of occupancy for the Building or the Premises, and (vii) the
estimated cost of the labor and materials for which shall not exceed Five
Hundred Thousand and 00/100 Dollars ($500,000.00), which amount shall be
increased on the third (3rd) anniversary of the Commencement Date and annually
thereafter by the annual percentage increase, if any, in the Consumer Price
Index from that in effect on the date immediately preceding the Commencement
Date, either individually or in the aggregate with other nonstructural
Alterations constructed within any twelve (12) month period; provided, however,
that at least ten (10) days prior to making any such nonstructural Alteration,
Tenant shall submit to Landlord for informational purposes only the detailed
plans and specifications for such Alteration, as required by Section
3.1(B)(1)(i) hereof, and any such Alteration shall otherwise be performed in
compliance with the provisions of this Article 3.
Section 3.5. (A) Landlord shall contribute an amount not to exceed (x)
One Million Five Hundred Nineteen Thousand Six Hundred Twenty and 00/100 Dollars
($1,519,620.00) in respect of the Seventh Floor Space Initial Alterations (the
"Seventh Floor Space Tenant Fund"), and (y) One Million Four Hundred Thirty
Thousand Four Hundred Forty-Five and 00/100 Dollars ($1,430,445.00) in respect
of the Tenth Floor Space Initial Alterations (the "Tenth Floor Space Tenant
Fund"; the Seventh Floor Space Tenant Fund or the Tenth Floor Space Tenant Fund
being referred to herein as the "Applicable Tenant Fund") toward (I) the "hard"
cost of the Applicable Initial Alterations, and (II) architect's and engineering
fees, permit fees, expediter's fees and designers' fees in connection with the
Applicable Initial Alterations and deposits for materials to be installed as
part of the Applicable Initial Alterations so long as such deposits are required
in the ordinary course of performing work similar to the Applicable Initial
Alterations (such "soft costs" and related costs referred to in this clause (II)
<PAGE>
incurred by Tenant in connection with the Applicable Initial Alterations being
collectively referred to herein as "Related Costs"). If Landlord fails to
disburse a portion of the Applicable Tenant Fund when due in accordance with
this Section 3.5 and such failure continues for ten (10) days after Tenant gives
Landlord notice thereof, then Tenant shall have the right to offset such
applicable portion thereof which Landlord failed to disburse against the Rental
due hereunder, together with interest thereon at the Applicable Rate computed
from the date such disbursement was due to Tenant in accordance with this
Section 3.5 through the date upon which such portion of the Applicable Tenant
Fund which Landlord failed to disburse is offset against such Rental.
(B) Landlord shall disburse a portion of the Applicable Tenant Fund
to Tenant (or at Tenant's request, to Tenant's general contractor or
construction manager) from time to time, within thirty (30) days after receipt
of the items set forth in Section 3.5(C) hereof, provided that on the date of a
request and on the date of disbursement from the Applicable Tenant Fund no Event
of Default shall have occurred and be continuing. Landlord shall have no
obligation to disburse any portion of the Seventh Floor Space Tenant Fund unless
and until the Seventh Floor Space Commencement Date has occurred. Landlord shall
portion of the Applicable Tenant Fund to or on behalf of Tenant until Tenant has
(i) disbursed an aggregate amount of at least Five Hundred Thousand and 00/100
Dollars ($500,000.00) (such amount for purposes of this Section 3.5 being
referred to herein as the "Required Amount") in respect of the Applicable
Initial Alterations (of which amount at least Four Hundred Twenty- Five Thousand
and 00/100 Dollars ($425,000.00) must be incurred for "hard" costs as described
in clause (A) of this Section 3.5), (ii) provided Landlord with copies of all
receipts, invoices and bills to reasonably substantiate that Tenant has spent
the Required Amount for the Applicable Initial Alterations, and (iii) provided
Landlord with waivers of lien for the Applicable Initial Alterations performed
in the Seventh Floor Space or the Tenth Floor Space, as the case may be, as of
the date Landlord makes its first disbursement of the Applicable Tenant Fund
from the contractors and materialmen involved in the performance of such
Applicable Initial Alterations (which waivers of lien may be conditioned upon
payment of an amount that is part of the requisition then being disbursed by
Landlord); provided, however, that if, as of the Seventh Floor Space
Commencement Date, Tenant's stock is traded publicly through the
"over-the-counter market" or through any recognized stock exchange, then Tenant
shall have no obligation to disburse the Required Amount prior to Landlord's
disbursing the Seventh Floor Space Tenant Fund to Tenant in accordance with this
Section 3.5. Disbursements from the Applicable Tenant Fund shall not be made
more frequently than monthly, and shall be in an amount equal to the aggregate
amounts theretofore paid or payable other than amounts on account of the
Required Amount (as certified by an officer of Tenant and Tenant's independent,
licensed architect) to Tenant's contractors, subcontractors and materialmen
which have not been the subject of a previous disbursement from the Applicable
Tenant Fund. In no event shall disbursements of the Applicable Tenant Fund on
account of Related Costs exceed (x) Two Hundred Fourteen Thousand Five Hundred
Sixty-Six and 75/100 Dollars ($214,566.75) in respect of the Tenth Floor Space
Tenant Fund, or (y) Two Hundred
<PAGE>
Twenty-Seven Thousand Nine Hundred Forty- Three and 00/100 Dollars ($227,943.00)
in respect of the Seventh Floor Space Tenant Fund.
(C) Landlord's obligation to make disbursements from the Applicable
Tenant Fund shall be subject to Landlord's verification of the total cost of the
Applicable Initial Alterations as estimated by Tenant's independent licensed
architect and receipt of: (a) a request for such disbursement from Tenant signed
by officer of Tenant, together with the certification required by Section 3.5(B)
hereof, (b) copies of all receipts, invoices and bills for the work completed
and materials furnished in connection with the Applicable Initial Alterations,
which are to be paid from the requested disbursement or which have been paid by
Tenant and for which Tenant is seeking reimbursement (it being agreed that
except for deposits for materials included in "soft costs" in accordance with
clause (A) of this Section 3.5, Landlord shall have no obligation to make a
disbursement from the Applicable Tenant Fund on account of materials in respect
of the Applicable Initial Alterations until such materials are incorporated in
the Seventh Floor Space or the Tenth Floor Space, as the case may be), (c)
copies of all contracts, work orders, change orders and other materials relating
to the work or materials which are the subject of the requested disbursement or
reimbursement, (d) if requested by Landlord, waivers of lien from all
contractors and materialmen involved in the performance of the Applicable
Initial Alterations relating to the portion of the Applicable Initial
Alterations theretofore performed and materials theretofore provided and for
which previous disbursements and/or the requested disbursement has been or is to
be made (except to the extent such waivers of lien were previously furnished to
Landlord upon a prior request), it being acknowledged that such lien waivers may
be conditioned upon payment of an invoice which is included in the subject
disbursement, and (e) a certificate of Tenant's independent licensed architect
stating that, in his opinion, the portion of the Applicable Initial Alterations
theretofore completed and for which the disbursement is requested was performed
in a good and workerlike manner and substantially in accordance with the final
detailed plans and specifications for such Applicable Initial Alterations, as
approved by Landlord.
(D) In no event shall the aggregate amount paid by Landlord to
Tenant under this Section 3.5 exceed the amount of the Applicable Tenant Fund.
Upon the completion of the Applicable Initial Alterations and satisfaction of
the conditions set forth in Section 3.5(E) hereof, any amount of the Applicable
Tenant Fund which has not been previously disbursed shall be retained by
Landlord; provided, however, that if (x) Tenant has disbursed the Required
Amount, and (y) the sum of the Required Amount and the amount of the Applicable
Tenant Fund theretofore disbursed to Tenant equals or exceeds the amount of the
Applicable Tenant Fund, then any amount of the Applicable Tenant Fund which has
not been previously disbursed shall be payable to Tenant on or prior to thirty
(30) days after Tenant's request therefor. Upon the disbursement of the entire
Applicable Tenant Fund (or the portion thereof if upon completion of the
Applicable Initial Alterations the Applicable Tenant Fund is not exhausted) in
accordance with this Section 3.5(D), Landlord shall have no further obligation
or liability whatsoever to Tenant for further disbursement of any portion of the
<PAGE>
Applicable Tenant Fund to Tenant. Subject to Landlord's obligation to disburse
the Applicable Tenant Fund, it is expressly understood and agreed that Tenant
shall complete, at its sole cost and expense, the Applicable Initial
Alterations, whether or not the Applicable Tenant Fund is sufficient to fund
such completion. Any costs to complete the Applicable Initial Alterations in
excess of the Applicable Tenant Fund shall be the sole responsibility and
obligation of Tenant.
(E) Within ninety (90) days after completion of the Applicable
Initial Alterations, Tenant shall deliver to Landlord and waivers of lien from
all contractors, subcontractors and materialmen involved in the performance of
the Applicable Initial Alterations and the materials furnished in connection
therewith (unless same previously were furnished pursuant to Section 3.5(C)
hereof), and a certificate from Tenant's independent licensed architect
certifying that (i) in his opinion the Applicable Initial Alterations have been
performed in a good and workerlike manner and completed in accordance with the
final detailed plans and specifications for such Applicable Initial Alterations
as approved by Landlord and (ii) all contractors, subcontractors and materialmen
have been paid for the Applicable Initial Alterations and materials furnished
through such date. Notwithstanding the foregoing, Tenant shall not be required
to deliver to Landlord any general release or waiver of lien if Tenant shall be
disputing in good faith the payment which would otherwise entitle Tenant to such
release or waiver, provided that Tenant shall keep Landlord advised in a timely
fashion of the status of such dispute and the basis therefor and Tenant shall
deliver to Landlord the waiver of lien when the dispute is settled. Nothing
contained in this Section, however, shall relieve Tenant from complying with the
provisions of Section 3.1(E) hereof.
(F) Tenant shall spend from the Applicable Tenant Fund no less than
(x) Twelve Thousand and 00/100 Dollars ($12,000.00) in the Tenth Floor Space,
and (y) Seventeen Thousand and 00/100 Dollars ($17,000.00) in the Seventh Floor
Space, in either case for the "hard" costs of installing restrooms in the Tenth
Floor Space or the Seventh Floor Space, as the case may be, that comply with the
American with Disabilities Act and all other applicable Requirements.
Section 3.6. Subject to the terms of this Section 3.6, Landlord shall
deliver to Tenant, in connection with Tenant's applications to the applicable
Governmental Authority for a building permit regarding any Alterations, three
(3) copies of a Form ACP-5, duly executed by an appropriate party and covering
all of the Premises, within two (2) weeks after Tenant delivers to Landlord the
final plans and specifications for the applicable Alterations. If (x) any
asbestos or asbestos containing materials (any asbestos or any such materials
being collectively referred to herein as "ACM") are located in the Premises, and
(y) Tenant reasonably determines that applicable Requirements require that such
ACM be abated before Tenant performs Alterations therein, then (i) Landlord, at
Landlord's sole cost and expense, shall perform such abatement, with due
diligence, in accordance with good construction practice and in compliance with
all applicable Requirements, in an effort to Substantially Complete
<PAGE>
such abatement within a reasonable period after the date that Tenant gives
Landlord notice thereof, and (ii) Landlord shall have reasonable access to the
Premises (if necessary) for the purpose of performing such abatement in
accordance with the provisions of Article 4 hereof, it being agreed that
Landlord shall not be required to (A) deliver a Form ACP-5 for the portion of
the Premises or the other portions of the Building in which Tenant, or any
Person claiming by, through or under Tenant, plans to perform the applicable
Alteration until the applicable ACM is abated as contemplated by this Section
3.6, or (B) abate any such ACM to the extent that such ACM is installed by
Tenant or any other party claiming by, through or under Tenant, after the
Commencement Date (or the Seventh Floor Space Commencement Date, as the case may
be). If (i) the Commencement Date (or the Seventh Floor Space Commencement Date,
as the case may be) has theretofore occurred, (ii) ACM is discovered in the
Premises, (iii) the existence or removal of such ACM actually delays Tenant's
performance of the Applicable Initial Alterations, and (iv) Tenant gives notice
thereof to Landlord (which includes reasonable evidence of such actual delay),
then the Applicable Rent Commencement Date shall be adjourned by one (1) day for
each day that Tenant's performance of the Applicable Initial Alterations is
actually delayed by reason of Landlord's performance of such abatement (or, if
the Applicable Rent Commencement Date has theretofore occurred, Tenant shall be
entitled to a one (1) day abatement of the Rental due hereunder for the Tenth
Floor Space or the Seventh Floor Space, as the case may be for each such day
that Tenant's performance is so actually delayed). Tenant shall cooperate with
Landlord, at no expense to Tenant, to minimize, to the extent reasonably
practicable, the duration of any such actual delay suffered by Tenant in the
performance of the applicable Alterations. If Tenant's performance of the
Applicable Initial Alterations is actually delayed by virtue of the
existence or presence of ACM in the Premises pursuant to this Section 3.6 on a
day when Landlord's failure to complete Landlord's Work pursuant to and in
accordance with Section 19.2 hereof also delays Tenant's performance of the
Applicable Initial Alterations, then Tenant shall only be entitled to one (1)
day's adjournment of the Applicable Rent Commencement Date (or a one (1) day
abatement of the Rental due hereunder, as the case may be) for such day.
Section 3.7. Subject to the terms of this Section 3.7, Landlord hereby
consents to Tenant, as part of the Initial Alterations, installing electrical
risers, telecommunications risers, or other similar risers (collectively, the
"Risers") in any of the stairwells depicted on Exhibit "F" attached hereto and
made a part hereof to the extent permitted by Requirements (it being agreed that
any Risers shall be enclosed or "boxed" within the applicable stairwell).
Landlord shall provide Tenant with all reasonably necessary access for the
installation of the Risers, provided that such access shall (i) not unreasonably
interfere with or interrupt the operation and maintenance of the Building, and
(ii) be upon such other terms reasonably designated by Landlord. If Tenant
installs any Risers, then such installation shall be Tenant's sole cost and
expense. Any such installation shall be performed in accordance with the
provisions of this Lease, including, without limitation, the provisions
pertaining to the performance of Alterations (it being acknowledged that
Tenant's installation of the
<PAGE>
Risers under this Section 3.7 shall be subject to Landlord's approval of
Tenant's plans and specifications therefor, which approval Landlord shall not
unreasonably withhold, condition or delay as otherwise provided in this Article
3). Tenant, at Tenant's sole cost and expense, shall repair and maintain any
such Risers during the Term in accordance with all applicable Requirements.
Landlord, at Landlord's cost and expense and at no cost to Tenant, and upon
reasonable prior notice to Tenant of not less than ninety (90) days, may, at any
time and from time to time during the Term, relocate any of the Risers, provided
that such relocation does not interfere other than to a de minimis extent with
the operation of Tenant's business. Any Risers installed by Tenant shall
constitute a Specialty Alteration for purposes hereof, it being understood,
however, that Tenant, upon the Expiration Date, shall not be required to remove
the Risers but shall at Tenant's sole cost and expense be required to remove and
discard the wiring and cabling within the Risers.
Section 3.8. Subject to the terms of this Section 3.8, Landlord shall not
unreasonably withhold, condition or delay its consent to Tenant, as part of the
Initial Alterations, installing louvers in place of windows for the Premises,
for purposes of drawing outside air into, or for exhausting air from, the
Premises to reasonably accommodate Tenant's supplemental HVAC system and any
other Alteration requiring an exhaust or air intake system. Tenant shall not use
any such louvers to exhaust air to the extent such exhaust violates any
applicable Requirements. Tenant's installation of such louvers shall be at
Tenant's sole cost and expense. Any installation of such louvers shall be
performed in accordance with the provisions of this Article 3. If Tenant
installs any louvers, then Tenant, at Tenant's sole cost and expense, shall
operate, repair, clean, and maintain such louvers in a manner that is consistent
with the operation of the Building as a first-class office building and that
complies with all applicable Requirements. Tenant acknowledges that Landlord, in
considering whether to consent to Tenant's request to install any such louvers,
shall have the right to take into account the aesthetic qualities of any such
louvers, the proximity of such louvers to the mechanical rooms on the particular
floor of the Building, the effect of such louvers on the exterior appearance of
the Building, and the proximity of any such louvers to louvers, ducts, or other
similar apparatus theretofore installed in the Building that in any such case
are used for purposes of drawing fresh air into the Building. Landlord, at
Landlord's cost and expense and at no cost to Tenant, and upon prior reasonable
notice to Tenant of not less than ninety (90) days, may, at any time during the
Term, relocate any of Tenant's louvers, provided that such relocation does not
interfere other than to a de minimis extent with the operation of Tenant's
business. Tenant's installation of such louvers as contemplated by this Section
3.8 shall constitute a Qualified Specialty Alteration for purposes hereof.
Section 3.9. Landlord shall not unreasonably withhold, delay, or condition
its consent to an Alteration consisting of the installation of a supplementary
air-cooled air conditioning system (and any equipment required to be installed
in connection therewith) to service the Premises. Tenant shall install any such
system at Tenant's sole cost and expense. If Tenant installs any such systems,
then such installation shall
<PAGE>
be in accordance with the provisions of this Lease, including, without
limitation, the provisions pertaining to the performance of Alterations (it
being acknowledged that Tenant's installation of such system under this Section
3.9 shall be subject to Landlord's approval of Tenant's plans and specifications
therefor, which approval Landlord shall not unreasonably withhold, condition or
delay as otherwise provided in this Article 3). Any such system installed by
Tenant shall be repaired and maintained during the Term at Tenant's sole cost
and expense in accordance with all applicable Requirements.
ARTICLE 4
REPAIRS-FLOOR LOAD
Section 4.1. Landlord shall operate, maintain and make all necessary
repairs (both structural and nonstructural) to the part of the Building Systems
which provide service to the Premises (but not to the distribution portions of
such Building Systems located within the Premises) and the structural portion of
the Building, the roof, and the sidewalks adjacent to the Building, and the
public portions of the Building, both exterior and interior, in conformance with
standards applicable to non-institutional first class office buildings in
Manhattan. Tenant, at Tenant's sole cost and expense, shall take good care of
the Premises and the fixtures, equipment and appurtenances therein and the
distribution portions of such Building Systems and shall make all nonstructural
repairs thereto as and when needed to preserve them in good working order and
condition, except for reasonable wear and tear, obsolescence and damage for
which Tenant is not responsible pursuant to the provisions of Article 10 hereof.
Notwithstanding the foregoing, all damage or injury to the Premises or to any
other part of the Building and Building Systems, or to its fixtures, equipment
and appurtenances (other than any damage with respect to which Article 10 shall
apply), whether requiring structural or nonstructural repairs, caused by or
resulting from the negligence of, or Alterations made by, Tenant, Tenant's
agents, employees, invitees or licensees, shall be repaired at Tenant's sole
cost and expense, by Tenant to the reasonable satisfaction of Landlord (if the
required repairs are nonstructural in nature and do not affect any
Building System), or by Landlord (if the required repairs are structural in
nature or affect any Building System). All of the aforesaid repairs shall be of
first quality and of a class consistent with non-institutional first class
office building work or construction and shall be made in accordance with the
provisions of Article 3 hereof. If Tenant fails after thirty (30) days' notice
(or such shorter period as Landlord may be permitted pursuant to any Superior
Lease or Mortgage or such shorter period as may be required due to an emergency)
to proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by Landlord at the expense of Tenant, and the expenses thereof
incurred by Landlord, with interest thereon at the Applicable Rate, shall be
forthwith paid to Landlord as additional rent within thirty (30) days after
rendition of a bill or statement therefor. Tenant shall give Landlord prompt
notice of any defective condition in the Building or in any Building System,
located in, servicing or passing through the Premises of which Tenant has
knowledge.
<PAGE>
Section 4.2. Tenant shall not place a load upon any floor of the Premises
exceeding fifty (50) pounds per square foot "live load". Tenant shall not move
any safe, heavy machinery, heavy equipment, business machines, freight, bulky
matter or fixtures into or out of the Building without Landlord's prior consent,
which consent shall not be unreasonably withheld, conditioned or delayed, and
shall make payment to Landlord of Landlord's reasonable, out-of-pocket costs in
connection therewith. If such safe, machinery, equipment, freight, bulky matter
or fixtures requires special handling, Tenant shall employ only persons holding
a Master Rigger's license to do said work. All work in connection therewith
shall comply with all Requirements and the Rules and Regulations, and shall be
done at any time, provided that if such work is reasonably likely to materially
interfere with the operation of the Building or unreasonably interfere with the
use and occupancy of the Building by other tenants, then such work shall be done
during such hours as Landlord may reasonably designate. Business machines and
mechanical equipment shall be placed and maintained by Tenant at Tenant's
expense in settings sufficient in Landlord's reasonable judgment to absorb and
prevent vibration, noise and annoyance. Except as expressly provided in this
Lease, there shall be no allowance to Tenant for a diminution of rental value
and no liability on the part of Landlord by reason of inconvenience, annoyance
or injury to business arising from Landlord, Tenant or others making, or failing
to make, any repairs, alterations, additions or improvements in or to any
portion of the Building or the Premises, or in or to fixtures, appurtenances or
equipment thereof.
Section 4.3. Landlord shall use its reasonable efforts to minimize
interference with Tenant's use and occupancy of the Premises in making any
repairs, alterations, additions or improvements; provided, however, that
Landlord shall have no obligation to employ contractors or labor at so-called
overtime or other premium pay rates or to incur any other overtime costs or
expenses whatsoever, except that Landlord, at its expense but subject to
recoupment pursuant to Article 27 hereof, shall employ contractors or labor at
so-called overtime or other premium pay rates if necessary to make any repair
required to be made by it hereunder to remedy any condition that either (i)
results in a denial of access to the Premises, (ii) threatens the health or
safety of any occupant of the Premises, or (iii) except in the case of a fire or
other casualty, materially interferes with Tenant's ability to conduct its
business in the Premises. In all other cases, at Tenant's request, Landlord
shall employ contractors or labor at so-called overtime or other premium pay
rates and incur any other overtime costs or expenses in making any repairs,
alterations, additions or improvements, and Tenant shall pay to Landlord, as
additional rent, within thirty (30) Business Days after demand, an amount equal
to the difference between the overtime or other premium pay rates and the
regular pay rates for such labor and any other overtime costs or expenses so
incurred.
Section 4.4. Both the design and decoration of the elevator areas of
each entire floor of the Premises and the public corridors of any entire floor
of the Premises occupied by more than one (1) occupant (as a result of a
subletting or occupancy arrangement, if any, in accordance with Article 12
hereof) shall be subject to Landlord's
<PAGE>
approval, which approval shall not be unreasonably withheld, conditioned or
delayed, and such elevator areas and public corridors shall be maintained and
kept clean by Tenant to Landlord's reasonable satisfaction. Nothing contained in
the foregoing sentence, however, shall vitiate Landlord's obligation to clean
the Premises as provided in Section 28.4 hereof. ARTICLE 5 WINDOW CLEANING
Tenant shall not clean, nor require, permit, suffer or allow any window in
the Premises to be cleaned from the outside in violation of Section 202 of the
Labor Law, or any other Requirement, or of the rules of the Board of Standards
and Appeals, or of any other board or body having or asserting jurisdiction.
ARTICLE 6
REQUIREMENTS OF LAW
Section 6.1. (A) Tenant, at Tenant's expense, shall comply with all
Requirements applicable to the use and occupancy of the Premises, including,
without limitation, those applicable to the making of any Alterations therein or
the result of the making thereof and those applicable by reason of the nature or
type of business operated by Tenant in the Premises except that (other than with
respect to the making of Alterations or the result of the making thereof) Tenant
shall not be under any obligation to make any Alteration in order to comply with
any Requirement applicable to the mere general "office" use (as opposed to the
manner of use) of the Premises, unless otherwise expressly required herein.
Tenant shall not do or permit to be done any act or thing upon the Premises
which will invalidate or be in conflict with a standard "all-risk" insurance
policy; and shall not do, or permit anything to be done in or upon the Premises,
or bring or keep anything therein, except as now or hereafter permitted by the
New York City Fire Department, New York Board of Fire Underwriters, the
Insurance Services Office or other authority having jurisdiction and then only
in such quantity and manner of storage as not to increase the rate for fire
insurance applicable to the Building, or use the Premises in a manner
(as opposed to mere use as general "offices") which shall increase the rate of
fire insurance on the Building or on property located therein, over that in
similar type buildings or in effect on the Commencement Date. If by reason of
Tenant's failure to comply with the provisions of this Article, the fire
insurance rate shall be higher than it otherwise would be, then Tenant shall
desist from doing or permitting to be done any such act or thing and shall
reimburse Landlord, as additional rent hereunder, for that part of all fire
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant, and shall make such reimbursement upon demand
by Landlord. In any action or proceeding wherein Landlord and Tenant are
parties, a schedule or "make up" of rates for the Building or the Premises
issued by the Insurance Services Office, or other body
<PAGE>
fixing such fire insurance rates, shall be conclusive evidence of the facts
therein stated and of the several items and charges in the fire insurance rates
then applicable to the Building.
(B) Landlord, at its sole cost and expense (but subject to
recoupment as provided in Article 27 hereof), shall comply with all Requirements
applicable to the Premises and the Building which affect Tenant's use or
occupancy of the Premises other than those Requirements with respect to which
Tenant or other tenants or occupants of the Building shall be required to
comply, subject to Landlord's right to contest the applicability or legality
thereof.
Section 6.2. Tenant, at its sole cost and expense and after notice to
Landlord, may contest by appropriate proceedings prosecuted diligently and in
good faith, the legality or applicability of any Requirement affecting the
Premises with which Tenant is obligated to comply, provided that (a) Landlord
(or any Indemnitee) shall not be subject to imprisonment or to prosecution for a
crime, nor shall the Real Property or any part thereof be subject to being
condemned or vacated, nor shall the certificate of occupancy for the Premises or
the Building be suspended or threatened to be suspended by reason of
non-compliance or by reason of such contest; (b) before the commencement of such
contest, if Landlord or any Indemnitee may be subject to any civil fines or
penalties or other criminal penalties or if Landlord may be liable to any
independent third party as a result of such noncompliance, Tenant shall furnish
to Landlord either (i) a bond of a surety company satisfactory to Landlord, in
form and substance reasonably satisfactory to Landlord, and in an amount equal
to one hundred twenty percent (120%) of the sum of (A) the cost of such
compliance, (B) the criminal or civil penalties or fines that may accrue by
reason of such non-compliance (as reasonably estimated by Landlord), and (C) the
amount of such liability to independent third parties (as reasonably estimated
by Landlord), and shall indemnify Landlord (and any Indemnitee) against the cost
of such compliance and liability resulting from or incurred in connection with
such contest or non-compliance (except that Tenant shall not be required to
furnish such bond to Landlord if it has otherwise furnished any similar bond
required by law to the appropriate Governmental Authority and has named Landlord
as a beneficiary thereunder) or (ii) other security reasonably satisfactory in
all respects to Landlord; (c) such non-compliance or contest shall not
constitute or result in a violation (either with the giving of notice or the
passage of time or both) of the terms of any Mortgage or Superior Lease, or if
such Superior Lease or Mortgage shall condition such non-compliance or contest
upon the taking of action or furnishing of security by Landlord, such action
shall be taken or such security shall be furnished at the
expense of Tenant; and (d) Tenant shall keep Landlord regularly advised as to
the status of such proceedings. Without limiting the applicability of the
foregoing, Landlord (or any Indemnitee) shall be deemed subject to prosecution
for a crime if Landlord (or any Indemnitee), a Lessor, a Mortgagee or any of
their officers, directors, partners, shareholders, agents or employees is
charged with a crime of any kind whatsoever, unless such charges are withdrawn
ten (10) days before Landlord (or any Indemnitee), such Lessor or such Mortgagee
or such officer, director, partner, shareholder, agent or
<PAGE>
employee, as the case may be, is required to plead or answer thereto.
ARTICLE 7
SUBORDINATION
Section 7.1. (A) Provided that (a) a Mortgagee shall execute and deliver
to Tenant an agreement to the effect that, if there shall be a foreclosure of
its Mortgage, such Mortgagee will not make Tenant a party defendant to such
foreclosure, evict Tenant, disturb Tenant's possession under this Lease, or
terminate or disturb Tenant's leasehold estate or rights hereunder, and will
recognize Tenant as the direct tenant of such Mortgagee on the same terms and
conditions as are contained in this Lease, subject to the provisions hereinafter
set forth, provided no Event of Default shall have occurred and be continuing
hereunder or (b) a Lessor shall execute and deliver to Tenant an agreement to
the effect that if its Superior Lease shall terminate or be terminated for any
reason, Lessor will not evict Tenant, disturb Tenant's possession under this
Lease, or terminate or disturb Tenant's leasehold estate or rights hereunder,
and will recognize Tenant as the direct tenant of such Lessor on the same terms
and conditions as are contained in this Lease (subject to the provisions
hereinafter set forth), provided no Event of Default shall have occurred and be
continuing and Lessor shall not make Tenant a party in any action to terminate
such Superior Lease or to remove or evict Tenant from the Premises provided no
Event of Default shall have occurred and be continuing (any such agreement, or
any agreement of similar import, from a Mortgagee or a Lessor, as the case may
be, being hereinafter referred to as a "Nondisturbance Agreement"), this Lease
shall be subject and subordinate to such Superior Lease and/or to such Mortgage.
Subject to receipt of a Nondisturbance Agreement, this clause shall be
self-operative and no further instrument of subordination shall be required from
Tenant to make the interest of any Lessor or Mortgagee superior to the interest
of Tenant hereunder. Tenant, however, at Tenant's sole cost and expense, shall
execute and deliver promptly the Nondisturbance Agreement or any other agreement
that Landlord may reasonably request in confirmation of such subordination. If
the date of expiration of any Superior Lease shall be the same day as the
Expiration Date, the Term shall end and expire twelve (12) hours prior to the
expiration of the Superior Lease. If, in connection with the financing of the
Real Property, the Building or the interest of the lessee under any Superior
Lease, or if in connection with the entering into of a Superior Lease, any
lending institution or Lessor shall request reasonable modifications of this
Lease that do not increase Tenant's monetary obligations under this Lease, or
adversely affect or diminish the rights, or increase the other obligations of
Tenant under this Lease, in any such case except to a de minimis extent, Tenant
shall make such modifications.
(B) Any Nondisturbance Agreement may be made on the condition that
neither the Mortgagee nor the Lessor (other than a Mortgagee or a Lessor that is
an Affiliate of Landlord), as the case may be, nor any Person claiming by,
through or under such Mortgagee or Lessor, as the case may be, including a
purchaser at a foreclosure sale, shall be:
<PAGE>
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting Landlord), or
(2) subject to any defense, offsets or abatements which Tenant
may have against any prior landlord (including, without limitation, the then
defaulting Landlord), (except for any offsets expressly permitted under this
Lease, including, without limitation (a) the offset set forth in this Lease to
which Tenant is entitled after Tenant exercises Tenant's rights hereunder to
perform work that Landlord failed to perform, (b) the offset set forth in this
Lease to which Tenant is entitled if Landlord does not disburse the Applicable
Tenant Fund, (c) the abatement set forth in Section 14.5 of this Lease, and (d)
any adjournment of the Applicable Rent Commencement Date expressly set forth
herein), or
(3) bound by any payment of Rental which Tenant may have made
to any prior landlord (including, without limitation, the then defaulting
Landlord) more than thirty (30) days in advance of the date upon which such
payment was due, or
(4) bound by any obligation to make any payment to or on
behalf of Tenant, or to make any payments on account of any Applicable Tenant
Fund (it being understood, however, that if Landlord fails to disburse the
Applicable Tenant Fund in accordance with the provisions hereof, then Tenant
shall have the right to offset the applicable portion of the Applicable Tenant
Fund which Landlord failed to disburse against the Rental due hereunder in
accordance with Section 3.5(A) hereof, from and after the date that such
Mortgagee or such Lessor, or any such Person, succeeds to the interest of the
then defaulting Landlord), or
(5) bound by any obligation to perform any work or to make
improvements to the Premises, except for (i) repairs, alterations and
maintenance pursuant to the provisions of Articles 4 or 6 hereof, the need for
which repairs, alterations and maintenance first arises after the date upon
which such owner, Lessor or Mortgagee shall be entitled to possession of the
Premises, (ii) repairs to the Premises or any part thereof as a result of damage
by fire or other casualty (x) that occur after the date upon which such owner,
Lessor or Mortgagee shall be entitled to possession of the Premises, or (y) that
occur prior to such date, but only to the extent (in the case of clause (y))
that such repairs can be reasonably made from the net proceeds of any insurance
actually made available to such Mortgagee, and (iii) repairs to the Premises as
a result of a partial condemnation pursuant to Article 11 hereof, but only to
the extent that such repairs can be reasonably made from the net proceeds of any
award made available to such owner, Lessor or Mortgagee, or
(6) bound by any amendment or modification of this Lease made
without its consent if such amendment or modification was made after Tenant was
notified of the existence of such Superior Lease or Mortgage, or
<PAGE>
(7) bound to return Tenant's security deposit, if any, until
such deposit has come into its actual possession and Tenant would be entitled to
such security deposit pursuant to the terms of this Lease.
(C) If required by the Lessor or Mortgagee, within seven (7) days
after notice thereof, Tenant shall join in any Nondisturbance Agreement to
indicate its concurrence with the provisions thereof and its agreement set forth
in Section 7.2 hereof to attorn to such Lessor or Mortgagee, as Tenant's
landlord hereunder. Tenant shall promptly so accept, execute and deliver any
Nondisturbance Agreement proposed by any such Mortgagee or Lessor which conforms
to the provisions of this Article 7. Any such Nondisturbance Agreement may also
contain other terms and conditions as may otherwise be required by such Lessor
or Mortgagee which do not increase Tenant's monetary obligations under this
Lease, or, except to a de minimis extent, adversely affect or diminish the
rights, or increase the other obligations of Tenant under this Lease.
Section 7.2. If at any time prior to the expiration of the Term, any
Superior Lease shall terminate or be terminated for any reason or any Mortgagee
comes into possession of the Real Property or the Building or the estate created
by any Superior Lease by receiver or otherwise, Tenant agrees, at the election
and upon demand of any owner of the Real Property or the Building, or of the
Lessor, or of any Mortgagee in possession of the Real Property or the Building,
to attorn, from time to time, to any such owner, Lessor or Mortgagee or any
person acquiring the interest of Landlord as a result of any such termination,
or as a result of a foreclosure of the Mortgage or the granting of a deed in
lieu of foreclosure, upon the then executory terms and conditions of this Lease,
subject to the provisions of Section 7.1 hereof, for the remainder of the Term,
provided that such owner, Lessor or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, shall then be entitled to
possession of the Premises. The provisions of this Section 7.2 shall enure to
the benefit of any such owner, Lessor or Mortgagee, shall apply notwithstanding
that, as a matter of law, this Lease may terminate upon the termination of any
Superior Lease, and shall be self-operative upon any such demand, and no further
instrument shall be required to give effect to said provisions. Tenant, however,
upon demand of any such owner, Lessor or Mortgagee, shall execute, at Tenant's
expense, from time to time, instruments, in recordable form, which are
reasonably required by such owner, Lessor or Mortgagee, in confirmation of the
foregoing provisions of this Section 7.2, satisfactory to any such owner, Lessor
or Mortgagee, acknowledging such attornment and setting forth the terms and
conditions of its tenancy. Nothing contained in this Section 7.2 shall be
construed to impair any right otherwise exercisable by any such owner, Lessor or
Mortgagee except as may be set forth in Section 7.1 or in any Nondisturbance
Agreement.
Section 7.3. From time to time, within fifteen (15) days next following
request by Landlord, any Mortgagee or any Lessor, Tenant shall deliver to
Landlord, such Mortgagee or such Lessor a written statement executed by Tenant,
in form satisfactory
<PAGE>
to Landlord, such Mortgagee or such Lessor, (1) stating that this Lease is then
in full force and effect and has not been modified (or if modified, setting
forth all modifications), (2) setting forth the date to which the Fixed Rent,
Escalation Rent and other items of Rental have been paid, (3) stating whether or
not, to the best knowledge of Tenant (but without having made any
investigation), Landlord is in default under this Lease, and, if Landlord is in
default, setting forth the specific nature of all such defaults, and (4) as to
any other matters reasonably requested by Landlord, such Mortgagee or such
Lessor and related to this Lease. Tenant acknowledges that any statement
delivered pursuant to this Section 7.3 may be relied upon by any purchaser or
owner of the Real Property or the Building, or Landlord's interest in the Real
Property or the Building or any Superior Lease, or by any Mortgagee, or by an
assignee of any Mortgagee, or by any Lessor.
Section 7.4. From time to time, within fifteen (15) days next following
request by Tenant, Landlord shall deliver to Tenant a written statement executed
by Landlord (i) stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all modifications), (ii)
setting forth the date to which the Fixed Rent, Escalation Rent and any other
items of Rental have been paid, (iii) stating whether or not, to the best
knowledge of Landlord (but without having made any investigation), Tenant is in
default under this Lease, and, if Tenant is in default, setting forth the
specific nature of all such defaults, and (iv) as to any other matters
reasonably requested by Tenant and related to this Lease. Landlord acknowledges
that any statement delivered pursuant to this Section 7.4 may be relied upon by
any subtenant or assignee of Tenant.
Section 7.5. As long as any Superior Lease or Mortgage shall exist (other
than any Superior Lease or Mortgage held by an Affiliate of Landlord), Tenant
shall not seek to terminate this Lease by reason of any act or omission of
Landlord until Tenant shall have given written notice of such act or omission to
all Lessors and Mortgagees at such addresses as shall have been furnished to
Tenant by such Lessors and Mortgagees and, if any such Lessor or Mortgagee, as
the case may be, shall have notified Tenant within ten (10) Business Days
following receipt of such notice of its intention to remedy such act or
omission, until a reasonable period of time (not to exceed ninety (90) days)
shall have elapsed following the giving of such notice, during which period such
Lessors and Mortgagees shall have the right, but not the obligation, to remedy
such act or omission.
Section 7.6. Tenant hereby irrevocably waives any and all right(s) it may
have in connection with any zoning lot merger or transfer of development rights
with respect to the Real Property including, without limitation, any rights it
may have to be a party to, to contest, or to execute, any Declaration of
Restrictions (as such term is used in Section 12-10 of the Zoning Resolution of
The City of New York effective December 15, 1961, as amended) with respect to
the Real Property, which would cause the Premises to be merged with or unmerged
from any other zoning lot pursuant to such Zoning Resolution or to any document
of a similar nature and purpose, and Tenant agrees that this Lease
<PAGE>
shall be subject and subordinate to any Declaration of Restrictions or any other
document of similar nature and purpose now or hereafter affecting the Real
Property. In confirmation of such subordination and waiver, Tenant shall execute
and deliver promptly any certificate or instrument that Landlord reasonably may
request.
Section 7.7. If Tenant enters into a Major Sublease, then, subject to the
terms of this Section 7.7, Landlord, promptly after Tenant's request, shall
execute and deliver to the applicable subtenant under such Major Sublease an
agreement (a "Recognition Agreement"), in form and substance reasonably
satisfactory to Landlord, to the effect that if this Lease terminates during the
term of the applicable Major Sublease for any reason other than pursuant to
Articles 10 or 11 hereof, Landlord will not evict such subtenant, disturb such
subtenant's possession or terminate or disturb such subtenant's leasehold estate
or rights thereunder, and will recognize such subtenant as the direct tenant of
Landlord on the Applicable Terms; provided, however, that if in addition to at
least the entire rentable area on one (1) full floor of the Building, the Major
Sublease demises to the subtenant thereunder less than the entire rentable area
on another floor, then Landlord, at Landlord's option, may elect to deliver a
Recognition Agreement to the applicable subtenant in respect of such Major
Sublease that excludes the space demised on such other floor that exceeds (x)
Thirty Thousand Five Hundred (30,500) square feet of rentable area in respect of
the Tenth Floor Space, or (y) Thirty-Two Thousand (32,000) square feet of
rentable area in respect of the Seventh Floor Space, as the case may be, from
the protection afforded by such Recognition Agreement (the space that Landlord
excludes from the protection afforded by a Recognition Agreement being referred
to herein as the "Excluded Space")(and, accordingly, if this Lease terminates
during the term of the applicable Major Sublease for any reason, Landlord may
elect to evict such subtenant from the Excluded Space, disturb such subtenant's
possession therein and terminate such subtenant's leasehold estate or rights
thereunder). Landlord shall reasonably determine the configuration and location
of the Excluded Space. If Landlord makes such an election, then Landlord shall
notify Tenant thereof on or prior to the tenth (10th) day after the date that
Landlord receives Tenant's request for a Recognition Agreement for such Major
Sublease. If Tenant still desires a Recognition Agreement in respect of such
Major Sublease, then Tenant shall so notify Landlord on or prior to the tenth
(10th) day after the date upon which Tenant receives Landlord's notice (it being
understood that if Tenant fails to notify Landlord within such ten (10) day
period, then Tenant's request for such Recognition Agreement shall be deemed to
be withdrawn). Tenant shall not have the right to request a Recognition
Agreement as contemplated by this Section 7.7 (w) more than forty-five (45) days
after the applicable Major Sublease is executed and delivered by Tenant and the
applicable subtenant, (x) if Tenant is not then a LivePerson Party, (y) if an
Event of Default has occurred and is then continuing, and (z) if the financial
condition of the applicable subtenant is not reasonably satisfactory to Landlord
(it being understood that if such subtenant's net worth, determined in
accordance with generally accepted accounting principles, is equal to or greater
than ten (10) times the annual Fixed Rent that would be payable by the
applicable subtenant to Landlord pursuant to the Applicable Terms or if such
subtenant's net worth, determined in accordance with generally accepted
<PAGE>
accounting principles, is less than ten (10) times but more than five (5) times
the annual Fixed Rent that would be payable by the applicable subtenant to
Landlord pursuant to the Applicable Terms and such subtenant posts a security
deposit of fifty percent (50%) of the then annual Fixed Rent, then such
subtenant's financial condition shall be deemed to be reasonably satisfactory to
Landlord).
Section 7.8. As used herein, the term "Applicable Terms" shall mean all of
the terms and conditions set forth in this Lease, with the understanding that:
(i) the annual Fixed Rent payable by the applicable subtenant
at any time from and after the Recognition Effective Date shall be an amount
equal to the greatest of (A) the rental that would have been payable by the
applicable subtenant under the Major Sublease at such time if the applicable
Major Sublease remained in effect, (B) the product obtained by multiplying (x)
the quotient obtained by dividing (I) the Fixed Rent that would have then been
payable by Tenant under this Lease at such time if this Lease then remained in
full force and effect, by (II) the number of square feet of rentable area
included in the Premises on the day immediately preceding the Recognition
Effective Date, by (y) the number of square feet of rentable area demised by
Tenant to the applicable subtenant under the applicable Major Sublease, and (C)
the Rental Value for the portion of the Premises demised under the Major
Sublease (the "Major Sublease Fair Market Rent") as of the Recognition Effective
Date, as determined pursuant to Article 41 hereof;
(ii) the subtenant under the applicable Major Sublease shall
have no right to receive from Landlord any payments on account of the Applicable
Tenant Fund;
(iii) the term of the applicable subtenant's direct tenancy
shall expire on the Fixed Expiration Date (it being the parties' intention that
such subtenant shall not have any right to extend the term of such direct
tenancy to a date that occurs later than the Fixed Expiration Date);
(iv) if, on the Recognition Effective Date, the applicable
subtenant's net worth determined in accordance with generally accepted
accounting principles consistently applied, is (I) less than five (5) times the
annual Fixed Rent determined pursuant to clause (i) above, then, on the
Recognition Effective Date, the applicable subtenant shall deposit with the
party that then constitutes the applicable subtenant's lessor an amount equal to
the annual Fixed Rent determined pursuant to clause (i) above as security for
such subtenant's obligations to such party in respect of such direct tenancy, or
(II) at least five (5) times but less than ten (10) times the Fixed Rent
determined pursuant to clause (i) above, then, on the Recognition Effective
Date, the applicable subtenant shall deposit with the party that then
constitutes the applicable subtenant's lessor an amount equal to fifty percent
(50%) of the annual Fixed Rent determined pursuant to clause (i) above as
security for such subtenant's obligations to such party in respect of such
direct tenancy;
<PAGE>
(v) for purposes of such direct tenancy, the Space Factor
shall be deemed to be the number of square feet of rentable area in the space
demised by the applicable Major Sublease, excluding any Excluded Space;
(vi) for purposes of such direct tenancy, Tenant's Share shall
be deemed to be the quotient (expressed as a percentage) obtained by dividing
(x) the Space Factor as determined pursuant to clause (v) above, by (y) the
number of square feet of rentable area in the Building (other than any portion
of the Building that is used for retail purposes);
(vii) the applicable subtenant shall not be deemed to
constitute a LivePerson Party for purposes of such direct tenancy;
(viii) the applicable subtenant shall not have the right to
such direct tenancy (and accordingly, the applicable subtenant, at the lessor's
option, shall have no right to remain in occupancy of the applicable portion of
the Premises from and after the Recognition Effective Date) if (w) this Lease is
terminated by reason of an Event of Default that derives from the applicable
subtenant's default under the applicable Major Sublease, (x) on the day
immediately preceding the Recognition Effective Date, the applicable Major
Sublease demises less than the entire rentable area of the Tenth Floor Space or
the entire rentable area of the Seventh Floor Space, as the case may be, (y) on
the day immediately preceding the Recognition Effective Date, the applicable
subtenant then occupies less than seventy-five percent (75%) of the entire
rentable area demised by the Major Sublease for the conduct of business, or (z)
the applicable subtenant is the Person, or an Affiliate of the Person, that
constituted Tenant immediately prior to the Recognition Effective Date; and
(ix) the party that constitutes such subtenant's direct lessor
shall not be:
(1) liable for any act or omission of such subtenant's
lessor immediately prior to the Recognition Effective Date;
(2) subject to any defense or offsets which the
applicable subtenant may have against any prior lessor;
(3) bound by any payment of rental which the applicable
subtenant may have made to any prior lessor more than thirty (30) days in
advance of the due date therefor; or
(4) bound by any of the provisions of the applicable
Major Sublease.
As used herein, the term "Recognition Effective Date" shall mean the date when
<PAGE>
Landlord, the Lessor, Mortgagee or any other Person claiming by, through or
under the Mortgagee (including, without limitation, a purchaser of a foreclosure
sale) becomes the direct lessor of the applicable subtenant under a Major
Sublease as contemplated by a Recognition Agreement.
Section 7.9. Tenant shall submit to Landlord, with each request for a
Recognition Agreement financial information about the subtenant for whose
benefit such agreement is requested, including, without limitation,
documentation of such subtenant's net worth determined in accordance with
generally accepted accounting principles.
Section 7.10. Landlord represents that: (a) Landlord is not in default in
respect of its material obligations under the Existing Ground Lease, (b)
Landlord has delivered to Tenant a true and correct copy of the Existing Ground
Lease, (c) the term of the Existing Ground Lease was validly extended to expire
on December 31, 2020, (d) there are no mortgages encumbering Landlord's interest
in the Real Property, and (e) there are no Superior Leases other than the
Existing Ground Lease. Promptly after the date hereof, Landlord shall request a
Nondisturbance Agreement from the Lessor under the Existing Ground Lease.
ARTICLE 8
RULES AND REGULATIONS
Tenant and Tenant's contractors, employees, agents, visitors, invitees and
licensees shall comply with the Rules and Regulations. Tenant shall have the
right to dispute the reasonableness of any additional Rule or Regulation
hereafter adopted by Landlord. If Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter adopted by Landlord, the dispute shall
be determined by arbitration in the City of New York in accordance with the
rules and regulations then obtaining of the American Arbitration Association or
its successor. Any such determination shall be final and conclusive upon the
parties hereto. The right to dispute the reasonableness of any additional Rule
or Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice upon Landlord within thirty (30) days after
receipt by Tenant of notice of the adoption of any such additional Rule or
Regulation. Nothing in this Lease contained shall be construed to impose upon
Landlord any duty or obligation to enforce the Rules and Regulations or terms,
covenants or conditions in any other lease against any other tenant, and
Landlord shall not be liable to Tenant for violation of the same by any other
tenant, its employees, agents, visitors or licensees, except that Landlord shall
not enforce any Rule or Regulation against Tenant which Landlord shall not then
be enforcing against all other office tenants in the Building (other than
Landlord or its Affiliates). In the event of any inconsistency between the
provisions of this Lease and the provisions of any Rule or Regulation, the
provisions of this Lease shall control.
<PAGE>
ARTICLE 9
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
Section 9.1. (A) Any Building employee to whom any property shall be
entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's
agent with respect to such property and neither Landlord nor its agents shall be
liable for any damage to property of Tenant or of others entrusted to employees
of the Building, nor for the loss of or damage to any property of Tenant by
theft or otherwise. Neither Landlord nor its agents shall be liable for any
injury (or death) to persons or damage to property, or interruption of Tenant's
business, resulting from fire or other casualty; nor shall Landlord or its
agents be liable for any such injury (or death) to persons or damage caused by
other tenants or persons in the Building or caused by construction of any
private, public or quasi-public work; nor shall Landlord be liable for any
injury (or death) to persons or damage to property or improvements, or
interruption of Tenant's business, resulting from any latent defect in the
Premises or in the Building (provided that the foregoing shall not relieve
Landlord from its obligations, if any, to repair such latent defect pursuant to
the provisions of Article 4 hereof or affect Tenant's rights pursuant to Section
14.5 hereof. Anything in this Article 9 to the contrary notwithstanding, except
as set forth in Articles 4, 10, 13, 28 and 35 of this Lease and otherwise as
expressly provided herein, Landlord shall not be relieved from responsibility
directly to Tenant for any loss or damage caused directly to Tenant wholly or in
part by the negligent acts or omissions of Landlord.
(B) If at any time any windows of the Premises are temporarily
closed, darkened or bricked-up due to any Requirement or by reason of repairs,
maintenance, alterations, or improvements to the Building performed in
accordance with Article 4, or any of such windows are permanently closed,
darkened or bricked-up due to any Requirement, Landlord shall not be liable for
any damage Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor, nor abatement or diminution of Fixed Rent or any other
item of Rental, nor shall the same release Tenant from its obligations
hereunder, nor constitute an actual or constructive eviction, in whole or in
part, by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise, nor impose any liability upon
Landlord or its agents. If at any time the windows of the Premises are
temporarily closed, darkened or bricked-up, as aforesaid, then, unless Tenant is
required pursuant to the Lease to perform the repairs, maintenance, alterations,
or improvements, or to comply with the Requirements, which resulted in such
windows being closed, darkened or bricked-up, Landlord shall perform such
repairs, maintenance, alterations or improvements and comply with the applicable
Requirements with reasonable diligence and otherwise take such action as may be
reasonably necessary to minimize the period during which such windows are
temporarily closed, darkened, or bricked-up.
(C) Tenant shall immediately notify Landlord of any fire or
accident in the Premises.
<PAGE>
Section 9.2. Tenant shall obtain and keep in full force and effect (i) an
"all risk" insurance policy for Tenant's Specialty Alterations and Tenant's
Property at the Premises in an amount equal to one hundred percent (100%) of the
replacement value thereof, and (ii) a policy of commercial general liability and
property damage insurance on an occurrence basis, with a broad form contractual
liability endorsement. Such policies shall provide that Tenant is named as the
insured. Landlord, Landlord's managing agent, Landlord's agents and any Lessors
and any Mortgagees (whose names shall have been furnished to Tenant) shall be
added as additional insureds, as their respective interests may appear, with
respect to the insurance required to be carried pursuant to clauses (i) and (ii)
above. Such policy with respect to clause (ii) above shall include a provision
under which the insurer agrees to indemnify, defend and hold Landlord,
Landlord's managing agent, Landlord's agents and such Lessors and Mortgagees
harmless from and against, subject to the limits of liability set forth in this
Section 9.2, all cost, expense and liability arising out of, or based upon, any
and all claims, accidents, injuries and damages mentioned in Article 35. In
addition, the policy required to be carried pursuant to clause (ii) above shall
contain a provision that (a) no act or omission of Tenant shall affect or limit
the obligation of the insurer to pay the amount of any loss sustained and (b)
the policy shall be non-cancelable with respect to Landlord, Landlord's managing
agent, Landlord's agents and such Lessors and Mortgagees (whose names and
addresses shall have been furnished to Tenant) unless thirty (30) days' prior
written notice shall have been given to Landlord by certified mail, return
receipt requested, which notice shall contain the policy number and the names of
the insured and additional insureds. In addition, upon receipt by Tenant of any
notice of cancellation or any other notice from the insurance carrier which may
adversely affect the coverage of the insureds under such policy of insurance,
Tenant shall immediately deliver to Landlord and any other additional insured
hereunder a copy of such notice. The minimum amounts of liability under the
policy of insurance required to be carried pursuant to clause (ii) above shall
be a combined single limit with respect to each occurrence in an amount of
$5,000,000 for injury (or death) to persons and damage to property, which amount
shall be increased from time to time (but not more than once in any three (3)
year period) to that amount of insurance which in Landlord's reasonable judgment
is then being customarily required by prudent landlords of non-institutional
first class buildings in New York City, provided the same is not inconsistent
with the minimum amounts of insurance then required by Landlord for other office
tenants in the Building. All insurance required to be carried by Tenant pursuant
to the terms of this Lease shall be effected under valid and enforceable
policies issued by reputable and independent insurers permitted to do business
in the State of New York, and rated in Best's Insurance Guide, or any successor
thereto (or if there be none, an organization having a national reputation) as
having a general policyholder rating of "A" and a financial rating of at least
"XIII".
Section 9.3. Landlord shall obtain and keep in full force and effect
insurance against loss or damage by fire and other casualty to the Building,
including Tenant's Alterations (exclusive of Specialty Alterations), as may be
insurable under then
<PAGE>
available standard forms of "all-risk" insurance policies, in an amount equal to
one hundred percent (100%) of the replacement value thereof or in such lesser
amount as will avoid co-insurance (including an "agreed amount" endorsement).
Notwithstanding the foregoing, Landlord shall not be liable to Tenant for any
failure to insure, replace or restore any Alterations unless Tenant shall have
notified Landlord of the completion of such Alterations and of the cost thereof,
and shall have maintained adequate records with respect to such Alterations to
facilitate the adjustment of any insurance claims with respect thereto. Tenant
shall cooperate with Landlord and Landlord's insurance companies in the
adjustment of any claims for any damage to the Building or such Alterations.
Landlord also shall maintain in full force and effect a policy of commercial
general liability insurance that names Landlord as the insured thereunder and
that is consistent with the nature and level of insurance customarily obtained
by prudent owners of first-class office buildings in midtown Manhattan. Landlord
shall name Tenant as an additional insured under the aforesaid policy of
commercial general liability insurance if Landlord's insurer is willing to do so
without additional charge to Landlord (with the understanding, however, that the
liability insurance policy described in Section 9.2 hereof shall afford primary
coverage to Landlord and Tenant with respect to claims for property damage or
personal injury that derive from events occurring within the Premises or
Tenant's conduct of business therein).
Section 9.4. On or prior to the Commencement Date, Tenant shall deliver to
Landlord appropriate certificates of insurance, including evidence of waivers of
subrogation required pursuant to Section 10.5 hereof, required to be carried by
Tenant pursuant to this Article 9. Evidence of each renewal or replacement of a
policy shall be delivered by Tenant to Landlord at least twenty (20) days prior
to the expiration of such policy.
Section 9.5. Tenant acknowledges that Landlord shall not carry insurance
on, and shall not be responsible for damage to, Tenant's Property or Specialty
Alterations, and that Landlord shall not carry insurance against, or be
responsible for any loss suffered by Tenant due to, interruption of Tenant's
business.
Section 9.6. If notwithstanding the recovery of insurance proceeds by
Tenant for loss, damage or destruction of its property Landlord is liable to
Tenant with respect thereto or is obligated under this Lease to make
replacement, repair or restoration, then, at Landlord's option, either (i) the
amount of the net proceeds of Tenant's insurance against such loss, damage or
destruction shall be offset against Landlord's liability to Tenant therefor, or
(ii) shall be made available to Landlord to pay for replacement, repair or
restoration.
ARTICLE 10 DESTRUCTION-FIRE OR OTHER CAUSE
Section 10.1. (A) If the Premises (including Alterations which shall
include
<PAGE>
Landlord's Work but not Specialty Alterations) shall be damaged by fire or other
casualty, and if Tenant shall give prompt notice thereof to Landlord, the
damage, with such modifications as shall be required in order to comply with
Requirements shall be diligently repaired by and at the expense of Landlord to
substantially the condition prior to the damage, and until such repairs which
are required to be performed by Landlord (excluding Long Lead Work the absence
of which does not in and of itself materially impair Tenant's ability to conduct
its business in the Premises in substantially the same manner as prior to such
casualty) shall be Substantially Completed (of which Substantial Completion
Landlord shall promptly notify Tenant) the Fixed Rent, Escalation Rent and Space
Factor shall be reduced in the proportion which the area of the part of the
Premises which is not usable by Tenant, bears to the total area of the Premises
immediately prior to such casualty. Upon the Substantial Completion of such
repairs (excluding Long Lead Work the absence of which does not in and of itself
materially impair Tenant's ability to conduct its business in the Premises in
substantially the same manner as prior to such casualty), Landlord shall
diligently prosecute to completion any items of Long Lead Work remaining to be
completed. Landlord shall have no obligation to repair any damage to, or to
replace, any Specialty Alterations or Tenant's Property. In addition, Landlord
shall not be obligated to repair any damage to, or to replace, any Alterations
unless Tenant shall have notified Landlord of the completion of such Alterations
and the cost thereof. Landlord shall use its reasonable efforts to minimize
interference with Tenant's use and occupancy in making any repairs pursuant to
this Section. Anything contained herein to the contrary notwithstanding, if the
Premises (including any Alterations) are damaged by fire or other casualty at
any time prior to the completion of the Initial Alterations, Landlord's
obligation to repair the Premises (and any Alterations) shall be limited to
repair of the part of the Building Systems serving the Premises on the
Commencement Date, but not the distribution portions of such Building Systems
located within the Premises, the floor and ceiling slabs of the Premises and the
exterior walls of the Premises, all to substantially the same condition which
existed on the Commencement Date, with such modifications as shall be required
in order to comply with Requirements. If a fire or other casualty occurs during
the period beginning on (x) the Commencement Date and ending on the day
immediately prior to the Tenth Floor Space Rent Commencement Date, or (y) the
Seventh Floor Space Commencement Date and ending on the day immediately prior to
the Seventh Floor Space Rent Commencement Date, as the case may be, then Tenant,
as and for the abatement of Rental as contemplated by this Article 10 by reason
of the occurrence of a fire or other casualty during such period, shall have the
right to credit against the Rental due hereunder from and after the Applicable
Rent Commencement Date an amount equal to the abatement of Rental to which
Tenant would have been entitled under this Article 10 if such fire or other
casualty occurred immediately after the Applicable Rent Commencement Date.
(B) Prior to the Substantial Completion of Landlord's repair
obligations set forth in Section 10.1(A) hereof, Landlord shall provide Tenant
and Tenant's contractor, subcontractors and materialmen access to the Premises
to perform Specialty Alterations (or Alterations, if Landlord is not obligated
to repair same pursuant
<PAGE>
to the provisions hereof), on the following terms and conditions (but not to
occupy the same for the conduct of business).
(1) Tenant shall not commence work in any portion of the
Premises until the date specified in a notice from Landlord to Tenant stating
that the repairs required to be made by Landlord have been or will be completed
to the extent reasonably necessary, in Landlord's discretion, to permit the
commencement of the Specialty Alterations (or Alterations, if Landlord is not
obligated to repair same pursuant to the provisions hereof) then prudent to be
performed in accordance with good construction practice in the portion of the
Premises in question without interference with, and consistent with the
performance of, the repairs remaining to be performed.
(2) Such access by Tenant shall be deemed to be subject to all
of the applicable provisions of this Lease except that there shall be no
obligation on the part of Tenant solely because of such access to pay any Fixed
Rent or Escalation Rent with respect to the affected portion of the Premises for
any period prior to substantial completion of the repairs.
(3) It is expressly understood that if Landlord shall be
delayed from substantially completing the repairs due to any acts of Tenant, its
agents, servants, employees or contractors, including, without limitation, by
reason of the performance of any Specialty Alteration (or Alteration, if
Landlord is not obligated to repair same pursuant to the provisions hereof), by
reason of Tenant's failure or refusal to comply or to cause its architects,
engineers, designers and contractors to comply with any of Tenant's obligations
described or referred to in this Lease, or if such repairs are not completed
because under good construction scheduling practice such repairs should be
performed after completion of any Specialty Alteration (or Alteration, if
Landlord is not obligated to repair same pursuant to the provisions hereof),
then such repairs shall be deemed substantially complete on the date when the
repairs would have been substantially complete but for such delay and the
expiration of the abatement of the Tenant's obligations hereunder shall not be
postponed by reason of such delay. Any additional costs to Landlord to complete
any repairs occasioned by such delay shall be paid by Tenant to Landlord within
thirty (30) days after demand, as additional rent.
Section 10.2. Anything contained in Section 10.1 hereof to the contrary
notwithstanding, if the Building shall be so damaged by fire or other casualty
that substantial alteration, demolition, or reconstruction of the Building shall
be required (whether or not the Premises shall have been damaged or rendered
untenantable), then Landlord, at Landlord's option, may, not later than ninety
(90) days following the damage, give Tenant a notice in writing terminating this
Lease; provided that if the Premises are not substantially damaged or rendered
untenantable, Landlord may not terminate this Lease unless it shall elect to
terminate leases (including this Lease), affecting at least fifty percent (50%)
of the rentable area of the Building (excluding any rentable area occupied by
Landlord or its Affiliates). If Landlord elects to terminate this
<PAGE>
Lease, the Term shall expire upon a date set by Landlord, but not sooner than
the thirtieth (30th) day after such notice is given, and Tenant shall vacate the
Premises and surrender the same to Landlord in accordance with the provisions of
Article 20 hereof. Upon the termination of this Lease under the conditions
provided for in this Section 10.2, the Fixed Rent and Escalation Rent shall be
apportioned and any prepaid portion of Fixed Rent and Escalation Rent for any
period after such date shall be refunded by Landlord to Tenant.
Section 10.3. (A) Within forty-five (45) days after notice to Landlord of
any damage described in Section 10.1 hereof, Landlord shall deliver to Tenant a
statement prepared by an independent reputable contractor setting forth such
contractor's estimate as to the time required to repair such damage, exclusive
of time required to perform Long Lead Work. If the estimated time period exceeds
nine (9) months from the date of such statement, then Tenant may elect to
terminate this Lease by notice given to Landlord not later than thirty (30) days
following Tenant's receipt of such statement. If Tenant makes such election,
then the Term shall expire upon the thirtieth (30th) day after notice of such
election is given by Tenant, and Tenant shall vacate the Premises and surrender
the same to Landlord in accordance with the provisions of Article 20 hereof. If
Tenant does not elect to terminate this Lease pursuant to this Article 10 (or is
not entitled to terminate this Lease pursuant to this Article 10), then the
damages shall be diligently repaired by and at the expense of Landlord as set
forth in Section 10.1 hereof, unless Landlord elects to terminate this Lease in
accordance with Section 10.2 hereof.
(B) If Tenant does not elect to terminate this Lease pursuant to
Section 10.3(A) (or is not entitled to terminate this Lease pursuant to Section
10.3(A)), and the repair of the damage to the Premises described in Section 10.1
hereof is not Substantially Completed within three (3) months after the
estimated date of such Substantial Completion as set forth in the contractor's
estimate delivered to Tenant as aforesaid (which three (3) month period may be
extended for up to a six (6) month period to the extent Landlord cannot
Substantially Complete such damage within such three (3) month period by virtue
of Unavoidable Delays), then Tenant may elect to terminate this Lease by
delivering a notice to Landlord not later than the earlier to occur of (x) the
date that such Substantial Completion occurs, and (y) the thirtieth (30th) day
following the last day of such three (3) month period (or the thirtieth (30th)
day following the last day of such extended period, if applicable), and the Term
shall expire upon the thirtieth (30th) day after notice of such election is
given by Tenant, and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof.
(C) If the Premises shall be substantially damaged during the last
two (2) years of the Term, Landlord or Tenant may elect by notice, given within
thirty (30) days after the occurrence of such damage, to terminate this Lease
and if either party makes such election, the Term shall expire upon the
thirtieth (30th) day after notice of such election is given by such party and
Tenant shall vacate the Premises and
<PAGE>
surrender the same to Landlord in accordance with the provisions of Article 20
hereof.
Section 10.4. This Article 10 constitutes an express agreement governing
any case of damage or destruction of the Premises or the Building by fire or
other casualty, and Section 227 of the Real Property Law of the State of New
York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.
Section 10.5. The parties hereto shall procure an appropriate clause in,
or endorsement on, any fire or extended coverage insurance covering the
Premises, the Building and personal property, fixtures and equipment located
thereon or therein, pursuant to which the insurance companies waive subrogation
or consent to a waiver of right of recovery and having obtained such clauses or
endorsements of waiver of subrogation or consent to a waiver of right of
recovery, will not make any claim against or seek to recover from the other for
any loss or damage to its property or the property of others resulting from fire
or other hazards covered by such fire and extended coverage insurance, provided,
however, that the release, discharge, exoneration and covenant not to sue herein
contained shall be limited by and be coextensive with the terms and provisions
of the waiver of subrogation clause or endorsements or clauses or endorsements
consenting to a waiver of right of recovery. If the payment of an additional
premium is required for the inclusion of such waiver of subrogation provision,
each party shall advise the other of the amount of any such additional premiums
and the other party at its own election may, but shall not be obligated to, pay
the same. If such other party shall not elect to pay such additional premium,
the first party shall not be required to obtain such waiver of subrogation
provision. If either party shall be unable to obtain the inclusion of such
clause even with the payment of an additional premium, then such party shall
attempt to name the other party as an additional insured (but not a loss payee)
under the policy. If the payment of an additional premium is required for naming
the other party as an additional insured (but not a loss payee), each party
shall advise the other of the amount of any such additional premium and the
other party at its own election may, but shall not be obligated to, pay the
same. If such other party shall not elect to pay such additional premium or if
it shall not be possible to have the other party named as an additional insured
(but not loss payee), even with the payment of an additional premium, then (in
either event) such party shall so notify the first party and the first party
shall not have the obligation to name the other party as an additional insured.
Tenant acknowledges that Landlord shall not carry insurance on and shall not be
responsible for damage to, Tenant's Property or Specialty Alterations or any
other Alteration prior to the completion of the Initial Alterations, and that
Landlord shall not carry insurance against, or be responsible for any loss
suffered by Tenant due to, interruption of Tenant's business.
ARTICLE 11
EMINENT DOMAIN
<PAGE>
Section 11.1. If the whole of the Real Property, the Building or the
Premises shall be acquired or condemned for any public or quasi-public use or
purpose, this Lease and the Term shall end as of the date of the vesting of
title with the same effect as if said date were the Expiration Date. If only a
part of the Real Property and not the entire Premises shall be so acquired or
condemned then, (1) except as hereinafter provided in this Section 11.1, this
Lease and the Term shall continue in force and effect, but, if a part of the
Premises is included in the part of the Real Property so acquired or condemned,
from and after the date of the vesting of title, the Fixed Rent and the Space
Factor shall be reduced in the proportion which the area of the part of the
Premises so acquired or condemned bears to the total area of the Premises
immediately prior to such acquisition or condemnation and Tenant's Share shall
be redetermined based upon the proportion in which the ratio between the
rentable area of the Premises remaining after such acquisition or condemnation
bears to the rentable area of the Building remaining after such acquisition or
condemnation; (2) if at least ten percent (10%) of the Real Property is so
acquired or condemned and whether or not the Premises shall be affected thereby,
Landlord, at Landlord's option, may give to Tenant, within sixty (60) days next
following the date upon which Landlord shall have received notice of vesting of
title, a thirty (30) days' notice of termination of this Lease if Landlord shall
elect to terminate leases (including this Lease), affecting at least fifty
percent (50%) of the rentable area of the Building (excluding any rentable area
leased by Landlord or its Affiliates); and (3) if the part of the Real Property
so acquired or condemned shall contain more than fifteen percent (15%) of the
total area of the Premises immediately prior to such acquisition or
condemnation, or if, by reason of such acquisition or condemnation, Tenant no
longer has reasonable means of access to the Premises, Tenant, at Tenant's
option, may give to Landlord, within sixty (60) days next following the date
upon which Tenant shall have received notice of vesting of title, a thirty (30)
days' notice of termination of this Lease. If any such thirty (30) days' notice
of termination is given by Landlord or Tenant, this Lease and the Term shall
come to an end and expire upon the expiration of said thirty (30) days with the
same effect as if the date of expiration of said thirty (30) days were the
Expiration Date. If a part of the Premises shall be so acquired or condemned and
this Lease and the Term shall not be terminated pursuant to the foregoing
provisions of this Section 11.1, Landlord, at Landlord's expense, shall restore
that part of the Premises not so acquired or condemned to a self-contained
rental unit inclusive of Tenant's Alterations (other than Specialty
Alterations), except that if such acquisition or condemnation occurs prior to
completion of the Initial Alterations, Landlord shall only be required to
restore that part of the Premises not so acquired or condemned to a
self-contained rental unit exclusive of Tenant's Alterations. Upon the
termination of this Lease and the Term pursuant to the provisions of this
Section 11.1, the Fixed Rent and Escalation Rent shall be apportioned as of the
date of vesting of title and any prepaid portion of Fixed Rent and Escalation
Rent for any period after such date shall be refunded by Landlord to Tenant.
Section 11.2. In the event of any such acquisition or condemnation of all
or any part of the Real Property, Landlord shall be entitled to receive the
entire award for any
<PAGE>
such acquisition or condemnation, Tenant shall have no claim against Landlord or
the condemning authority for the value of any unexpired portion of the Term and
Tenant hereby expressly assigns to Landlord all of its right in and to any such
award. Nothing contained in this Section 11.2 shall be deemed to prevent Tenant
from making a separate claim in any condemnation proceedings for the then value
of any Tenant's Property included in such taking, and for any moving expenses.
Section 11.3. If the whole or any part of the Premises shall be acquired
or condemned temporarily during the Term for any public or quasi-public use or
purpose, Tenant shall give prompt notice thereof to Landlord and the Term shall
not be reduced or affected in any way and Tenant shall continue to pay in full
all items of Rental payable by Tenant hereunder without reduction or abatement,
and Tenant shall be entitled to receive for itself any award or payments for
such use, provided, however, that:
(i) if the acquisition or condemnation is for a period
not extending beyond the Term and if such award or payment is made
less frequently than in monthly installments, the same shall be paid
to and held by Landlord as a fund which Landlord shall apply from
time to time to the Rental payable by Tenant hereunder, except that,
if by reason of such acquisition or condemnation changes or
alterations are required to be made to the Premises which would
necessitate an expenditure to restore the Premises, then a portion
of such award or payment reasonably appropriate to cover the
expenses of the restoration shall be retained by Landlord, without
application as aforesaid, and applied toward the restoration of the
Premises as provided in Section 11.1 hereof; or
(ii) if the acquisition or condemnation is for a period
extending beyond the Term, such award or payment shall be
apportioned between Landlord and Tenant as of the Expiration Date;
Tenant's share thereof, if paid less frequently than in monthly
installments, shall be paid to Landlord and applied in accordance
with the provisions of clause (i) above, provided, however, that the
amount of any award or payment allowed or retained for restoration
of the Premises shall remain the property of Landlord if this Lease
shall expire prior to the restoration of the Premises.
ARTICLE 12
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC.
Section 12.1. (A) Except as expressly permitted herein, Tenant, without
the prior consent of Landlord in each instance, shall not (a) assign its rights
or delegate its duties under this Lease (whether by operation of law, transfers
of interests in Tenant or otherwise), mortgage or encumber its interest in this
Lease, in whole or in part, (b)
<PAGE>
sublet, or permit the subletting of, the Premises or any part thereof, or (c)
permit the Premises or any part thereof to be occupied or used for desk space,
mailing privileges or otherwise, by any Person other than Tenant.
(B) If this Lease is assigned to any person or entity pursuant to
the provisions of the Bankruptcy Code, any and all monies or other consideration
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all monies or other
consideration constituting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the benefit of Landlord
and shall be promptly paid to or turned over to Landlord.
Section 12.2. (A) If Tenant's interest in this Lease is assigned in
violation of the provisions of this Article 12, such assignment shall be void
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy, and shall apply the net
amount collected to the Fixed Rent and other items of Rental reserved in this
Lease. If the Premises or any part thereof are sublet to, or occupied by, or
used by, any Person other than Tenant, whether or not in violation of this
Article 12, Landlord, after default by Tenant under this Lease, including,
without limitation, a subletting or occupancy in violation of this Article 12,
may collect any item of Rental or other sums paid by the subtenant, user or
occupant as a fee for its use and occupancy, and shall apply the net amount
collected to the Fixed Rent and other items of Rental reserved in this Lease. No
such assignment, subletting, occupancy or use, whether with or without
Landlord's prior consent, nor any such collection or application of Rental or
fee for use and occupancy, shall be deemed a waiver by Landlord of any term,
covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as tenant hereunder. The consent by
Landlord to any assignment, subletting, occupancy or use shall not relieve
Tenant from its obligation to obtain the express prior consent of Landlord to
any further assignment, subletting, occupancy or use, to the extent required
hereunder.
(B) Tenant shall reimburse Landlord within thirty (30) days after
demand for any reasonable, out-of-pocket costs that may be incurred by Landlord
in connection with any proposed assignment of Tenant's interest in this Lease or
any proposed subletting of the Premises or any part thereof, including, without
limitation, any reasonable processing fee, reasonable attorneys' fees and
disbursements and the reasonable costs of making investigations as to the
acceptability of the proposed subtenant or the proposed assignee.
(C) Neither any assignment of Tenant's interest in this Lease nor
any subletting, occupancy or use of the Premises or any part thereof by any
Person other than Tenant, nor any collection of Rental by Landlord from any
Person other than Tenant as provided in this Section 12.2, nor any application
of any such Rental as
<PAGE>
provided in this Section 12.2 shall, in any circumstances, relieve Tenant of its
obligations under this Lease on Tenant's part to be observed and performed.
(D) Any Person to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall execute and deliver to Landlord
upon demand an instrument confirming such assumption. No assignment of this
Lease shall relieve Tenant of its obligations hereunder and, subsequent to any
assignment, Tenant's liability hereunder shall continue notwithstanding any
subsequent modification or amendment hereof or the release of any subsequent
tenant hereunder from any liability, to all of which Tenant hereby consents in
advance (it being understood, however, that Tenant shall not have liability
hereunder to the extent that Tenant's obligations hereunder are expanded or
amended by any such modification or amendment that Landlord consummates with the
assignee after the date of any such assignment by Tenant of the tenant's
interest).
Section 12.3. (A) If Tenant assumes this Lease and proposes to assign the
same pursuant to the provisions of the Bankruptcy Code to any Person who shall
have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to Tenant, then notice of such proposed assignment shall be given to
Landlord by Tenant no later than twenty (20) days after receipt by Tenant, but
in any event no later than ten (10) days prior to the date that Tenant shall
make application to a court of competent jurisdiction for authority and approval
to enter into such assignment and assumption. Such notice shall set forth (a)
the name and address of such Person, (b) all of the terms and conditions of such
offer, and (c) adequate assurance of future performance by such Person under the
Lease as set forth in Paragraph (B) below, including, without limitation, the
assurance referred to in Section 365(b)(3) of the Bankruptcy Code. Landlord
shall have the prior right and option, to be exercised by notice to Tenant given
at any time prior to the effective date of such proposed assignment, to accept
an assignment of this Lease upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such Person, less any
brokerage commissions which would otherwise be payable by Tenant out of the
consideration to be paid by such Person in connection with the assignment of
this Lease.
(B) The term "adequate assurance of future performance" as used in
this Lease shall mean that any proposed assignee shall, among other things, (a)
deposit with Landlord on the assumption of this Lease an amount equal to the
then annual Fixed Rent as security for the faithful performance and observance
by such assignee of the terms and obligations of this Lease, which sum shall be
held by Landlord in accordance with the provisions of Article 31 hereof, (b)
furnish Landlord with financial statements of such assignee for the prior three
(3) fiscal years, as finally determined after an audit and certified as correct
by a certified public accountant, which financial statements shall show a net
worth of at least six (6) times the then Fixed Rent for each of such three (3)
years, (c) grant to Landlord a security interest in such
<PAGE>
property of the proposed assignee as Landlord shall deem necessary to secure
such assignee's future performance under this Lease, and (d) provide such other
information or take such action as Landlord, in its reasonable judgment shall
determine is necessary to provide adequate assurance of the performance by such
assignee of its obligations under the Lease.
Section 12.4. (A) Tenant shall have the privilege, subject to the terms
and conditions hereinafter set forth, without the consent of Landlord but
subject to Tenant's satisfaction of conditions set forth in clauses (4) and (5)
of Section 12.8(A) hereof, and without Landlord having the right granted in
Section 12.8(B) hereof to recapture, to assign its interest in this Lease (i) to
any corporation which is a successor to Tenant either by merger or
consolidation, (ii) to a purchaser of all or substantially all of Tenant's
assets or stock (provided such purchaser shall have also assumed substantially
all of Tenant's liabilities) or (iii) to a Person which shall (1) Control, (2)
be under the Control of, or (3) be under common Control with Tenant (any such
Person referred to in this clause (iii) being a "Related Entity"). Tenant also
shall have the privilege, subject to the terms and conditions hereinafter set
forth, without the consent of Landlord but subject to Tenant's satisfaction of
conditions set forth in clauses (5) through (7) and (9) of Section 12.6(A) and
without Landlord having the right granted in Section 12.6(B) hereof to
recapture, to sublease all or any portion of the Premises to a Related Entity.
Any assignment or subletting described above may only be made upon the condition
that (a) the principal purpose of such assignment or sublease is not the
acquisition of Tenant's interest in this Lease or to circumvent the provisions
of Section 12.1 of this Article (except if such assignment or sublease is made
to a Related Entity and is made for a valid intracorporate business purpose and
is not made to circumvent the provisions of Section 12.1 of this Article), and
(b) in the case of an assignment, any such assignee shall have a net worth
determined in accordance with generally accepted accounting principles,
consistently applied, after giving effect to such assignment, equal to the
greater of Tenant's net worth and annual income and cash flow, as so determined,
on (i) the date immediately preceding the date of such assignment, and (ii) the
Commencement Date. Tenant shall, within ten (10) Business Days after execution
thereof, deliver to Landlord either (x) a duplicate original instrument of
assignment in form and substance reasonably satisfactory to Landlord, duly
executed by Tenant, together with an instrument in form and substance reasonably
satisfactory to Landlord, duly executed by the assignee, in which such assignee
shall assume observance and performance of, and agree to be personally bound by,
all of the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed, or (y) a duplicate original sublease in form and
substance reasonably satisfactory to Landlord, duly executed by Tenant and the
subtenant.
(B) If Tenant is a partnership, the admission of new Partners, the
withdrawal, retirement, death, incompetency or bankruptcy of any Partner, or the
reallocation of partnership interests among the Partners shall not constitute an
assignment of this Lease, provided the principal purpose of any of the foregoing
is not to circumvent the restrictions on assignment set forth in the provisions
of this Article 12.
<PAGE>
The reorganization of Tenant from a professional corporation into a partnership
or the reorganization of a Tenant from a partnership into a professional
corporation, shall not constitute an assignment of this Lease, provided that
immediately following such reorganization the Partners of Tenant shall be
substantially the same as the shareholders of Tenant existing immediately prior
to such reorganization, or the shareholders of Tenant shall be substantially the
same as the Partners of Tenant existing immediately prior to such
reorganization, as the case may be. If Tenant shall become a professional
corporation, each individual shareholder in Tenant and each professional
employee of a professional corporation which is a shareholder in Tenant shall
have the same personal liability as such individual or professional employee
would have under this Lease if Tenant were a partnership and such individual or
accountant-employee were a Partner in Tenant. If any individual Partner in
Tenant is or becomes a professional employee of a professional corporation, such
individual shall have the same personal liability under this Lease as such
individual would have if he and not the professional corporation were a Partner
of Tenant.
(C) Except as set forth above, either a transfer (including the
issuance of treasury stock or the creation and issuance of new stock or a new
class of stock) of a controlling interest in the shares of Tenant or of any
entity which holds an interest in Tenant through one or more intermediaries (if
Tenant or such entity is a corporation or trust) or a transfer of a majority of
the total interest in Tenant or of any entity which holds an interest in Tenant
through one or more intermediaries (if Tenant or such entity is a partnership or
other entity) at any one time or over a period of time through a series of
transfers, shall be deemed an assignment of this Lease and shall be subject to
all of the provisions of this Article 12, including, without limitation, the
requirement that Tenant obtain Landlord's prior consent thereto. The transfer of
shares of Tenant or of any entity which holds an interest in Tenant through one
or more intermediaries (if Tenant or such entity is a corporation or trust) for
purposes of this Section 12.4 shall not include the sale of shares by persons
other than those deemed "insiders" within the meaning of the Securities Exchange
Act of 1934, as amended, which sale is effected through the "over-the-counter
market" or through any recognized stock exchange.
Section 12.5. If, at any time after the originally named Tenant herein may
have assigned Tenant's interest in this Lease, this Lease shall be disaffirmed
or rejected in any proceeding of the types described in paragraph (E) of Section
16.1 hereof, or in any similar proceeding, or in the event of termination of
this Lease by reason of any such proceeding or by reason of lapse of time
following notice of termination given pursuant to said Article 16 based upon any
of the Events of Default set forth in such paragraph, any prior Tenant,
including, without limitation, the originally named Tenant, then at such
originally named Tenant's option or upon request of Landlord given within thirty
(30) days next following any such disaffirmance, rejection or termination (and
actual notice thereof to Landlord or such Tenant in the event of a disaffirmance
or rejection or in the event of termination other than by act of Landlord),
shall (1) pay to Landlord all Fixed Rent, Escalation Rent and other items of
Rental due and owing by the assignee to Landlord under this Lease to and
including the date of such disaffirmance, rejection or termination (other than
any Rental demanded by Landlord pursuant to Section 17.2(A)(3)), and (2) as
"tenant", enter into a new lease with Landlord of the Premises for a term
commencing on the effective date of such
<PAGE>
disaffirmance, rejection or termination and ending on the Expiration Date,
unless sooner terminated as in such lease provided, at the same Fixed Rent and
upon the then executory terms, covenants and conditions as are contained in this
Lease, except that (a) Tenant's rights under the new lease shall be subject to
the possessory rights of the assignee under this Lease and the possessory rights
of any person claiming through or under such assignee or by virtue of any
statute or of any order of any court, (b) such new lease shall require all
defaults existing under this Lease to be cured by Tenant with due diligence, and
(c) such new lease shall require Tenant to pay all Escalation Rent reserved in
this Lease which, had this Lease not been so disaffirmed, rejected or
terminated, would have accrued under the provisions of Article 27 hereof after
the date of such disaffirmance, rejection or termination with respect to any
period prior thereto. If any such prior Tenant shall default in its obligation
to enter into said new lease for a period of ten (10) days next following
Landlord's request therefor, then, in addition to all other rights and remedies
by reason of such default, either at law or in equity, Landlord shall have the
same rights and remedies against such Tenant as if such Tenant had entered into
such new lease and such new lease had thereafter been terminated as of the
commencement date thereof by reason of such Tenant's default thereunder.
Section 12.6. (A) Notwithstanding the provisions of Section 12.1 hereof,
if Landlord shall not exercise its rights pursuant to paragraph (B) of this
Section 12.6, Landlord shall not unreasonably withhold, condition or delay its
consent to any subletting of the Premises, provided that:
(1) the Premises shall not, without Landlord's prior consent,
have been listed or otherwise publicly advertised for subletting at a rental
rate less than the prevailing rental rate set by Landlord for comparable space
in the Building or if there is no comparable space the prevailing rental rate
reasonably determined by Landlord;
(2) no Event of Default shall have occurred and be continuing;
(3) upon the date Tenant delivers the Tenant Statement to
Landlord and upon the date immediately preceding the commencement date of any
sublease approved by Landlord, the proposed subtenant shall have a financial
standing (taking into consideration the obligations of the proposed subtenant
under the sublease and the financial standing of Tenant) reasonably satisfactory
to Landlord, be of a character, be engaged in a business, and propose to use the
Premises in a manner in keeping with the standards in such respects of the other
tenancies in the Building;
(4) if Landlord has or within one hundred eighty (180) days
thereafter reasonably expects to have comparable space in the Building for a
comparable term, the proposed subtenant (or any Person who is an Affiliate of
the
<PAGE>
proposed subtenant) shall not be a tenant or subtenant of any space in the
Building, nor shall the proposed subtenant (or any Person who is an Affiliate of
the proposed subtenant) be a Person with whom Landlord is negotiating or
discussing to lease space in the Building (it being agreed, however, that the
proposed subtenant may be an Affiliate of a Person with whom Landlord is
negotiating or discussing to lease space in the Building or an Affiliate of a
tenant or subtenant of the Building, so long as in either case (x) such proposed
subtenant constitutes a separate business entity that has operated independently
as a separate entity from such Person with whom Landlord is negotiating or
discussing as aforesaid, or from such tenant or subtenant in the Building, in
either case for at least two (2) years, and (y) such proposed subtenant was not
formed for the purpose of circumventing the requirements of this clause (4)). If
Tenant shall propose to sublease space and is about to commence negotiations
with a prospective subtenant, then Tenant may notify Landlord of the identity of
such prospective subtenant and Landlord shall notify Tenant within ten (10) days
after the date upon which Landlord is advised of the identity of such
prospective subtenant if the execution of a sublease with a prospective
subtenant would violate the provisions of this clause (4). If (x) Landlord does
not so notify Tenant within such ten (10) day period, and (y) Tenant submits a
Tenant Statement for such proposed subtenant to Landlord within the one hundred
eighty (180) day period of time commencing on the day after the end of such ten
(10) day period, then Landlord, within such succeeding one hundred eighty (180)
day period, shall not have the right to withhold, delay or condition its consent
to the subleasing contemplated by such Tenant Statement solely by reason of such
proposed subtenant being (i) a Person (or an Affiliate of a Person) with whom
Landlord is negotiating or discussing to lease space in the Building, or (ii) a
tenant or subtenant of the Building or an Affiliate of a tenant or subtenant of
the Building;
(5) the character of the business to be conducted or the
proposed use of the Premises by the proposed subtenant shall not (a) be likely
to increase Landlord's operating expenses beyond that which would be incurred
for use by Tenant, (b) increase the burden on existing cleaning services or
elevators over the burden prior to such proposed subletting; (c) violate any
provision or restrictions herein relating to the use or occupancy of the
Premises; (d) require any alterations, installations, improvements, additions or
other physical changes to be performed in or made to any portion of the Building
or the Real Property other than the Premises; or (e) violate any provision or
restrictions in any Superior Lease or Mortgage to which this Lease is
subordinate; if Landlord shall have consented to a sublease and, as a result of
the use and occupancy of the subleased portion of the Premises by the subtenant,
operating expenses are increased, then Tenant shall pay to Landlord, within ten
(10) days after demand, as additional rent, all resulting increases in operating
expenses;
(6) the subletting shall be expressly subject to all of the
terms, covenants, conditions and obligations on Tenant's part to be observed and
performed under this Lease and the further condition and restriction that the
sublease shall not be materially modified without the prior written consent of
Landlord, which consent shall
<PAGE>
not be unreasonably withheld, conditioned or delayed or assigned (by operation
of law or otherwise; for purposes of this clause (6), the transfer of a majority
of the issued and outstanding capital stock of any corporate subtenant or the
transfer of a majority of the total interest in a subtenant (if a partnership or
other entity), however accomplished, whether in a single transaction or in a
series of related or unrelated transactions, shall be deemed an assignment of
the sublease, except that the transfer of the outstanding capital stock of a
corporate subtenant shall be deemed not to include the sale of such stock by
persons other than those deemed "insiders" within the meaning of the Securities
Exchange Act of 1934, as amended, which sale is effected through the
"over-the-counter market" or through any recognized stock exchange) encumbered
or otherwise transferred or the subleased premises further sublet by the
subtenant in whole or in part, or any part thereof suffered or permitted by the
subtenant to be used or occupied by others, without the prior written consent of
Landlord in each instance;
(7) the subletting shall end no later than one (1) day before
the Expiration Date and shall not be for a term of less than two (2) years
unless it commences less than two (2) years before the Expiration Date
(provided, however, that Tenant shall have the one- time right to sublease the
Seventh Floor Space (or a portion thereof, subject to clause (8) of this Section
12.6) for a term of less than two (2) years that commences more than two (2)
years prior to the Expiration Date);
(8) no subletting shall be for less than Five Thousand (5,000)
contiguous rentable square feet and at no time shall there be more than three
(3) occupants, including Tenant, on any one (1) floor of the Premises; and
(9) subject to the terms of a Recognition Agreement, such
sublease shall expressly provide that in the event of termination, re-entry or
dispossess of Tenant by Landlord under this Lease, Landlord may, at its option,
take over all of the right, title and interest of Tenant, as sublessor under
such sublease, and such subtenant, at Landlord's option, shall attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
Landlord shall not be:
(i) liable for any act or omission of Tenant under such
sublease, or
(ii) subject to any defense or offsets which such
subtenant may have against Tenant, or
(iii) bound by any previous payment which such subtenant
may have made to Tenant more than thirty (30) days in advance of the date upon
which such payment was due, unless previously approved by Landlord, or
(iv) bound by any obligation to make any payment to or
on behalf of such subtenant, or
<PAGE>
(v) bound by any obligation to perform any work or to
make improvements to the Premises, or portion thereof demised by such sublease,
or
(vi) bound by any amendment or modification of such
sublease made without its consent, or
(vii) bound to return such subtenant's security deposit,
if any, until such deposit has come into its actual possession and such
subtenant would be entitled to such security deposit pursuant to the terms of
such sublease.
If Tenant proposes to sublet a portion of the Premises then, unless the context
otherwise requires, references in this Section 12.6 to the Premises shall be
deemed to refer to the portion of the Premises proposed to be sublet by Tenant.
Landlord shall have the right to enter into a Recapture Sublease or a Recapture
Termination on the terms set forth in this Article 12 in respect of Tenant's
proposed subleasing of all or any portion of the Premises.
(B) Except as otherwise provided in Section 12.4 hereof and subject
to the terms of this Section 12.6(B), if (x) Tenant proposes to sublet all or
any portion of the Premises in respect of which Landlord does not have the right
to enter into a Recapture Sublease or a Recapture Termination, or (y) Tenant
proposes to sublet all or any portion of the Premises in respect of which (I)
Landlord had the right to enter into a Recapture Sublease or a Recapture
Termination, (II) Tenant gave a Recapture Statement to Landlord as contemplated
by Section 12.6(C) hereof, and (III) Landlord did not exercise Landlord's rights
to enter into a Recapture Sublease or a Recapture Termination in respect
thereof, then Tenant shall submit a statement to Landlord (a "Tenant Statement")
containing the following information: (a) a description of the Premises (or a
portion thereof) to be sublet, (b) the name of the proposed subtenant, (c) the
material terms and conditions of the proposed subletting, including, without
limitation, the rent payable, the free rent period (if any) and the estimated
value (including cost, overhead and supervision) of any improvements (including
any demolition to be performed) to the Premises for occupancy by the proposed
subtenant, and (d) any other information that Landlord may reasonably request
within five (5) Business Days of Landlord's receipt of the Tenant Statement,
together with a statement specifically directing Landlord's attention to the
provisions of this Section 12.6(B) requiring Landlord to respond to Tenant's
request within fifteen (15) Business Days after Landlord's receipt of the Tenant
Statement. If Landlord fails to notify Tenant within fifteen (15) Business Days
after the date when Tenant gives the Tenant Statement to Landlord of Landlord's
consent to or disapproval of the proposed subletting pursuant to the Tenant
Statement as contemplated by Section 12.6(A) hereof, or if Landlord consents to
such subletting as provided in Section 12.6(A) hereof, then Tenant shall have
the right to sublease the Premises (or the applicable portion thereof) to the
proposed subtenant on the same terms and conditions set forth in the Tenant
Statement. If Tenant does not enter into such sublease within one hundred twenty
(120) days after the delivery of the Tenant Statement to Landlord, then the
<PAGE>
provisions of Section 12.1 hereof and this Section 12.6 shall again be
applicable to any other proposed subletting. If Tenant enters into such sublease
within one hundred twenty (120) days as aforesaid, then Tenant shall deliver a
true, complete and fully executed counterpart of such sublease to Landlord
within ten (10) days after execution thereof.
(C) Subject to the terms of this Section 12.6(C), if Tenant proposes
to sublease all or any portion of the Premises in respect of which Landlord has
the right to enter into a Recapture Sublease or a Recapture Termination, then
Tenant shall submit a statement to Landlord (a "Recapture Statement") containing
the following information: (a) a description of the Premises (or portion
thereof) to be sublet, (b) the material terms and conditions of the proposed
subletting, including, without limitation, the term of such proposed subletting,
the rent payable, the free rent period (if any), and the estimated value
(including cost, overhead and supervision) of any improvements (including any
demolition to be performed) to the Premises for occupancy by a subtenant, and
(c) any other information that Landlord may reasonably request within five (5)
Business Days after Landlord's receipt of the Recapture Statement (but excluding
the identity of the proposed subtenant), together with a statement specifically
directing Landlord to respond to Tenant's request within thirty (30) days after
Landlord's receipt of the Recapture Statement. Landlord shall have the right,
exercisable within thirty (30) days after Landlord's receipt of the Recapture
Statement, (x) to sublet (in its own name or that of its designee) the Premises
(or the applicable portion thereof) (the "Recapture Space") from Tenant on the
terms and conditions set forth in the Recapture Statement, subject to the
further provisions of paragraph (D) of this Section 12.6, or (y) with respect to
a proposed sublease of any portion of the Premises for the balance of the Term
with respect to which Landlord would otherwise have the right to enter into a
Recapture Sublease, to terminate this Lease with respect to such Recapture Space
on the terms set forth in Section 12.6(H) hereof by giving notice thereof to
Tenant within thirty (30) days after Landlord's receipt of the Recapture
Statement (such termination of this Lease with respect to the Recapture Space
being referred to herein as a "Recapture Termination") (it being agreed that for
purposes of this clause (C), any proposed sublease shall be deemed to be for the
balance of the Term if the last day of the term of such
proposed sublease occurs later than two (2) years prior to the Fixed Expiration
Date). If (x) Tenant gives a Recapture Statement to Landlord as contemplated by
this Section 12.6(C), (y) Landlord does not exercise Landlord's rights to enter
into a Recapture Sublease or a Recapture Termination (as the case may be) in
respect thereof, and (z) Tenant does not give a Tenant Statement in respect of
such subletting within one hundred eighty (180) days after the delivery of the
Recapture Statement to Landlord, then the provisions of Section 12.1 hereof and
this Section 12.6 shall again be applicable to any other proposed subletting
therefor (including, without limitation, the requirement that Tenant deliver to
Landlord a Recapture Notice therefor). If, at any time during the one hundred
eighty (180) day period commencing on the date when Tenant gives a Recapture
Statement to Landlord, the sublease rental, the term, the portion of the
Premises that Tenant proposes to sublet, or any other term set forth in such
Recapture Statement changes in any material respect such that (I) there is a
<PAGE>
greater than ten percent (10%) variance in the space proposed to be sublet from
the space specified in the Recapture Statement, or (II) there is a greater than
ten percent (10%) decrease in the value to Tenant of the aggregate economic
terms of the proposed sublease specified in the Recapture Statement (taking into
account, without limitation, work to be performed, work allowances, and free
rent periods), then Tenant shall not have the right to enter into any sublease
unless Tenant gives Landlord a revised Recapture Statement in respect thereof,
and the procedure described in this Section 12.6(C) shall again apply. Tenant's
submission of such revised Recapture Statement shall be accompanied by a
statement directing Landlord to respond to Tenant's request within five (5)
Business Days after Landlord's receipt of such revised Recapture Statement.
Landlord shall have the right, exercisable within five (5) Business Days after
Landlord's receipt of the revised Recapture Statement, to enter into a Recapture
Sublease (on the terms and conditions set forth in the revised Recapture
Statement, subject to the further provisions of paragraph (D) of this Section
12) or a Recapture Termination (if the term of the proposed sublease pursuant to
such revised Recapture Statement is (or is deemed to be) for the balance of the
Term). Landlord acknowledges that Tenant shall have the right to give the Tenant
Statement and the Recapture Statement simultaneously.
(D) If Landlord exercises its option to sublet the Recapture Space,
such sublease to Landlord or its designee as subtenant (each, a "Recapture
Sublease") shall:
(1) be at a rental equal to the lesser of (x) the Rent Per
Square Foot multiplied by the number of rentable square feet of the Recapture
Space, and (y) the sublease rent set forth in the Tenant Statement, and
otherwise be upon the same terms and conditions as those contained in this Lease
(as modified by the Tenant Statement, including, without limitation, the
obligation to pay the rental set forth in the Tenant Statement), except such as
are irrelevant or inapplicable and except as otherwise expressly set forth to
the contrary in this paragraph (D);
(2) give the subtenant the unqualified and unrestricted right,
without Tenant's permission, to assign such sublease and to further sublet the
Recapture Space or any part thereof and to make any and all changes,
alterations, and improvements in the Recapture Space;
(3) provide in substance that any such changes, alterations,
and improvements made in the Recapture Space may be removed, in whole or in
part, prior to or upon the expiration or other termination of the Recapture
Sublease provided that any material damage and injury caused thereby shall be
repaired (it being agreed that (I) any Specialty Alterations in the Recapture
Space shall be removed and the Recapture Space restored to the condition
existing on the day immediately prior to the commencement of the term of the
Recapture Sublease if (x) so provided in the Recapture Statement, and (y) the
term of such Recapture Sublease is for less than the balance of the Term, (II)
if the term of such Recapture Sublease is for the balance of
<PAGE>
the Term, then any Specialty Alteration in the Recapture Space shall be deemed a
Qualified Specialty Alteration to the extent the Recapture Statement provided
for the proposed subtenant to remove such Specialty Alteration, and (III) if
Landlord fails to fulfill its obligation to remove any Specialty Alterations
from the Recapture Space and restore the Recapture Space as aforesaid, and
Tenant so notifies Landlord, then Tenant, from and after the day that is thirty
(30) days after the day that Tenant gives such notice and Landlord fails to
fulfill such obligation, shall have the right to (x) remove such Specialty
Alterations and restore the Recapture Space as aforesaid, and (y) offset against
the Rental next due hereunder an amount equal to the reasonable out-of-pocket
expenses incurred by Tenant in performing such work together with interest
thereon at the Applicable Rate computed from the date that Tenant paid such
expense on account of such work through the date that Tenant offsets such
expenses against the Rental as aforesaid);
(4) provide that (i) the parties to such Sublease expressly
negate any intention that any estate created under such Sublease be merged with
any other estate held by either of said parties, (ii) prior to the commencement
of the term of the Recapture Sublease, Tenant, at its sole cost and expense
(unless the Tenant Statement provides otherwise), shall make such alterations as
may be required or reasonably deemed necessary by the subtenant to physically
separate the Recapture Space, if such Recapture Space constitutes a portion of a
floor, from the balance of the Premises and to provide appropriate means of
ingress to and egress thereto and to the public portions of the balance of the
floor such as toilets, janitor's closets, telephone and electrical closets, fire
stairs, elevator lobbies, etc., and (iii) at the expiration of the term of such
Recapture Sublease, Tenant shall accept the Recapture Space in its then existing
condition, broom clean except as provided in Section 12.6(D)(3) hereof;
(5) provide that the subtenant or occupant may use and occupy
the Recapture Space for any lawful purpose (without regard to any limitation set
forth in the Tenant Statement); and
(6) not require the subtenant thereunder to post a security
deposit.
(E) Performance by Landlord, or its designee, under a Recapture
Sublease shall be deemed performance by Tenant of any similar obligation under
this Lease and Tenant shall not be liable for any default under this Lease or
deemed to be in default hereunder if such default is occasioned by or arises
from any act or omission of the subtenant under the Recapture Sublease or is
occasioned by or arises from any act or omission of any occupant under the
Recapture Sublease. If Landlord or its designee fails to make any payment due to
Tenant under the Recapture Sublease, Tenant shall have the right to offset the
amount thereof against the next Rental due hereunder.
(F) If Landlord is unable to give Tenant possession of the Recapture
<PAGE>
Space at the expiration of the term of the Recapture Sublease by reason of the
holding over or retention of possession of any tenant or other occupant, then
(w) Landlord, at Landlord's expense, shall use commercially reasonable efforts
to deliver possession of the Recapture Space, (x) Landlord shall continue to pay
all charges previously payable, and comply with all other obligations, under the
Recapture Sublease until the date upon which Landlord shall give Tenant
possession of the Recapture Space free of occupancies, (y) neither the
Expiration Date nor the validity of this Lease shall be affected, and (z) Tenant
waives any rights under Section 223-a of the Real Property Law of New York, or
any successor statute of similar import, to rescind this Lease and further
waives the right to recover any damages from Landlord which may result from the
failure of Landlord to deliver possession of the Recapture Space at the end of
the term of the Recapture Sublease.
(G) The failure by Landlord to exercise its option under Section
12.6(B) with respect to any subletting shall not be deemed a waiver of such
option with respect to any extension of such subletting (other than pursuant to
a renewal right set forth in the relevant Tenant Statement and the corresponding
sublease) or any subsequent subletting of the Premises affected thereby.
(H) If Landlord exercises Landlord's right to consummate a Recapture
Termination in respect of the Recapture Space and the Recapture Space
constitutes the then entire Premises, then the Lease shall terminate on the date
that the term of the sublease proposed initially by Tenant would have commenced
and the provisions of Article 20 hereof shall apply. If Landlord exercises
Landlord's right to consummate a Recapture Termination in respect of Recapture
Space that constitutes a portion of the Premises, then:
(1) on the date that the term of the sublease proposed
initially by Tenant would have commenced, the Recapture Space shall be deemed to
be deleted from the Premises, and accordingly, on such date, Tenant shall
deliver exclusive possession of the Recapture Space to Landlord in the condition
required hereby upon the expiration or earlier termination of the Term, free and
clear of leases, tenancies and rights of occupants;
(2) effective on such date, the Fixed Rent payable hereunder
shall be reduced by an amount equal to the product obtained by multiplying (I)
the number of square feet of rentable area that comprises the Recapture Space,
and (II) each of the applicable amounts set forth on Exhibit "G" attached hereto
that corresponds to the period from such date to the Fixed Expiration Date;
(3) effective on such date, the Space Factor shall be reduced
by an amount equal to the number of square feet of rentable area that comprises
the Recapture Space;
(4) effective on such date, Tenant's Share shall be
recalculated
<PAGE>
as the fraction, the numerator of which shall be the number of
square feet of rentable area then constituting the Premises, and the denominator
of which shall be the rentable area of the Building (exclusive of any space
leased for retail use); and
(5) prior to the date that the term of the sublease proposed
initially by Tenant would have commenced (unless the Recapture Statement
provides otherwise), Tenant, at its sole cost and expense (unless the Recapture
Statement provides otherwise), shall make such Alterations as may be required or
reasonably deemed necessary by Landlord to physically separate the Recapture
Space, if such Recapture Space constitutes a portion a floor, from the balance
of the Premises and to provide appropriate means of ingress to and egress
thereto and to the public portions of the balance of the floor such as toilets,
janitor's closets, telephone and electrical closets, fire stairs, elevator
lobbies, etc.
Section 12.7. (A) In connection with any subletting of all or any portion
of the Premises other than pursuant to Section 12.4(A), Tenant shall pay to
Landlord an amount equal to seventy percent (70%) of any Sublease Profit derived
therefrom. Anything contained herein to the contrary notwithstanding Tenant
shall not be entitled to any proceeds derived from or relating to (directly or
indirectly) any subletting of the Recapture Space by Landlord or its designee to
a subtenant. All sums payable hereunder by Tenant shall be calculated on an
annualized basis, but shall be paid to Landlord, as additional rent, within ten
(10) days after receipt thereof by Tenant.
(B) For purposes of this Lease:
(1) "Rent Per Square Foot" shall mean the sum of the then
Fixed Rent and Escalation Rent divided by the Space Factor.
(2) "Sublease Profit" shall mean the product of (x) the
Sublease Rent Per Square Foot less the Rent Per Square Foot, and (y) the number
of rentable square feet constituting the portion of the Premises sublet by
Tenant.
(3) "Sublease Rent" shall mean any rent or other consideration
paid to Tenant directly or indirectly by any subtenant or any other amount
received by Tenant from or in connection with any subletting (including, but not
limited to, sums paid for the sale or rental, or consideration received on
account of any contribution, of Tenant's Property or sums paid in connection
with the supply of electricity or HVAC) less the Sublease Expenses.
(4) "Sublease Expenses" shall mean: (i) in the event of a sale
of Tenant's Property, the then unamortized or undepreciated cost thereof
determined on the basis of Tenant's federal income tax returns, (ii) the
reasonable out-of-pocket costs and expenses of Tenant in making such sublease,
such as brokers' fees, attorneys' fees, and advertising fees paid to unrelated
third parties, (iii) any sums paid to Landlord pursuant to Section 12.2(B)
hereof, (iv) the cost of improvements or alterations made
<PAGE>
by Tenant expressly and solely for the purpose of preparing that portion of the
Premises for such subtenancy if not used by Tenant subsequent to the expiration
of the term of the sublease, (v) the cost of any other concession granted to the
subtenant other than free rent or any rent credit, and (vi) the unamortized or
undepreciated cost of any Tenant's Property leased to and used by such
subtenant. In determining Sublease Rent, the costs set forth in clauses (ii),
(iii), (iv) and (v) shall be amortized on a straight-line basis over the term of
such sublease and the costs set forth in clause (vi) shall be amortized on a
straight line basis over the greater of the longest useful life of such
improvements, alterations or Property (as permitted pursuant to the Internal
Revenue Code of 1986, as amended) and the term of such sublease.
(5) "Sublease Rent Per Square Foot" shall mean the Sublease
Rent divided by the rentable square feet of the space demised under the sublease
in question.
(6) Sublease Profit shall be recalculated from time to time to
reflect any corrections in the prior calculation thereof due to (i) subsequent
payments received or made by Tenant, (ii) the final adjustment of payments to be
made by or to Tenant, and (iii) mistake. Promptly after receipt or final
adjustment of any such payments or discovery of any such mistake, Tenant shall
submit to Landlord a recalculation of the Sublease Profit, and an adjustment
shall be made between Landlord and Tenant, on account of prior payments made or
credits received pursuant to this Section 12.7. In addition, if Sublease
Expenses utilized for the purpose of calculating Sublease Profit included an
amount attributable to the cost of the improvements made by Tenant expressly and
solely for the purpose of preparing the Premises or a portion thereof for the
occupancy of the subtenant and subsequent to the expiration of the sublease such
improvements and/or alterations were not demolished and/or removed and Tenant
reoccupies the Premises or portion thereof demised under such sublease, Sublease
Profits shall be recalculated as if the cost of such improvements and/or
alterations were not incurred by Tenant and Tenant promptly shall pay to
Landlord seventy percent (70%) of the additional amount of such Sublease Profit
resulting from such recalculation.
Section 12.8. (A) Notwithstanding the provisions of Section 12.1 hereof
but subject to the provisions of Section 12.4 hereof, if Landlord shall not
exercise its rights pursuant to paragraph (B)(2) of this Section 12.8, Landlord
shall not unreasonably withhold condition or delay its consent to an assignment
of this Lease in its entirety provided that:
(1) no Event of Default shall have occurred and be continuing;
(2) upon the date Tenant delivers the Assignment Statement to
Landlord and upon the date immediately preceding the date of any assignment
approved by Landlord, the proposed assignee shall have a financial standing
(taking into consideration the obligations of the proposed assignee under this
Lease)
<PAGE>
reasonably satisfactory to Landlord, be of a character, be engaged in a
business, and propose to use the Premises in a manner in keeping with the
standards in such respects of the other tenancies in the Building;
(3) if Landlord has or within one hundred eighty (180) days
thereafter reasonably expects to have comparable space in the Building available
for leasing, the proposed assignee (or any Person who is an Affiliate of the
proposed assignee) shall not be a tenant or subtenant of any space in the
Building, nor shall the proposed assignee (or any Person who is an Affiliate of
the Proposed Assignee) be a Person with whom Landlord is negotiating or
discussing to lease space in the Building (it being agreed, however, that the
proposed assignee may be an Affiliate of a Person with whom Landlord is
negotiating or discussing to lease space in the Building or an Affiliate of a
tenant or subtenant of the Building, so long as in either case (x) the proposed
assignee constitutes a separate business entity that has operated independently
as a separate entity from such Person with whom Landlord is negotiating or
discussing as aforesaid, or from such tenant or subtenant in the Building, in
either case for at least two (2) years, and (y) such proposed subtenant was not
formed for the purpose of circumventing the requirements of this clause (3));
(4) the proposed use of the Premises by the proposed assignee
shall not (a) be likely to increase Landlord's operating expenses beyond that
which would be incurred for use by Tenant; (b) increase the burden on existing
cleaning services or elevators over the burden prior to such proposed
assignment; (c) violate any provision or restrictions herein relating to the use
or occupancy of the Premises; (d) require any alterations, installations,
improvements, additions or other physical changes to be performed in or made to
any portion of the Building or the Real Property other than the Premises; or (e)
violate any provision or restrictions in any Superior Lease or Mortgage to which
this Lease is subordinate; if Landlord shall have consented to an assignment
and, as a result of the use and occupancy of the Premises by Tenant/assignee,
operating expenses are increased, then Tenant shall pay to Landlord, within
thirty (30) days after demand, as additional rent, all resulting increases in
operating expenses; and
(5) the assignee shall agree to assume all of the obligations
of Tenant under this Lease from and after the date of the assignment.
(B) (1) Subject to the terms of this Section 12.8(B), if Tenant
proposes to assign the tenant's interest hereunder in its entirety, then Tenant
shall submit a statement to Landlord (the "Assignment Statement") containing the
following information: (i) the essential terms and conditions of the proposed
assignment, including, without limitation, the consideration payable for such
assignment and the estimated value (including cost, overhead and supervision) of
any improvements (including any demolition to be performed) to the Premises
proposed to be made by Tenant to prepare the Premises for occupancy by such
assignee, and (ii) any other information that Landlord may reasonably request,
together with a statement
<PAGE>
specifically directing Landlord's attention to the provisions of this Section
12.8(B) requiring Landlord to respond to Tenant's request within (x) forty-five
(45) days (if Tenant does not identify the proposed assignee in the Assignment
Statement) or (y) fifteen (15) Business Days (if Tenant identifies the proposed
assignee in the Assignment Statement), as the case may be, after Landlord's
receipt of the Assignment Statement (it being understood that Tenant shall not
be required to identify the proposed assignee in the Assignment Statement).
Tenant shall not be required to deliver an Assignment Statement in respect of
assignments that do not require Landlord's prior approval as provided in Section
12.4 hereof.
(2) Landlord shall have the right, exercisable by written
notice given by Landlord to Tenant within forty-five (45) days after Landlord's
receipt of the Assignment Statement, to terminate this Lease (an "Assignment
Termination"), in which event the Term shall expire on the proposed effective
date set forth in the Assignment Statement, or if none, on a date set by
Landlord that is not later than ninety (90) days after the date of Landlord's
notice, and Tenant shall vacate the Premises and surrender the same to Landlord
on such date set by Landlord in accordance with the provisions of Article 20
hereof; provided, however, that the aforesaid period of forty-five (45) days
shall be reduced to fifteen (15) Business Days if Tenant identifies the proposed
assignee in the Assignment Statement.
(3) If Landlord fails to notify Tenant within said forty-five
(45) day period (or said fifteen (15) Business Day period, as the case may be)
of Landlord's intention to exercise its rights pursuant to paragraph (B)(2) of
this Section 12.8 (or if Landlord notifies Tenant that Landlord is not
exercising its rights pursuant to paragraph (B)(2) of this Section 12.8) or of
Landlord's consent to or disapproval of the proposed assignment pursuant to the
Assignment Statement, or if Landlord consents to such assignment as provided in
Section 12.8(A) hereof, then Tenant shall be free to assign the Premises to the
proposed assignee on substantially the same terms and conditions set forth in
the Assignment Statement (it being understood that with respect to proposed
assignments in respect of which Landlord had the right to exercise Landlord's
rights as set forth in Section 12.8(B)(2) hereof, Tenant's rights to so assign
this Lease shall be subject to the terms hereof, including, without limitation,
Landlord's right to approve the assignee under Section 12.8(A) hereof). If
Tenant does not enter into such assignment within one hundred eighty (180) days
after the delivery of the Assignment Statement to Landlord, then the provisions
of this Section 12.8 shall again be applicable in their entirety to any proposed
assignment. If, at any time after delivery of an Assignment Statement, the
consideration payable to Tenant pursuant to the terms of an assignment
transaction that Tenant proposes with an independent third party changes in any
material respect such that there is a greater than ten percent (10%) decrease in
the value to Tenant of the aggregate economic terms of the proposed assignment
specified in the Assignment Statement, then Tenant shall promptly notify
Landlord of such change in writing and Landlord shall have the right,
exercisable within ten (10) Business Days after Landlord's receipt of such
revised Assignment Statement, to effect an Assignment Termination pursuant to
paragraph (B)(2) of this Section 12.8. Prior to
<PAGE>
entering into any such assignment, Tenant shall notify Landlord in
writing of the identity of the proposed assignee (if not identified in the
Assignment Statement) so that Landlord may exercise its reasonable approval
rights pursuant to this Section 12.8. If Landlord shall fail to notify Tenant
within fifteen (15) Business Days of Landlord's receipt of the identity of the
proposed assignee, Tenant shall have the right to assign the Lease to such
proposed assignee for the terms set forth in the Assignment Statement (as the
same may have been modified, as aforesaid) pursuant to an assignment which shall
otherwise be subject to the terms and conditions of this Lease.
(4) If Tenant proposes to assign this Lease and is about to
commence negotiations with a prospective assignee, Tenant may supply Landlord
with a list of Persons with whom Tenant plans to negotiate an assignment, and
Landlord shall notify Tenant within ten (10) days after Landlord's receipt of
such list if such Persons would violate the provisions of paragraph (A)(3) of
this Section 12.8. If (x) Landlord does not so notify Tenant within such ten
(10) day period, and (y) Tenant submits an Assignment Statement to Landlord
within the one hundred eighty (180) day period of time commencing on the day
after the end of such ten (10) day period, then Landlord, during such succeeding
one hundred eighty (180) day period, shall not have the right to withhold,
delay, or condition its consent to the assignment contemplated by such
Assignment Statement solely by reason of such proposed assignee being (i) a
Person (or an Affiliate of a Person) with whom Landlord is negotiating or
discussing to lease space in the Building, or (ii) a tenant or subtenant in the
Building or an Affiliate of a tenant or subtenant of the Building.
(C) If Tenant shall assign this Lease, Tenant shall deliver to
Landlord, within five (5) days after execution thereof, (x) a duplicate original
instrument of assignment in form and substance reasonably satisfactory to
Landlord, duly executed by Tenant, and (y) an instrument in form and substance
reasonably satisfactory to Landlord, duly executed by the assignee, in which
such assignee shall assume observance and performance of, and agree to be
personally bound by, all of the terms, covenants and conditions of this Lease on
Tenant's part to be observed and performed.
(D) Except in connection with an assignment pursuant to Section
12.4(A), Tenant shall pay to Landlord, upon receipt thereof, an amount equal to
seventy percent (70%) of all Assignment Proceeds. For purposes of this paragraph
(D), "Assignment Proceeds" shall mean all consideration paid to Tenant, directly
or indirectly, by any assignee, including Landlord pursuant to paragraph (B) of
this Section 12.8, or any other amount received by Tenant from or in connection
with any assignment (including, but not limited to, sums paid for the sale or
rental, or consideration received on account of any contribution, of Tenant's
Property) after deducting therefrom: (i) in the event of a sale (or
contribution) of Tenant's Property, the then unamortized or undepreciated cost
thereof determined on the basis of Tenant's federal income tax returns, (ii) the
reasonable out-of-pocket costs and expenses of Tenant in making such assignment,
such as brokers' fees, attorneys' fees, and advertising fees paid to unrelated
third parties, (iii) any payments required to be made
<PAGE>
by Tenant in connection with the assignment of its interest in this Lease
pursuant to Article 31-B of the Tax law of the State of New York or any real
property transfer tax of the United States or the City or State of New York
(other than any income tax), (iv) any sums paid by Tenant to Landlord pursuant
to Section 12.2(B) hereof, (v) the cost of improvements or alterations made by
Tenant expressly and solely for the purpose of preparing the Premises for such
assignment, as determined by Tenant's federal income tax returns, (vi) the
unamortized or undepreciated cost of any Tenant's Property leased to and used by
such assignee, (vii) the cost of any other concession granted to the assignee,
and (viii) the then unamortized or undepreciated cost of the Alterations
determined on the basis of Tenant's federal income tax returns less the
Applicable Tenant Fund. If the consideration paid to Tenant for any assignment
shall be paid in installments, then the expenses specified in this paragraph (D)
shall be amortized over the period during which such installments shall be
payable.
Section 12.9. Notwithstanding any other provision of this Lease, neither
Tenant nor any direct or indirect assignee or subtenant of Tenant may enter into
any lease, sublease, license, concession or other agreement for use, occupancy
or utilization of space in the Premises which provides for a rental or other
payment for such use, occupancy or utilization based in whole or in part on the
net income or profits derived by any person from the property leased, occupied
or utilized, or which would require the payment of any consideration which would
not fall within the definition of "rents from real property", as that term is
defined in Section 856(d) of the Internal Revenue Code of 1986, as amended.
ARTICLE 13
ELECTRICITY
Section 13.1. Tenant shall at all times comply with the rules,
regulations, terms and conditions applicable to service, equipment, wiring and
requirements of the public utility supplying electricity to the Building. The
risers and other electrical installations serving the Tenth Floor Space shall be
capable of supplying on a demand load basis eight (8) watts of electricity per
usable square foot of the Tenth Floor Space at the electrical closets serving
the Premises (exclusive of the electricity required for HVAC). The risers and
other electrical installations serving the Seventh Floor Space shall be capable
of supplying on a demand load basis seven (7) watts of electricity per usable
square foot of the Seventh Floor Space (exclusive of the electricity required
for HVAC); provided, however, that by notice given by Tenant to Landlord not
later than sixty (60) days after the Seventh Floor Space Commencement Date,
Tenant shall have the right with respect to the Seventh Floor Space to increase
such supplied wattage to eight (8) watts. If Tenant elects to so increase such
wattage with respect to the Seventh Floor Space, then Tenant shall pay to
Landlord within thirty (30) days after demand therefor, an amount equal to
Sixty-Five Thousand Dollars ($65,000) to provide such additional wattage at the
electrical closet serving the Seventh Floor Space. Tenant shall not use any
electrical equipment which, in Landlord's reasonable judgment, would exceed such
<PAGE>
capacity or interfere with the electrical service to other tenants of the
Building. In the event that, in Landlord's sole judgment, Tenant's electrical
requirements necessitate installation of an additional riser, risers or other
proper and necessary equipment, Landlord shall so notify Tenant of same. Within
ten (10) Business Days after receipt of such notice, Tenant shall either cease
such use of such additional electricity or shall request that additional
electrical capacity (specifying the amount requested) be made available to
Tenant. Landlord, in Landlord's sole judgment shall determine whether to make
available such additional electrical capacity to Tenant and the amount of such
additional electrical capacity to be made available. If Landlord shall
agree to make available additional electrical capacity and the same necessitates
installation of an additional riser, risers or other proper and necessary
equipment, including, without limitation, any switchgear, the same shall be
installed by Landlord. Any such installation shall be made at Tenant's sole cost
and expense, and shall be chargeable and collectible as additional rent and paid
within thirty (30) days after the rendition of a bill to Tenant therefor.
Landlord shall not be liable in any way to Tenant for any failure or defect in
the supply or character of electric service furnished to the Premises by reason
of any requirement, act or omission of the utility serving the Building or for
any other reason not attributable to the negligence of Landlord, whether
electricity is provided by public or private utility or by any electricity
generation system owned and operated by Landlord.
Section 13.2. Tenant shall obtain electric energy directly from the public
utility furnishing electric service to the Building. The costs of such service
shall be paid by Tenant directly to such public utility. Such electricity may be
furnished to Tenant by means of the existing electrical facilities serving the
Premises, at no charge, to the extent the same are available, suitable and safe
for such purposes. All meters and all additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to obtain
electricity shall be installed by Landlord at Tenant's expense.
ARTICLE 14
ACCESS TO PREMISES
Section 14.1. (A) Subject to the provisions of Section 14.1(C) below,
Tenant shall permit Landlord, Landlord's agents, representatives, contractors
and employees and public utilities servicing the Building to erect, use and
maintain, concealed ducts, pipes and conduits in and through the Premises.
Landlord, Landlord's agents, representatives, contractors, and employees and the
agents, representatives, contractors, and employees of public utilities
servicing the Building shall have the right to enter the Premises at all
reasonable times upon reasonable prior notice (except in the case of an
emergency in which event Landlord and Landlord's agents, representatives,
contractors, and employees may enter without prior notice to Tenant), which
notice may be oral, to examine the same, to show them to prospective purchasers,
or prospective or existing Mortgagees or Lessors, and to make such
<PAGE>
repairs, alterations, improvements, additions or restorations (1) to the
Premises (i) as Landlord is required to perform pursuant to this Lease, or (ii)
which Landlord may elect to perform following ten (10) days after notice, except
in the case of an emergency (in which event Landlord and Landlord's agents,
representatives, contractors, and employees may enter without prior notice to
Tenant), following Tenant's failure to make repairs or perform any work which
Tenant is obligated to make or perform under this Lease, or (iii) for the
purpose of complying with any Requirements, a Superior Lease or a Mortgage, and
(2) to any other portion of the Building as Landlord may deem necessary or
desirable, and Landlord shall be allowed to take all material into and upon the
Premises that may be required therefor without the same constituting an eviction
or constructive eviction of Tenant in whole or in part and, except as set forth
in Section 14.5 hereof, the Fixed Rent (and any other item of Rental) shall in
no wise abate while said repairs, alterations, improvements, additions or
restorations are being made, by reason of loss or interruption of business of
Tenant, or otherwise.
(B) Any work performed or installations made pursuant to this
Article 14 shall be made with reasonable diligence and otherwise pursuant to the
provisions of Section 4.3 hereof.
(C) Except as hereinafter provided, any pipes, ducts, or conduits
installed in or through the Premises pursuant to this Article 14 shall be
concealed behind, beneath or within partitioning, columns, ceilings or floors
located or to be located in the Premises. Notwithstanding the foregoing, any
such pipes, ducts, or conduits may be furred at points immediately adjacent to
partitioning columns or ceilings located or to be located in the Premises,
provided that the same are completely furred and that the installation of such
pipes, ducts, or conduits, when completed, shall not reduce the usable area of
the Premises beyond a de minimis amount. All costs and expenses in connection
with any such installation pursuant to this clause (C), including the costs of
repairing and restoring any portion of the Premises affected by such
installation, shall be borne by Landlord.
Section 14.2. During the twelve (12) month period prior to the Expiration
Date, Landlord may exhibit the Premises to prospective tenants thereof upon
prior appointment with Tenant during regular business hours.
Section 14.3. If Tenant shall not be present when for any reason entry
into the Premises shall be necessary, Landlord or Landlord's agents,
representatives, contractors or employees may enter the same without rendering
Landlord or such agents liable therefor if during such entry Landlord or
Landlord's agents shall accord reasonable care under the circumstances to
Tenant's Property, and without in any manner affecting this Lease. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever, for the care,
supervision or repair of the Building or any part thereof, other than as herein
provided.
<PAGE>
Section 14.4. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, elevators, stairs, toilets,
or other public parts of the Building and to change the name, number or
designation by which the Building is commonly known, provided any such change
does not (a) unreasonably reduce, interfere with or deprive Tenant of access to
the Building or the Premises (it being agreed that any permanent reduction in
the number of elevators serving the Premises shall be deemed to unreasonably
interfere with Tenant's access to the Premises) or (b) reduce the rentable area
(except by a de minimis amount) of the Premises. All parts (except surfaces
facing the interior of the Premises) of all walls, windows and doors bounding
the Premises (including exterior Building walls, exterior core corridor walls,
exterior doors and entrances), all balconies, terraces and roofs adjacent to the
Premises, all space in or adjacent to the Premises used for shafts, stacks,
stairways, chutes, pipes, conduits, ducts, fan rooms, heating, air cooling,
plumbing and other mechanical facilities, service closets and other Building
facilities are not part of the Premises, and Landlord shall have the use
thereof, as well as access thereto through the Premises for the purposes of
operation, maintenance, alteration and repair as provided in this Article 14.
Section 14.5. If, due to any alterations, restorations, work,
installation, or repair (collectively the "Work") performed by Landlord
hereunder or failure by Landlord to perform any of its obligations hereunder
(including, without limitation, Landlord's obligation to provide the services
described in Article 28 hereof), (i) Tenant is unable for at least ten (10)
consecutive days to reasonably operate its business in all or any portion of the
Premises in substantially the same manner as such business was operated prior to
the performance of the Work or such failure, and (ii) such interruption occurs
during Tenant's business hours, then the Fixed Rent and the Escalation Rent
shall be reduced on a per diem basis in the proportion in which the area of the
portion of the Premises which is unusable bears to the total area of the
Premises for each day from and after the aforesaid ten (10) day period that such
portion of the Premises was and remains unusable (it being understood that such
portion of the Premises shall be deemed to be usable if Tenant actually uses
such portion of the Premises for the conduct of business).
ARTICLE 15
CERTIFICATE OF OCCUPANCY
Tenant shall not at any time use or occupy the Premises in violation of
the certificate of occupancy at such time issued for the Premises or for the
Building and in the event that any department of the City or State of New York
shall hereafter contend or declare by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose which is a violation
of such certificate of occupancy, Tenant, upon written notice from Landlord or
any Governmental Authority, shall
<PAGE>
immediately discontinue such use of the Premises. On the Commencement Date a
temporary or permanent certificate of occupancy covering the Premises will be in
force permitting the Premises to be used as offices, provided, however, neither
such certificate, nor any provision of this Lease, nor any act or omission of
Landlord, shall be deemed to constitute a representation or warranty that the
Premises, or any part thereof, lawfully may be used or occupied for any
particular purpose or in any particular manner, in contradistinction to mere
"office" use. Landlord shall not cause the certificate of occupancy to be
amended during the Term so as to cause Tenant's use or occupancy of the Premises
in accordance with the terms of this Lease to violate such certificate of
occupancy.
ARTICLE 16
DEFAULT
Section 16.1. Each of the following events shall be an "Event of Default"
hereunder:
(A) If Tenant shall default in the payment when due of any
installment of Fixed Rent and such default shall continue for five (5) Business
Days after notice of such default is given to Tenant, or in the payment when due
of any other item of Rental and such default shall continue for five (5)
Business Days after notice of such default is given to Tenant, except that if
Landlord shall have given two (2) such notices in any twelve (12) month period,
Tenant shall not be entitled to any further notice of its delinquency in the
payment of Rental until such time as twelve (12) consecutive months shall have
elapsed without Tenant having defaulted in any such payment; or
(B) if the entire Premises shall become permanently abandoned; or
(C) if Tenant shall default in the observance or performance of any
term, covenant or condition on Tenant's part to be observed or performed under
any other lease with Landlord or Landlord's predecessor in interest of space in
the Building and such default shall continue beyond any grace period set forth
in such other lease for the remedying of such default; or,
(D) if Tenant's interest or any portion thereof in this Lease shall
devolve upon or pass to any person, whether by operation of law or otherwise,
except as expressly permitted under Article 12 hereof; or
(E) (1) if Tenant shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due; or
(2) if Tenant shall commence or institute any case, proceeding
or other action (A) seeking relief on its behalf as debtor, or to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation,
<PAGE>
dissolution, composition or other relief with respect to it or its debts under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property; or
(3) if Tenant shall make a general assignment for the benefit
of creditors; or
(4) if any case, proceeding or other action shall be commenced
or instituted against Tenant (A) seeking to have an order for relief entered
against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts under any existing
or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property, which in either of such cases (i) results in
any such entry of an order for relief, adjudication of bankruptcy or insolvency
or such an appointment or the issuance or entry of any other order having a
similar effect or (ii) remains undismissed for a period of ninety (90) days; or
(5) if any case, proceeding or other action shall be commenced
or instituted against Tenant seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its property which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within ninety (90) days from the entry thereof; or
(6) if Tenant shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clauses (2), (3), (4) or (5) above; or
(7) if a trustee, receiver or other custodian is appointed for
any substantial part of the assets of Tenant which appointment is not vacated or
stayed within ten (10) Business Days; or
(F) if Tenant shall fail more than five (5) times during any twelve
(12) month period to pay any installment of Fixed Rent or any item of Rental
when due, after receipt of the notice and the expiration of the applicable grace
period pursuant to the provisions of paragraph (A) above, if such notice and
grace period are then required; or
(G) if Tenant shall fail to pay any installments of Fixed Rent or
items of Rental when due as required by this Lease, and Landlord shall bring
more than one (1) summary dispossess proceeding during any twelve (12) month
period; or
(H) if this Lease is assigned (or all or a portion of the Premises
are
<PAGE>
subleased) to a Related Entity and such Related Entity shall no longer (i)
Control, (ii) be under common Control with, or (iii) be under the Control of
Tenant (or any permitted successor by merger, consolidation or purchase as
provided herein); or
(I) if Landlord shall present the Letter of Credit to the bank which
issued the same in accordance with the provisions of Article 31 hereof, and the
bank shall fail to honor the Letter of Credit and pay the proceeds thereof to
Landlord for any reason whatsoever (other than by virtue of an act or failure to
act of Tenant) and Tenant on or prior to five (5) Business Days after notice of
such failure is given to Tenant fails to pay to Landlord an amount equal to the
Security Amount for the Applicable Security Period; or
(J) if Landlord shall present the Letter of Credit to the bank which
issued the same in accordance with the provisions of Article 31 hereof, and the
bank shall fail by virtue of an act or failure to act of Tenant to honor the
Letter of Credit and pay the proceeds thereof to Landlord, or
(K) if Tenant shall fail to provide the Seventh Floor Space Security
Amount in respect of the period of time commencing on the Seventh Floor Space
Commencement Date on or prior to five (5) Business Days after the occurrence of
the Seventh Floor Space Commencement Date; or
(L) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed and Tenant shall fail to remedy such default within thirty (30)
days after notice by Landlord to Tenant of such default, or if such default is
of such a nature that it cannot with due diligence be completely remedied within
said period of thirty (30) days and Tenant shall not commence within said period
of thirty (30) days, or shall not thereafter diligently prosecute to completion,
all steps necessary to remedy such default.
Section 16.2. (A) If an Event of Default (i) described in Section 16.1(E)
hereof shall occur, or (ii) described in Sections 16.1(A), (B), (C), (D), (F),
(G), (H), (I), (J), (K) or (L) shall occur and Landlord, at any time thereafter,
at its option gives written notice to Tenant stating that this Lease and the
Term shall expire and terminate on the date Landlord shall give Tenant such
notice, then this Lease and the Term and all rights of Tenant under this Lease
shall expire and terminate as if the date on which the Event of Default
described in clause (i) above occurred the date of such notice, pursuant to
clause (ii) above, as the case may be, were the Fixed Expiration Date and Tenant
immediately shall quit and surrender the Premises, but Tenant shall nonetheless
be liable for all of its obligations hereunder, as provided for in Articles 17
and 18 hereof. Anything contained herein to the contrary notwithstanding, if
such termination shall be stayed by order of any court having jurisdiction over
any proceeding described in Section 16.1(E) hereof, or by federal or state
statute, then, following the expiration of any such stay, or if the trustee
appointed in any such proceeding, Tenant or Tenant as
<PAGE>
debtor-in-possession shall fail to assume Tenant's obligations under this Lease
within the period prescribed therefor by law or within one hundred twenty (120)
days after entry of the order for relief or as may be allowed by the court, or
if said trustee, Tenant or Tenant as debtor-in-possession shall fail to provide
adequate protection of Landlord's right, title and interest in and to the
Premises or adequate assurance of the complete and continuous future performance
of Tenant's obligations under this Lease as provided in Section 12.3(B),
Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on five (5) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said five (5)
day period this Lease shall cease and expire as aforesaid and Tenant, Tenant as
debtor-in-possession or said trustee shall immediately quit and surrender the
Premises as aforesaid.
(B) If an Event of Default described in Section 16.1(A) hereof shall
occur, or this Lease shall be terminated as provided in Section 16.2(A) hereof,
Landlord, without notice but only to the extent permitted by law, may reenter
and repossess the Premises using such force for that purpose as may be necessary
without being liable to indictment, prosecution or damages therefor and may
dispossess Tenant by summary proceedings or otherwise.
Section 16.3. If at any time, (i) Tenant shall be comprised of two (2) or
more persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any person other than Tenant, or (iii) Tenant's interest in this
Lease shall have been assigned, the word "Tenant", as used in Section 16.1(E),
shall be deemed to mean any one or more of the persons primarily or secondarily
liable for Tenant's obligations under this Lease. Any monies received by
Landlord from or on behalf of Tenant during the pendency of any proceeding of
the types referred to in Section 16.1(E) shall be deemed paid as compensation
for the use and occupation of the Premises and the acceptance of any such
compensation by Landlord shall not be deemed an acceptance of Rental or a waiver
on the part of Landlord of any rights under Section 16.2.
ARTICLE 17
REMEDIES AND DAMAGES
Section 17.1. (A) If there shall occur any Event of Default, and this
Lease and the Term shall expire and come to an end as provided in Article 16
hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
default or after the date upon which this Lease and the Term shall expire and
come to an end, re-enter the Premises or any part thereof, without notice,
either by summary proceedings, or by any other applicable action or proceeding,
or by force or otherwise (without being liable to indictment, prosecution or
damages therefor, except as otherwise provided by law), and may repossess the
Premises and dispossess Tenant
<PAGE>
and any other persons from the Premises and remove any and all of their property
and effects from the Premises; and
(2) Landlord, at Landlord's option, may relet the whole or any
portion or portions of the Premises from time to time, either in the name of
Landlord or otherwise, to such tenant or tenants, for such term or terms ending
before, on or after the Expiration Date, at such rental or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in its sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
repairs, replacements, alterations, additions, improvements, decorations and
other physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with any such
reletting or proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of
intention to re-enter or to institute legal proceedings to that end which may
otherwise be required to be given under any present or future law. Tenant, on
its own behalf and on behalf of all persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court or judge, or (b) any re-entry by Landlord,
or (c) any expiration or termination of this Lease and the Term, whether such
dispossess, re-entry, expiration or termination shall be by operation of law or
pursuant to the provisions of this Lease. The words "re-enter," "re-entry" and
"re-entered" as used in this Lease shall not be deemed to be restricted to their
technical legal meanings. In the event of a breach or threatened breach by
Tenant, or any persons claiming through or under Tenant, of any term, covenant
or condition of this Lease, Landlord shall have the right to enjoin such breach
and the right to invoke any other remedy allowed by law or in equity as if
re-entry, summary proceedings and other special remedies were not provided in
this Lease for such breach. The right to invoke the remedies hereinbefore set
forth are cumulative and shall not preclude Landlord from invoking any other
remedy allowed at law or in equity.
Section 17.2. (A) If this Lease and the Term shall expire and come to
an end as provided in Article 16 hereof, or by or under any summary proceeding
or any other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 17.1, or by or under any summary proceeding or any other
action or proceeding, then, in any of said events:
<PAGE>
(1) Tenant shall pay to Landlord all Fixed Rent, Escalation
Rent and other items of Rental payable under this Lease by Tenant to Landlord to
the date upon which this Lease and the Term shall have expired and come to an
end or to the date of re-entry upon the Premises by Landlord, as the case may
be;
(2) Tenant also shall be liable for and shall pay to Landlord,
as damages, any deficiency (referred to as "Deficiency") between the Rental for
the period which otherwise would have constituted the unexpired portion of the
Term and the net amount, if any, of rents collected under any reletting effected
pursuant to the provisions of clause (2) of Section 17.1(A) for any part of such
period (first deducting from the rents collected under any such reletting all of
Landlord's expenses in connection with the termination of this Lease, Landlord's
re-entry upon the Premises and with such reletting, including, but not limited
to, all repossession costs, brokerage commissions, legal expenses, attorneys'
fees and disbursements, alteration costs, contribution to work and other
expenses of preparing the Premises for such reletting); any such Deficiency
shall be paid in monthly installments by Tenant on the days specified in this
Lease for payment of installments of Fixed Rent; Landlord shall be entitled to
recover from Tenant each monthly Deficiency as the same shall arise, and no suit
to collect the amount of the Deficiency for any month shall prejudice Landlord's
right to collect the Deficiency for any subsequent month by a similar
proceeding; and
(3) whether or not Landlord shall have collected any monthly
Deficiency as aforesaid, Landlord shall be entitled to recover from Tenant, and
Tenant shall pay to Landlord, on demand, in lieu of any further Deficiency as
and for liquidated and agreed final damages, a sum equal to the amount by which
the Rental for the period which otherwise would have constituted the unexpired
portion of the Term (commencing on the date immediately succeeding the last date
with respect to which a Deficiency, if any, was collected) exceeds the then fair
and reasonable rental value of the Premises for the same period, both discounted
to present worth at the Base Rate; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, shall have been relet by Landlord to a bona fide independent third
party in an arms' length transaction for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
(B) If the Premises, or any part thereof, shall be relet together
with other space in the Building, the rents collected or reserved under any such
reletting and the expenses of any such reletting shall be equitably apportioned
for the purposes of this Section 17.2. Tenant shall in no event be entitled to
any rents collected or payable under any reletting, whether or not such rents
shall exceed the Fixed Rent reserved in this Lease. Solely for the purposes of
this Article 17, the term "Escalation Rent" as used in Section 17.2(A) shall
mean the Escalation Rent in effect immediately prior to the Expiration Date, or
the date of re-entry upon the Premises by Landlord, as the case
<PAGE>
may be, adjusted to reflect any increase pursuant to the provisions of Article
27 hereof for the Operating Year immediately preceding such event. Nothing
contained in Article 16 hereof or this Article 17 shall be deemed to limit or
preclude the recovery by Landlord from Tenant of the maximum amount allowed to
be obtained as damages by any statute or rule of law, or of any sums or damages
to which Landlord may be entitled in addition to the damages set forth in this
Section 17.2.
ARTICLE 18
LANDLORD FEES AND EXPENSES
Section 18.1. If an Event of Default has occurred and is continuing,
Landlord may (1) as provided in Section 14.1 hereof, perform the obligation
which Tenant has failed to perform for the account of Tenant, or (2) make any
expenditure or incur any obligation for the payment of money, including, without
limitation, reasonable attorneys' fees and disbursements in instituting,
prosecuting or defending any action or proceeding, and the cost thereof, with
interest thereon at the Applicable Rate, shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Landlord within thirty (30) days of
rendition of any bill or statement to Tenant therefor and if the term of this
Lease shall have expired at the time of making of such expenditures or incurring
of such obligations, such sums shall be recoverable by Landlord as damages.
Section 18.2. If Tenant shall fail to pay any installment of Fixed Rent,
Escalation Rent or any other item of Rental when due, Tenant shall pay to
Landlord, in addition to such installment of Fixed Rent, Escalation Rent or
other item of Rental, as the case may be, as a late charge and as additional
rent, a sum equal to interest at the Applicable Rate on the amount unpaid,
computed from the date such payment was due to and including the date of
payment.
ARTICLE 19
NO REPRESENTATIONS BY LANDLORD
Section 19.1. Landlord and Landlord's agents and representatives have made
no representations or promises with respect to the Building, the Real Property
or the Premises except as herein expressly set forth, and no rights, easements
or licenses are acquired by Tenant by implication or otherwise except as
expressly set forth herein. Tenant shall accept possession of (i) the Tenth
Floor Space in the condition which shall exist on the Commencement Date and (ii)
the Seventh Floor Space in the condition which shall exist on the Seventh Floor
Space Commencement Date, in either case "as is" (subject to the provisions of
Section 4.1 hereof), and Landlord shall have no obligation to perform any work
or make any installations in order to prepare the Premises for Tenant's
occupancy except for (x) the items with respect to the Tenth Floor Space (the
"Tenth Floor Space Landlord's Work") set forth on Exhibit "H" attached hereto
and made a part hereof, and (y) the items with respect to the Seventh
<PAGE>
Floor Space (the "Seventh Floor Space Landlord's Work") set forth on Exhibit "I"
attached hereto and made a part hereof (the Tenth Floor Space Landlord's Work or
the Seventh Floor Space Landlord's Work, as the case may be, being referred to
herein as "Landlord's Work").
Section 19.2. Subject to the terms of Section 3.6 hereof and this Section
19.2, Landlord has made and makes no representation as to the date on which it
will complete Landlord's Work. Except as set forth herein, no delay in
completing Landlord's Work shall in any way affect the validity of this Lease or
the obligations of Tenant hereunder or give rise to a claim for damages by
Tenant or a claim for rescission of this Lease, nor shall the same be construed
in any wise to extend the Term hereof. Landlord agrees that, subject to
Unavoidable Delay, each item of Landlord's Work shall be prosecuted with due
diligence from and after the Commencement Date or the Seventh Floor Space
Commencement Date, as the case may be; provided, however, that nothing contained
in this Article 19 shall be deemed to impose upon Landlord any obligations to
employ contractors or labor at so-called overtime or other premium pay rates or
to incur any other overtime costs or expenses whatsoever. Landlord shall have
the right to enter the Premises subsequent to the Commencement Date or the
Seventh Floor Space Commencement Date, as the case may be, to perform Landlord's
Work and except as set forth herein the payment of Fixed Rent and Escalation
Rent shall not be affected thereby. Landlord and Tenant shall cooperate in
good faith in connection with scheduling and sequencing Tenant's performance of
the Initial Alterations with Landlord's performance of Landlord's Work. Landlord
shall use commercially reasonable efforts to complete Landlord's Work on or
prior to the Applicable Landlord's Work Date. Subject to the terms of this
Section 19.2, if Landlord does not Substantially Complete Landlord's Work on or
prior to the Applicable Landlord's Work Date therefor, then (a) Landlord shall
use its diligent efforts to complete Landlord's Work as promptly as reasonably
practicable after such date, (b) such failure by Landlord to so Substantially
Complete such Landlord's Work shall not extend the Term except as expressly
provided herein, (c) except as otherwise provided in this Section 19.2, as
Tenant's sole remedy for Landlord's aforesaid failure to Substantially Complete
such Landlord's Work on or prior to the Applicable Landlord's Work Date
therefor, (I) with respect to the Tenth Floor Space, Tenant shall receive a one
(1) day abatement of the Rental due hereunder with respect to the Tenth Floor
Space for each day from and after the Applicable Landlord's Work Date that
Landlord fails to Substantially Complete Landlord's Work with respect to the
Tenth Floor Space and such failure actually delays Tenant's performance of the
Tenth Floor Space Initial Alterations (it being agreed that Tenant shall give
Landlord reasonable evidence of such actual delay), (II) with respect to the
Seventh Floor Space, the Seventh Floor Space Rent Commencement Date shall be
adjourned by one (1) day for each day from and after the Applicable Landlord's
Work Date that Landlord fails to Substantially Complete Landlord's Work with
respect to the Seventh Floor Space and such failure actually delays Tenant's
performance of the Seventh Floor Space Initial Alterations (it being agreed that
Tenant shall give Landlord reasonable evidence of such actual delay), and (III)
the Expiration Date shall be adjourned by one (1) day for (x) each day
<PAGE>
that the Rental is abated (with respect to the Tenth Floor Space) as aforesaid,
or (y) each day that the Seventh Floor Space Rent Commencement Date is so
adjourned (with respect to the Seventh Floor Space), but in no event shall the
Expiration Date be so adjourned by more than thirty (30) days. Landlord and
Tenant each acknowledge that Landlord's Work does not include any items that
constitute Long Lead Work. If (i) Landlord does not Substantially Complete
Landlord's Work on or prior to the Applicable Landlord's Work Date, (ii) Tenant
gives Landlord notice of Tenant's intention to exercise its self- help rights
pursuant to this Section 19.2, and (iii) Landlord fails to Substantially
Complete such Landlord's Work on or prior to the thirtieth (30th) day after the
date that Tenant gives such notice to Landlord, then Tenant shall have the right
thereafter to (I) perform Landlord's Work in the Tenth Floor Space or the
Seventh Floor Space, as the case may be, and (II) offset against the Rental next
due hereunder an amount equal to the reasonable out-of-pocket expenses incurred
by Tenant in performing the Landlord's Work (but in no event may Tenant offset
any expenses on account of any work performed by Tenant that is outside the
scope of the Landlord's Work described on Exhibit "F" or Exhibit "G", as the
case may be, attached hereto), together with interest thereon at the Applicable
Rate computed from the date that Tenant paid such expenses on account of
Landlord's Work through the date that Tenant offsets such expenses against the
Rental as aforesaid. If Tenant performs such Landlord's Work in accordance with
the provisions of this Section 19.2, then, so long as Tenant prosecutes with due
diligence the Substantial Completion of such Landlord's Work, Tenant shall be
entitled to the aforesaid abatement or adjournment, as the case may be (in
addition to having the right of offset as aforesaid) for the period of time
through the date that Tenant Substantially Completes Landlord's Work.
ARTICLE 20
END OF TERM
Upon the expiration or other termination of this Lease, Tenant shall
quit and surrender to Landlord the Premises, vacant, broom clean, in good order
and condition, ordinary wear and tear and damage for which Tenant is not
responsible under the terms of this Lease excepted, and otherwise in compliance
with the provisions of Article 3 hereof. If the last day of the Term falls on
Saturday or Sunday, this Lease shall expire on the Business Day immediately
preceding. Tenant expressly waives, for itself and for any person claiming
through or under Tenant, any rights which Tenant or any such person may have
under the provisions of Section 2201 of the New York Civil Practice Law and
Rules and of any successor law of like import then in force in connection with
any holdover summary proceedings which Landlord may institute to enforce the
foregoing provisions of this Article 20. Tenant acknowledges that possession of
the Premises must be surrendered to Landlord on the Expiration Date. The parties
recognize and agree that the damage to Landlord resulting from any failure by
Tenant to timely surrender possession of the Premises as aforesaid will be
extremely substantial, will exceed the amount of the monthly installments of the
Fixed Rent and Rental theretofore payable hereunder, and will be impossible to
accurately measure. Tenant therefore agrees that if possession of the Premises
is not
<PAGE>
surrendered to Landlord on the Expiration Date, other than by reason of
any Unavoidable Delay relating solely to the Building, in addition to any other
rights or remedies Landlord may have hereunder or at law, and without in any
manner limiting Landlord's right to demonstrate and collect any damages suffered
by Landlord and arising from Tenant's failure to surrender the Premises as
provided herein, Tenant shall pay to Landlord on account of use and occupancy of
the Premises for each month and/or for each portion of any month during which
Tenant holds over in the Premises after the Expiration Date, a sum equal to the
greater of (i) one hundred fifty percent (150%) of the Rental which was payable
under this Lease during the last month of the Term, and (ii) the then fair
market rental value for the Premises; provided, however, that with respect to
the period from and after the forty-fifth (45th) day after the Expiration Date,
said monthly amount payable by Tenant to Landlord on account of use and
occupancy of the Premises shall be an amount equal to the greater of (i) two
hundred percent (200%) of the Rental which was payable under this Lease during
the last month of the Term, and (ii) the then fair market rental value for the
Premises. Nothing herein contained shall be deemed to permit Tenant to retain
possession of the Premises after the Expiration Date or to limit in any manner
Landlord's right to regain possession of the Premises through summary
proceedings, or otherwise, and no acceptance by Landlord of payments from Tenant
after the Expiration Date shall be deemed to be other than on account of the
amount to be paid by Tenant in accordance with the provisions of this Article
20. If (i) Tenant fails to deliver exclusive possession of the Premises to
Landlord on or prior to the date that is forty-five (45) days after the
Expiration Date pursuant to the terms of this Article 20 other than by reason of
any Unavoidable Delay relating solely to the Building, or (ii) Tenant defaults
in respect of Tenant's obligation to pay the aforesaid fee for use and occupancy
of the Premises after the Expiration Date and such default continues for seven
(7) Business Days after the date that Landlord gives Tenant notice thereof,
then Tenant shall indemnify and save Landlord harmless from and against all
claims, losses, damages, liabilities, costs and expenses (including, without
limitation, attorneys' fees and disbursements) resulting from the delay by
Tenant in so surrendering the Premises, including, without limitation, (x) any
claims made by any succeeding tenant founded on such delay, or (y) any damages
sustained by Landlord by reason of Tenant's failure to deliver possession of the
Premises to Landlord. The provisions of this Article 20 shall survive the
Expiration Date.
ARTICLE 21
QUIET ENJOYMENT
Provided no Event of Default has occurred and is continuing, Tenant may
peaceably and quietly enjoy the Premises subject, nevertheless, to the terms and
conditions of this Lease.
<PAGE>
ARTICLE 22
FAILURE TO GIVE POSSESSION
Landlord shall deliver vacant and exclusive possession of the Tenth Floor
Space to Tenant on the Commencement Date. Landlord hereby represents that the
Tenth Floor Space is occupied by a tenant pursuant to a lease expiring February
28, 2001. Except as hereinafter provided, Tenant waives any right to rescind
this Lease under Section 223-a of the New York Real Property Law or any
successor statute of similar nature and purpose then in force and further waives
the right to recover any damages which may result from Landlord's failure for
any reason to deliver vacant and exclusive possession of the Seventh Floor Space
to Tenant on the Seventh Floor Space Commencement Date. If Landlord shall be
unable to give vacant and exclusive possession of the Seventh Floor Space on the
Seventh Floor Space Commencement Date, and provided Tenant is not responsible
for such inability to give possession, then (i) Landlord, at Landlord's sole
cost and expense, shall use its diligent efforts to deliver to Tenant possession
of the Seventh Floor Space as promptly as reasonably practicable (it being
understood that Landlord, if necessary, shall promptly institute and diligently
and in good faith prosecute, at Landlord's sole cost and expense, holdover and
any other appropriate proceedings against the occupant of the Seventh Floor
Space), (ii) the Seventh Floor Space Commencement Date shall be deemed to be
adjourned until the date when Landlord delivers vacant and exclusive possession
of the Seventh Floor Space to Tenant, and (iii) the Seventh Floor Space Rent
Commencement Date shall be deemed to be the date that is the earlier to occur of
(I) the date that Tenant initially occupies the Seventh Floor Space for the
conduct of business (but not solely for the conduct of Tenant's Initial
Alterations therein), and (II) the date that occurs One Hundred Fifty-Two (152)
days after the adjourned Seventh Floor Space Commencement Date pursuant to
clause (ii) above. No such failure to give possession on the Seventh Floor
Commencement Date shall in any wise affect the validity of this Lease or the
obligations of Tenant hereunder or give rise to any claim for damages by Tenant
or claim for rescission of this Lease, nor shall the same be construed in any
wise to extend the Term. The provisions of this Article are intended to
constitute an "express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law. If Landlord fails to deliver to Tenant
vacant and exclusive possession of the Seventh Floor Space on or prior to
November 1, 2001 (the "Termination Date"), then Tenant shall have the right to
terminate this Lease with respect to the Seventh Floor Space only by giving
notice thereof to Landlord on or prior to the twentieth (20th) day after the
Termination Date, except that Tenant shall not have such right to terminate this
Lease with respect to the Seventh Floor Space if Landlord delivers such vacant
and exclusive possession to Tenant prior to the date when Tenant delivers such
notice to Landlord. If Tenant exercises Tenant's aforesaid right to terminate
this Lease for the Seventh Floor Space, then the Seventh Floor Space shall not
constitute part of the Premises for any purposes hereof, and accordingly, the
Fixed Rent shall not be deemed to include the Fixed Rent for the Seventh Floor
Space, Tenant's Share shall not include the Seventh Floor Space Tenant's Share,
and the Space Factor shall not include the Seventh Floor Space Factor. Tenant's
aforesaid termination of this Lease for the Seventh Floor Space shall not affect
or impair the validity of this Lease for the Tenth Floor Space.
<PAGE>
ARTICLE 23
NO WAIVER
Section 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys of the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises. In the
event Tenant at any time desires to have Landlord sublet the Premises for
Tenant's account, Landlord or Landlord's agents are authorized to receive said
keys for such purpose without releasing Tenant from any of the obligations under
this Lease, and Tenant hereby relieves Landlord of any liability for loss of or
damage to any of Tenant's effects in connection with such subletting.
Section 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease, or any of the Rules and Regulations set forth or hereafter adopted by
Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation of the provisions of this Lease, from having all of the
force and effect of an original violation of the provisions of this Lease. The
receipt by Landlord of Fixed Rent, Escalation Rent or any other item of Rental
with knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations set forth, or hereafter adopted, against Tenant or any other tenant
in the Building shall not be deemed a waiver of any such Rules and Regulations.
No provision of this Lease shall be deemed to have been waived by Landlord,
unless such waiver be in writing signed by Landlord. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly Fixed Rent or other item
of Rental herein stipulated shall be deemed to be other than on account of the
earliest stipulated Fixed Rent or other item of Rental, or as Landlord may elect
to apply same, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Fixed Rent or other item of Rental be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Fixed Rent
or other item of Rental or to pursue any other remedy provided in this Lease.
This Lease contains the entire agreement between the parties and all prior
negotiations and agreements are merged herein. Any executory agreement hereafter
made shall be ineffective to change, modify, discharge or effect an abandonment
of this Lease in whole or in part unless such executory agreement is in writing
and signed by the party against whom enforcement of the change, modification,
discharge or abandonment is sought.
Section 23.3. The failure of Tenant to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this
Lease, on
<PAGE>
Landlord's part to be performed, shall not be deemed to be a waiver of such
breach or prevent a subsequent act which would have originally constituted a
violation of the provisions of this Lease from having all of the force and
effect of an original violation of the provisions of this Lease. The payment by
Tenant of Fixed Rent, Escalation Rent or any other item of Rental or performance
of any obligation of Tenant hereunder with knowledge of any breach on the part
of Landlord of any covenant of this Lease shall not be deemed a waiver of such
breach, and payment of same by Tenant shall be without prejudice to Tenant's
right to pursue any remedy against Landlord provided in this Lease.
ARTICLE 24
WAIVER OF TRIAL BY JURY
The respective parties hereto shall and they hereby do waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
or for the enforcement of any remedy under any statute, emergency or otherwise.
If Landlord commences any summary proceeding against Tenant, Tenant will not
interpose any counterclaim of whatever nature or description in any such
proceeding (unless failure to impose such counterclaim would preclude Tenant
from asserting in a separate action the claim which is the subject of such
counterclaim), and will not seek to consolidate such proceeding with any other
action which may have been or will be brought in any other court by Tenant.
ARTICLE 25
INABILITY TO PERFORM
Except as provided in this Lease, including, without limitation, Section
14.5 hereof, this Lease and the obligation of Tenant to pay Rental hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no wise be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease expressly
or impliedly to be performed by Landlord or because Landlord is unable to make,
or is delayed in making any repairs, additions, alterations, improvements or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures, if Landlord is prevented or delayed from so doing by reason of strikes
or labor troubles or by accident, or by any cause whatsoever beyond Landlord's
control, including, but not limited to, laws, governmental preemption in
connection with a national emergency or by reason of any Requirements of any
Governmental Authority or by reason of failure of the HVAC, electrical,
plumbing, or other Building Systems in the Building, or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency ("Unavoidable
<PAGE>
Delays"), provided that Landlord exercises due diligence and commercially
reasonable efforts in fulfilling its obligations hereunder..
ARTICLE 26
BILLS AND NOTICES
Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease shall be in writing and shall be deemed
sufficiently given or rendered if delivered by hand (against a signed receipt by
an officer of the entity) or if sent by registered or certified mail (return
receipt requested) or by a nationally recognized overnight courier addressed
if to Tenant (a) at Tenant's address set forth in this Lease, Attn.:
Chief Financial Officer, if mailed prior to Tenant's taking
possession of the Premises, or (b) at the Building, Attn.: Chief
Financial Officer, if mailed subsequent to Tenant's taking
possession of the Premises, or (c) at any place where Tenant or any
agent or employee of Tenant may be found if mailed subsequent to
Tenant's vacating, deserting, abandoning or surrendering the
Premises, in each case with a copy to Robinson Silverman Pearce
Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New
York 10104, Attn.: Jonathan S. Margolis, Esq., or
if to Landlord at Landlord's address set forth in this Lease, Attn.:
Mr. David E. Green, and with copies to (x) Vornado Realty Trust,
Park 80 West, Plaza II, Saddle Brook, New Jersey, 07663, Attn.:
Joseph Macnow, (y) Proskauer Rose LLP, 1585 Broadway, New York, New
York 10036, Attn.: Lawrence J. Lipson, Esq., and (z) each Mortgagee
and Lessor which shall have requested same, by notice given in
accordance with the provisions of this Article 26 at the address
designated by such Mortgagee or Lessor, or
to such other address(es) as Landlord, Tenant or any Mortgagee or Lessor may
designate as its new address(es) for such purpose by notice given to the other
in accordance with the provisions of this Article 26. Any such bill, statement,
consent, notice, demand, request or other communication shall be deemed to have
been rendered or given on the date when it shall have been hand delivered
(against a signed receipt as aforesaid) or four (4) Business Days from when it
shall have been mailed as provided in this Article 26 except that any notices to
terminate the Lease given by Landlord to Tenant shall be deemed to have been
rendered or given on the date received by Tenant. Anything contained herein to
the contrary notwithstanding, any
<PAGE>
Operating Statement, Tax Statement or any other bill, statement, consent,
notice, demand, request or other communication from Landlord to Tenant with
respect to any item of Rental (other than any "default notice" if required
hereunder) may be sent to Tenant by regular United States mail.
ARTICLE 27
ESCALATION
Section 27.1. For the purposes of this Article 27, the following terms
shall have the meanings set forth below.
(A) "Assessed Valuation" shall mean the amount for which the Real
Property is assessed pursuant to applicable provisions of the New York City
Charter and of the Administrative Code of the City of New York for the purpose
of calculating all or any portion of the Taxes payable with respect to the Real
Property.
(B) "Base Operating Expenses" shall mean the Operating Expenses for
the Base Operating Year.
(C) "Base Operating Year" shall mean the calendar year ending
December 31, 2000.
(D) "Base Taxes" shall mean the Taxes payable for the Tax Year
commencing July 1, 2000 and ending June 30, 2001.
(E) (1) "Operating Expenses" shall mean the aggregate of those costs
and expenses (and taxes, if any, thereon, including without limitation, sales
and value added taxes) paid or incurred by or on behalf of Landlord (whether
directly or through independent contractors) in respect of the Operation of the
Property which, are properly chargeable to the Operation of the Property in
accordance with generally accepted accounting principles together with and
including (without limitation) the costs of gas, oil, steam, water, sewer
rental, electricity (for the portions of the Real Property not leased to and
occupied by tenants or available for occupancy), HVAC and other utilities
furnished to the Building and utility taxes, and the expenses incurred in
connection with the Operation of the Property such as insurance premiums,
attorneys' fees and disbursements, auditing and other professional fees and
expenses, and all expenses (including attorneys' fees and disbursements,
experts' and other witnesses' fees) incurred in contesting the validity or
amount of any Taxes or in obtaining a refund of any Taxes, but specifically
excluding:
(i) Taxes;
(ii) franchise, transfer, inheritance or income taxes imposed
upon Landlord;
<PAGE>
(iii) debt service on Mortgages and other financing costs;
(iv) leasing commissions and any other costs incurred in
connection with entering into leases;
(v) capital expenditures or any other expenses which are
required to be capitalized under generally accepted accounting principles
(except as otherwise provided herein);
(vi) the cost of electrical energy furnished directly to
Tenant and other tenants of the Building or to portions of the Building
available for occupancy by tenants;
(vii) the cost of tenant installations incurred in connection
with preparing space for a new tenant or payments made in lieu thereof;
(viii) salaries and fringe benefits of personnel above the
grade of building manager and such building manager's supervisor;
(ix) rent paid under Superior Leases (other than in the nature
of Rent consisting of Operating Expenses);
(x) any expense for which Landlord is otherwise compensated
through the proceeds of insurance or otherwise or is otherwise compensated by
any tenant (including Tenant) of the Building other than pursuant to this
Article 27 or pursuant to clauses in other leases similar to this Article 27;
(xi) the cost for services in excess of the services Landlord
is obligated to furnish to Tenant hereunder;
(xii) legal and other professional fees (other than in
connection with the preparation of annual operating expense statements);
(xiii) depreciation, except as provided herein;
(xiv) Landlord's advertising and promotional costs for the
Building or any space therein;
(xv) any fee or expenditure paid to any Affiliate of Landlord
in excess of the amount which would be paid in the absence of such relationship;
(xvi) the cost of the installation, operation and
<PAGE>
maintenance of any specialty service, such as an observatory, broadcasting
facilities, luncheon club, athletic or recreational club;
(xvii) the cost of any work or service performed for any
tenant of the Building (other than Tenant) to a materially greater extent or in
a materially more favorable manner than that furnished generally to the tenants
and other occupants (including Tenant);
(xviii) the cost of any work or service to the extent
performed for any facility other than the Building;
(xix) the cost of any capital improvements to the Building
after the date hereof (except to the extent otherwise expressly provided);
(xx) charges (including applicable taxes) for electricity,
water, steam and other utilities for which Landlord is entitled to reimbursement
from any tenant (except to the extent such reimbursement is accomplished by such
other tenant making contributions to costs incurred by Landlord for Operating
Expenses);
(xxi) any costs of painting or decorating of any tenanted part
of the Building;
(xxii) lease payments for rented equipment, the cost of which
equipment would constitute a capital expenditure if the equipment were purchased
(except to the extent otherwise expressly provided);
(xxiii) any tenant improvement work, tenant allowances or
other tenant concessions (e.g., lease takeover payments) paid, performed or
reimbursed by Landlord;
(xxiv) rent, additional rent or other charges under any lease
or sublease which is assumed by Landlord or under any recapture sublease entered
into by Landlord;
(xxv) costs in connection with any judgment, settlement or
arbitration resulting from any tort liability on the part of Landlord and the
amount of such judgment, settlement, or award, including any punitive damages
assessed against Landlord;
(xxvi) interest, penalties and late charges incurred as a
result of late payments made by Landlord;
(xxvii) fines, interest, late charges and penalties payable by
Landlord resulting from noncompliance with any laws and punitive damages
regardless of the underlying cause of action;
<PAGE>
(xxviii) costs incurred to correct any material
misrepresentation by Landlord in this Lease;
(xxix) costs incurred to correct any material violation by
Landlord of any of the terms of this Lease or any other lease with a tenant in
the Building (except to the extent such costs would otherwise constitute
Operating Expenses);
(xxx) fees and expenses incurred in connection with the
granting of any mortgage or the entering into of any ground lease or the sale of
the Real Property or any portion thereof;
(xxxi) costs and expenses incurred in causing the mechanical,
computer, or other systems of the Building to properly reflect the transition
from calendar year 1999 to calendar year 2000;
(xxxii) costs and expenses incurred in providing services for
any retail portions of the Building;
<PAGE>
(xxxiii) costs and expenses incurred for the handling,
removal, treatment, disposal or replacement of asbestos or asbestos containing
materials in the Building and costs and expenses incurred for the handling,
removal, treatment, disposal or replacement of other hazardous substances in the
Building to the extent any such hazardous materials violate applicable
Requirements as of the date hereof; and
(xxxiv) costs and expenses to cure violations (including the
cost of penalties and fines in connection therewith) noted against the Real
Property prior to the date hereof,
except, however, that if Landlord is not furnishing any particular work or
service (the cost of which if performed by Landlord would constitute an
Operating Expense) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses shall
be deemed to be increased by an amount equal to the additional Operating
Expenses which reasonably would have been incurred during such period by
Landlord if it had at its own expense furnished such work or services to such
tenant. Any insurance proceeds received with respect to any item previously
included as an Operating Expense shall be deducted from Operating Expenses for
the Operating Year in which such proceeds are received; provided, however, to
the extent any insurance proceeds are received by Landlord in any Operating Year
with respect to any item which was included in Operating Expenses during the
Base Operating Year, the amount of insurance proceeds so received shall be
deducted from Base Operating Expenses and (x) the Base Operating Expenses shall
be retroactively adjusted to reflect such deduction and (y) all retroactive
Operating
<PAGE>
Payments resulting from such retroactive adjustment shall be due and payable
when billed by Landlord. Until such time as the electricity supplied to each
floor of the Building and the common and public areas of the Building
(including, without limitation, the Building Systems) shall be separately
metered or submetered, Operating Expenses shall include an amount equal to (x)
(i) Landlord's cost (utilizing the electrical rates applicable to the Building
including energy charges, demand charges, time-of-day charges, fuel adjustment
charges, rate adjustment charges, sales tax and any other factors used by the
public utility in computing its charges to Landlord) of furnishing electric
current to the entire Building, multiplied by (ii) the number of kilowatt hours
of electric current furnished to the public and common areas of the Building
(including, without limitation, the Building Systems) and other areas not
available for occupancy as determined by a survey prepared by an independent,
reputable electrical engineer selected by Landlord, plus (y) an amount equal to
six percent (6%) of the amount determined pursuant to clause (x), as Landlord's
administrative charge for overhead and supervision. Operating Expenses shall be
reduced by any net reimbursement, refund or credit received by Landlord (other
than reimbursement by tenants of the Building for Operating Expenses as
contemplated by this Article 27) with respect to any item that is included in
Operating Expenses.
(2) In determining the amount of Operating Expenses for any
Operating Year (including, without limitation, the Base Operating Year), if less
than all of the Building rentable area shall have been occupied by tenant(s) at
any time during any such Operating Year, Operating Expenses shall be determined
for such Operating Year to be an amount equal to the like expenses which would
normally be expected to be incurred had all such areas been occupied throughout
such Operating Year.
(3) (a) If any capital improvement is made during any
Operating Year in compliance with a Requirement, whether or not such Requirement
is valid or mandatory, or in lieu of a repair, then the cost of such improvement
shall be included in Operating Expenses for the Operating Year in which such
improvement was made; provided, however, to the extent the cost of such
improvement is required to be capitalized for federal income tax purposes, such
cost shall be amortized over the useful economic life of such improvement as
reasonably estimated by Landlord, and the annual amortization, together with
interest thereon at the then Base Rate, of such improvement shall be deemed an
Operating Expense in each of the Operating Years during which such cost of the
improvement is amortized.
(b) If any capital improvement is made during any
Operating Year either for the purpose of saving or reducing Operating Expenses
(as, for example, a labor-saving improvement), then the cost of such improvement
shall be included in Operating Expenses for the Operating Year in which such
improvement was made; provided, however, such cost shall be amortized over such
period of time as Landlord reasonably estimates such savings or reduction in
Operating Expenses will equal the cost of such improvement and the annual
amortization, together with interest thereon at the then Base Rate, of such
improvement shall be deemed an Operating
<PAGE>
Expense in each of the Operating Years during which such cost of the improvement
is amortized, it being agreed however, that the annual amortization shall not
exceed the aforesaid savings or reduction in Operating Expense, or the annual
amounts Landlord would have incurred in performing the applicable repair, as the
case may be.
(F) "Operating Statement" shall mean a statement in reasonable
detail setting forth a comparison of the Operating Expenses for an Operating
Year with the Base Operating Expenses and the Escalation Rent for the preceding
Operating Year pursuant to the provisions of this Article 27.
(G) "Operating Year" shall mean the calendar year within which the
Commencement Date occurs and each subsequent calendar year for any part or all
of which Escalation Rent shall be payable pursuant to this Article 27.
(H) "Taxes" shall mean the aggregate amount of real estate taxes and
any general or special assessments (exclusive of penalties and interest thereon)
imposed upon the Real Property (including, without limitation, (i) assessments
made upon or with respect to any "air" and "development" rights now or hereafter
appurtenant to or affecting the Real Property, (ii) any fee, tax or charge
imposed by any Governmental Authority for any vaults, vault space or other space
within or outside the boundaries of the Real Property, and (iii) any taxes or
assessments levied after the date of this Lease in whole or in part for public
benefits to the Real Property or the Building, including, without limitation,
any Business Improvement District taxes and assessments) without taking into
account any discount that Landlord may receive by virtue of any early payment of
Taxes; provided, that if because of any change in the taxation of real estate,
any other tax or assessment, however denominated (including, without limitation,
any franchise, income, profit, sales, use, occupancy, gross receipts or rental
tax) is imposed upon Landlord or the owner of the Real Property or the Building,
or the occupancy, rents or income therefrom, in substitution for any of the
foregoing Taxes, such other tax or assessment shall be deemed part of Taxes
computed as if Landlord's sole asset were the Real Property. Anything contained
herein to the contrary notwithstanding, Taxes shall not be deemed to include (w)
any taxes on Landlord's income, (x) franchise taxes, (y) estate or inheritance
taxes or (z) any similar taxes imposed on Landlord, unless such taxes are
levied, assessed or imposed in lieu of or as a substitute for the whole or any
part of the taxes, assessments, levies, impositions which now constitute Taxes.
(I) "Tax Statement" shall mean a statement in reasonable detail
setting forth a comparison of the Taxes for a Tax Year with the Base Taxes.
(J) "Tax Year" shall mean the period July 1 through June 30 (or such
other period as hereinafter may be duly adopted by the Governmental Authority
then imposing Taxes as its fiscal year for real estate tax purposes), any
portion of which occurs during the Term.
<PAGE>
Section 27.2. (A) If the Taxes payable for any Tax Year (any part or all
of which falls within the Term from and after the Applicable Rent Commencement
Date) shall represent an increase above the Base Taxes, then Tenant shall pay as
additional rent for such Tax Year and continuing thereafter until a new Tax
Statement is rendered to Tenant, Tenant's Share of such increase (the "Tax
Payment") as shown on the Tax Statement with respect to such Tax Year. Tenant
shall be obliged to pay the Tax Payment regardless of whether Tenant is exempt
in whole or part, from the payment of any Taxes by reason of Tenant's diplomatic
status or for any other reason whatsoever. The Taxes shall be computed initially
on the basis of the Assessed Valuation in effect at the time the Tax Statement
is rendered (as the Taxes may have been settled or finally adjudicated prior to
such time) regardless of any then pending application, proceeding or appeal
respecting the reduction of any such Assessed Valuation, but shall be subject to
subsequent adjustment as provided in Section 27.3 hereof.
(B) At any time during or after the Term, Landlord may render to
Tenant a Tax Statement or Statements showing (i) a comparison of the Taxes for
the Tax Year with the Base Taxes and (ii) the amount of the Tax Payment
resulting from such comparison. On the first day of the month following the
furnishing to Tenant of a Tax Statement, Tenant shall pay to Landlord a sum
equal to 1/12th of the Tax Payment shown thereon to be due for such Tax Year
multiplied by the number of months of the Term then elapsed since the
commencement of such Tax Year after deducting any amounts paid by Tenant on
account of such Tax Year prior thereto. Tenant shall continue to pay to Landlord
a sum equal to one-twelfth (1/12th) of the Tax Payment shown on such Tax
Statement on the first day of each succeeding month until the first day of the
month following the month in which Landlord shall deliver to Tenant a new Tax
Statement. If Landlord furnishes a Tax Statement for a new Tax Year subsequent
to the commencement thereof, promptly after the new Tax Statement is furnished
to Tenant, Landlord shall give notice to Tenant stating whether the amount
previously paid by Tenant to Landlord for the current Tax Year was greater or
less than the installments of the Tax Payment for the current tax year in
accordance with the Tax Statement, and (a) if there shall be a deficiency,
Tenant shall pay the amount thereof within thirty (30) days after demand
therefor, or (b) if there shall have been an overpayment, Landlord shall credit
the amount thereof against the next monthly installments of the Fixed Rent
payable under this Lease. Tax Payments shall be collectible by Landlord in the
same manner as Fixed Rent. Landlord's failure to render a Tax Statement shall
not prejudice Landlord's right to render a Tax Statement during or with respect
to any subsequent Tax Year, and shall not eliminate or reduce Tenant's
obligation to make Tax Payments for such Tax Year; provided, however, that
Landlord shall not have the right to require Tenant to make a Tax Payment to
Landlord in respect of a Tax Year unless Landlord gives Tenant a Tax Statement
therefor within two (2) years after the last day of such Tax Year.
Section 27.3. (A) Only Landlord shall be eligible to institute tax
reduction or other proceedings to reduce the Assessed Valuation. In the event
that, after a Tax Statement has been sent to Tenant, an Assessed Valuation which
had been utilized in
<PAGE>
computing the Taxes for a Tax Year is reduced (as a result of settlement, final
determination of legal proceedings or otherwise), and as a result thereof a
refund of Taxes is actually received by or on behalf of Landlord, then, promptly
after receipt of such refund, Landlord shall send Tenant a Tax Statement
adjusting the Taxes for such Tax Year and setting forth Tenant's Share of such
refund and Tenant shall be entitled to receive such amount, at Landlord's
option, either by way of a credit against the Fixed Rent next becoming due after
the sending of such Tax Statement or by a refund to the extent no further Fixed
Rent is due; provided, however, that Tenant's Share of such refund shall be
limited to the portion of the Tax Payment, if any, which Tenant had theretofore
paid to Landlord attributable to increases in Taxes for the Tax Year to which
the refund is applicable on the basis of the Assessed Valuation before it had
been reduced. Not earlier than sixty (60) days nor later than thirty (30) days
before the last day on which tax certiorari proceedings (i.e. the filing of the
notice of protest) with respect to the Real Property may be instituted, Tenant
may request that Landlord advise it of whether Landlord intends to commence such
proceedings and Landlord, by the date which is the later to occur of (x) fifteen
(15) Business Days after Tenant shall make such request and (y) five (5)
Business Days after Landlord shall have received notice of the Assessed
Valuation of the Real Property, shall so advise Tenant. If within such period
Landlord either fails to advise Tenant of its intentions or advises Tenant that
it does not intend to commence such proceedings, then if, at any time on or
before the tenth (10th) day prior to the last date to commence such proceedings,
Tenant so requests and provided that Tenant then occupies at least forty-five
(45%) of the rentable area of the Building, or other tenants of the Building
which together with Tenant occupy at least fifty-one percent (51%) of the
rentable area of the Building (excluding any rentable area occupied by Landlord
or its Affiliates) join Tenant in such request and Tenant or Tenant and such
other tenants agree to pay Landlord's reasonable out-of-pocket expenses as
herein provided, Landlord shall institute, and in good faith prosecute (which
shall include the right of Landlord to settle in good faith any such
proceeding), tax certiorari proceedings with respect to the Real Property. In
the event of the institution of such proceedings, such proceedings shall be at
Tenant's sole cost and expense as to which cost and expense, Tenant may be
reimbursed by such other tenants if applicable) and Tenant or Tenant and such
other tenants shall promptly reimburse Landlord after request therefor (and such
obligation shall survive the Expiration Date), unless the Assessed Valuation of
the Real Property shall be reduced as a result of the institution of such
proceedings, in which event the cost and expense of such proceedings shall be
paid by Landlord to the extent of any tax savings obtained as a result of such
reduction, subject to reimbursement pursuant to the provisions of Section 27.2
hereof.
(B) In the event that, after a Tax Statement has been sent to
Tenant, the Assessed Valuation which had been utilized in computing the Base
Taxes is reduced (as a result of settlement, final determination of legal
proceedings or otherwise) then, and in such event: (i) the Base Taxes shall be
retroactively adjusted to reflect such reduction, and (ii) all retroactive Tax
Payments resulting from such retroactive adjustment shall be due and payable
within thirty (30) days after being billed
<PAGE>
by Landlord. Landlord promptly shall send to Tenant a statement setting forth
the basis for such retroactive adjustment and Tax Payments.
Section 27.4. (A) If the Operating Expenses for any Operating Year (any
part or all of which falls within the Term from and after the Applicable Rent
Commencement Date) shall be greater than the Base Operating Expenses, then
Tenant shall pay as additional rent for such Operating Year and continuing
thereafter until a new Operating Statement is rendered to Tenant, Tenant's Share
of such increase (the "Operating Payment") as hereinafter provided.
(B) At any time during or after the Term Landlord may render to
Tenant an Operating Statement or Statements showing (i) a comparison of the
Operating Expenses for the Operating Year in question with the Base Operating
Expenses, and (ii) the amount of the Operating Payment resulting from such
comparison. Landlord's failure to render an Operating Statement during or with
respect to any Operating Year in question shall not prejudice Landlord's right
to render an Operating Statement during or with respect to any subsequent
Operating Year, and shall not eliminate or reduce Tenant's obligation to make
payments of the Operating Payment pursuant to this Article 27 for such Operating
Year; provided, however, that Landlord shall not have the right to require
Tenant to make an Operating Payment to Landlord in respect of an Operating Year
unless Landlord gives Tenant an Operating Statement therefor within two (2)
years after the last day of such Operating Year.
(C) On the first day of the month following the furnishing to Tenant
of an Operating Statement, Tenant shall pay to Landlord a sum equal to 1/12th of
the Operating Payment shown thereon to be due for the preceding Operating Year
multiplied by the number of months (and any fraction thereof) of the Term then
elapsed since the commencement of such Operating Year in which such Operating
Statement is delivered, less Operating Payments theretofore made by Tenant for
such Operating Year and thereafter, commencing with the then current monthly
installment of Fixed Rent and continuing monthly thereafter until rendition of
the next succeeding Operating Statement, Tenant shall pay on account of the
Operating Payment for such Year an amount equal to 1/12th of the Operating
Payment shown thereon to be due for the preceding Operating Year. Any Operating
Payment shall be collectible by Landlord in the same manner as Fixed Rent.
(D) (1) As used in this Section 27.4, (i) "Tentative Monthly
Escalation Charge" shall mean a sum equal to 1/12th of the product of (a)
Tenant's Share, and (b) the difference between (x) the Base Operating Expenses
and (y) Landlord's good faith reasonable estimate of Operating Expenses for the
Current Year, and (ii) "Current Year" shall mean the Operating Year in which a
demand is made upon Tenant for payment of a Tentative Monthly Escalation Charge.
(2) At any time in any Operating Year, Landlord, at its
option, in lieu of the payments required under Section 27.4(C) hereof, may
demand and collect
<PAGE>
from Tenant, as additional rent, a sum equal to the Tentative Monthly Escalation
Charge multiplied by the number of months in said Operating Year preceding the
demand and reduced by the sum of all payments theretofore made under Section
27.4(C) with respect to said Operating Year, and thereafter, commencing with the
month in which the demand is made and continuing thereafter for each month
remaining in said Operating Year, the monthly installments of Fixed Rent shall
be deemed increased by the Tentative Monthly Escalation Charge. Any amount due
to Landlord under this Section 27.4(D) may be included by Landlord in any
Operating Statement rendered to Tenant as provided in Section 27.4(B) hereof.
(E) (1) After the end of the Current Year and at any time that
Landlord renders an Operating Statement or Statements to Tenant as provided in
Section 27.4(B) hereof with respect to the comparison of the Operating Expenses
for said Operating Year or Current Year, with the Base Operating Expenses, as
the case may be, the amounts, if any, collected by Landlord from Tenant under
Section 27.4(C) or (D) on account of the Operating Payment or the Tentative
Monthly Escalation Charge, as the case may be, shall be adjusted, and, if the
amount so collected is less than or exceeds the amount actually due under said
Operating Statement for the Operating Year, a reconciliation shall be made as
follows: Tenant shall be debited with any Operating Payment shown on such
Operating Statement and credited with the amounts, if any, paid by Tenant on
account in accordance with the provisions of subsection (C) and subsection
(D)(2) of this Section 27.4 for the Operating Year in question. Tenant shall pay
any net debit balance to Landlord within thirty (30) days next following
rendition by Landlord of an invoice for such net debit balance; any net credit
balance shall be applied against the next accruing monthly installments of Fixed
Rent.
(2) If the sum of the Tentative Monthly Escalation Charges and
payments made by Tenant in accordance with subsection (C) of this Section 27.4
for any Operating Year shall have exceeded the Operating Payment for such
Operating Year by more than ten percent (10%), interest at the Applicable Rate
on the portion of the overpayment that exceeds the applicable Operating Payment
by more than ten percent (10%) determined as of the respective dates of such
payments by Tenant and calculated from such respective dates to the dates on
which such amounts are credited against the monthly installments of Fixed Rent,
shall be so credited. Any amount owing to Tenant subsequent to the Term shall be
paid to Tenant within ten (10) Business Days after a final determination has
been made of the amount due to Tenant.
Section 27.5. Any Operating Statement sent to Tenant shall be conclusively
binding upon Tenant unless, within one hundred twenty (120) days after such
Statement is sent, Tenant shall send a written notice to Landlord objecting to
such Statement and specifying the respects in which such Statement is disputed.
If such notice is sent, Tenant (together with its independent certified public
accountants, provided they are a nationally recognized firm of at least one
hundred fifty (150) partners or principals who are certified public accountants)
may examine Landlord's
<PAGE>
books and records relating to the Operation of the Property to determine the
accuracy of the Operating Statement. Tenant recognizes the confidential nature
of such books and records and agrees to maintain the information obtained from
such examination in strict confidence. If after such examination, Tenant still
disputes such Operating Statement, either party may refer the decision of the
issues raised to a reputable independent firm of certified public accountants,
selected by Landlord and approved by Tenant, which approval shall not be
unreasonably withheld or delayed as long as such firm of certified public
accountants is one of the so-called "big-five" public accounting firms or if at
such time there is no group of accounting firms commonly referred to as
"big-five", then a nationally recognized firm of at least one hundred fifty
(150) partners or principals who are certified public accountants, and the
decision of such accountants shall be conclusively binding upon the parties. The
fees and expenses involved in such decision shall be borne by the unsuccessful
party (and if both parties are partially successful, such fees and expenses
shall be apportioned between Landlord and Tenant in inverse proportion to the
amount by which such decision is favorable to each party). Notwithstanding the
giving of such notice by Tenant, and pending the resolution of any such dispute,
Tenant shall pay to Landlord when due the amount shown on any such Operating
Statement, as provided in Section 27.4 hereof.
Section 27.6. The expiration or termination of this Lease during any
Operating Year or Tax Year shall not affect the rights or obligations of the
parties hereto respecting any payments of Operating Payments for such Operating
Year and any payments of Tax Payments for such Tax Year, and any Operating
Statement relating to such Operating Payment and any Tax Statement relating to
such Tax Payment, may be sent to Tenant subsequent to, and all such rights and
obligations shall survive, any such expiration or termination, subject to the
provisions of Section 27.2(B) and 27.4(B). In determining the amount of the
Operating Payment for the Operating Year or the Tax Payment for the Tax Year in
which the Term shall expire, the payment of the Operating Payment for such
Operating Year or the Tax Payment for the Tax Year shall be prorated based on
the number of days of the Term which fall within such Operating Year or Tax
Year, as the case may be. Any payments due under such Operating Statement or Tax
Statement shall be payable within thirty (30) days after such Statement is sent
to Tenant.
ARTICLE 28
SERVICES
Section 28.1. (A) Landlord shall provide passenger elevator service to the
Premises on Business Days from 8:00 A.M. to 6:00 P.M. and have an elevator
subject to call at all other times.
(B) There shall be two (2) freight elevators serving the Premises
and the entire Building on call on a "first come, first served" basis on
Business Days from 8:00 A.M. to 5:00 P.M., and on a reservation, "first come,
first served" basis from 5:00 P.M.
<PAGE>
to 8:00 A.M. on Business Days and at any time on days other than Business Days.
If Tenant shall use the freight elevators serving the Premises between 5:00 P.M.
and 8:00 A.M. on Business Days or at any time on any other days, Tenant shall
pay Landlord, as additional rent for such use, the standard rates then fixed by
Landlord for the Building, or if no such rates are then fixed, at reasonable
rates (it being agreed that Tenant shall not be charged such rates for up to ten
(10) hours of freight elevator use with respect to Tenant's initial move into
the Tenth Floor Space by Tenant during such hours). The standard rate for such
freight elevator service as of the date hereof is set forth as part of
Landlord's standard rates summary annexed as Schedule C hereto and made a part
hereof (it being agreed that any rate set forth on Schedule C hereto is subject
to change by Landlord from time to time).
(C) Landlord shall not be required to furnish any freight elevator
services during the hours from 5:00 P.M. to 8:00 A.M. on Business Days and at
any time on days other than Business Days unless Landlord has received advance
notice from Tenant requesting such services prior to 2:00 P.M. of the day upon
which such service is requested or by 2:00 P.M. of the last preceding Business
Day if such periods are to occur on a day other than a Business Day.
Section 28.2. Landlord, at Landlord's expense (but subject to recoupment
pursuant to Article 27 hereof), shall furnish to the Building standard
water-cooled air-conditioning units (the "HVAC Units") installed as part of
Landlord's Work, condenser water to provide air- conditioning in the cooling
season (May 15th through October 15th, from 8:00 A.M. to 6:00 P.M. on Business
Days). In addition, Landlord shall provide perimeter heating through the
existing radiators when required for the comfortable occupancy of the Premises
from 8:00 A.M. to 6:00 P.M. on Business Days, Landlord, throughout the Term,
shall have free access to any and all mechanical installations of Landlord,
including, but not limited to, air-cooling, fan, ventilating and machine rooms
and electrical closets; Tenant shall not construct partitions or other
obstructions which may interfere with Landlord's free access thereto, or
interfere with the moving of Landlord's equipment to and from the enclosures
containing said installations. Neither Tenant, nor its agents, employees or
contractors shall at any time enter the said enclosures or tamper with, adjust
or touch or otherwise in any manner affect said mechanical installations. Tenant
shall draw and close the draperies or blinds for the windows of the Premises
whenever the HVAC System is in operation and the position of the sun so requires
and shall at all times cooperate fully with Landlord and abide by all of the
reasonable regulations and requirements which Landlord may prescribe for the
proper functioning and protection of the HVAC System. Tenant, at Tenant's cost
and expense, shall maintain and repair the HVAC Units during the Term.
Section 28.3. The Fixed Rent does not reflect or include any charge to
Tenant for the furnishing of any necessary condenser water to the HVAC Units or
perimeter heating to the Premises during periods other than the hours and days
set forth above ("Overtime Periods"). Accordingly, if Landlord shall furnish
such condenser water to the HVAC Units or perimeter heating at the request of
Tenant during Overtime Periods,
<PAGE>
Tenant shall pay Landlord additional rent for such services at the standard
rates then fixed by Landlord for the Building, or if no such rates are then
fixed, at reasonable rates. The standard rate for such services during Overtime
Periods as of the date hereof is set forth on Schedule C annexed hereto and made
a part hereof (it being agreed that such rate set forth on Schedule C hereto is
subject to change from Landlord from time to time). Landlord shall not be
required to furnish any such services during any Overtime Periods unless
Landlord has received advance notice from Tenant requesting such services prior
to 2:00 P.M. of the day upon which such services are requested or by 2:00 P.M.
of the last preceding Business Day if such Overtime Periods are to occur on a
day other than a Business Day. If Tenant fails to give Landlord such advance
notice, then, failure by Landlord to furnish or distribute any such services
during such Overtime Periods shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of Rental, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reason of inconvenience or
annoyance to Tenant, or injury to or interruption of Tenant's business or
otherwise. If more than one tenant utilizing the same system as Tenant requests
the same Overtime Periods for the same services as Tenant, the charge to Tenant
shall be adjusted pro rata.
Section 28.4. Provided Tenant shall keep the Premises in order, Landlord,
at Landlord's expense, subject to recoupment pursuant to Article 27 hereof,
shall cause the Premises, excluding any portions thereof used for the storage or
preparation of food or beverages, to be cleaned, substantially in accordance
with the standards set forth in Schedule B annexed hereto and made a part
hereof. Tenant shall pay to Landlord the cost of removal of any of Tenant's
refuse and rubbish from the Premises and the Building to the extent that the
same exceeds the refuse and rubbish usually attendant upon the use of such
Premises as offices. Bills for the same shall be rendered by Landlord to Tenant
at such time as Landlord may elect and shall be due and payable within thirty
(30) days after being rendered as additional rent. Tenant, at Tenant's sole cost
and expense, shall cause all portions of the Premises used for the storage or
preparation, of food or beverages to be cleaned daily in a manner reasonably
satisfactory to Landlord, and to be exterminated against infestation by vermin,
rodents or roaches regularly and, in addition, whenever there shall be evidence
of any infestation. Any such exterminating shall be done at Tenant's sole cost
and expense, in a manner reasonably satisfactory to Landlord, and by Persons
approved by Landlord, which approval shall not be unreasonably withheld,
conditioned or delayed. If Tenant shall perform any cleaning services in
addition to the services provided by Landlord as aforesaid, Tenant shall employ
the cleaning contractor providing cleaning services to the Building on behalf of
Landlord provided the charges imposed by such cleaning contractor are
commercially reasonable or such other cleaning contractor as shall be approved
by Landlord, which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant shall comply with any recycling program and/or refuse disposal
program (including, without limitation, any program related to the recycling,
separation or other disposal of paper, glass or metals) which Landlord shall
reasonably impose or which shall be required pursuant to any Requirements.
<PAGE>
Section 28.5. If the New York Board of Fire Underwriters or the Insurance
Services Office or any Governmental Authority, department or official of the
state or city government shall require or recommend that any changes,
modifications, alterations or additional sprinkler heads or other equipment be
made or supplied by reason of Tenant's business, or the location of the
partitions, trade fixtures, or other contents of the Premises, Landlord, at
Tenant's cost and expense, shall promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment.
Section 28.6. Landlord shall provide to the Premises hot and cold water
for ordinary drinking, cleaning and lavatory purposes. If Tenant requires, uses
or consumes water for any purpose in addition to ordinary drinking, cleaning or
lavatory purposes, Landlord may install a water meter and thereby measure
Tenant's water consumption. In such event (1) Tenant shall pay Landlord for the
cost of the meter and the cost of the installation thereof and through the
duration of Tenant's occupancy Tenant shall keep said meter and equipment in
good working order and repair at Tenant's own cost and expense; (2) Tenant shall
pay for water consumed as shown on said meter at the rate charged to Landlord,
as additional rent, and on default in making such payment Landlord may pay such
charges and collect the same from Tenant; and (3) Tenant shall pay the sewer
rent, charge or any other tax, rent, levy or charge which now or hereafter is
assessed, imposed or shall become a lien upon the Premises or the Real Property
of which they are a part pursuant to any Requirement made or issued in
connection with any such metered use, consumption, maintenance or supply of
water, water system, or sewage or sewage connection or system. The bill rendered
by Landlord for the above shall be based upon Tenant's consumption and shall be
payable by Tenant as additional rent within thirty (30) days after rendition.
Section 28.7. Landlord reserves the right, on such prior notice as is
reasonably practicable, if any, to stop service of the HVAC System or the
elevator, electrical, plumbing or other Building Systems when necessary, by
reason of accident or emergency, or for repairs, additions, alterations,
replacements or improvements in the reasonable judgment of Landlord desirable or
necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed (which repairs, additions, alterations,
replacements and improvements shall be performed in accordance with Section 4.3
hereof). Subject to Section 14.5 hereof, Landlord shall have no responsibility
or liability for interruption, curtailment or failure to supply HVAC, elevator,
electrical, plumbing or other Building Systems when prevented by Unavoidable
Delays or by any Requirement of any Governmental Authority or due to the
exercise of its right to stop service as provided in this Article 28. The
exercise of such right or such failure by Landlord shall not constitute an
actual or constructive eviction, in whole or in part, or entitle Tenant to any
compensation or to any abatement or diminution of Rental subject to Section 14.5
hereof, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord or its agents by reason of inconvenience or
annoyance to Tenant, or injury to or interruption of Tenant's business, or
otherwise.
<PAGE>
Section 28.8. Tenant, at Tenant's cost and expense, shall be entitled to
ten (10) listings on the standard directory in the Building. From time to time,
but not more frequently than once every three (3) months, Landlord shall change
the listings in the standard directory therein as Tenant shall request, and
Tenant promptly after request shall pay to Landlord a reasonable charge for each
Tenant request.
ARTICLE 29
PARTNERSHIP TENANT
If Tenant is a partnership (including, without limitation, a limited
liability partnership) or a limited liability company or a professional
corporation (or is comprised of two (2) or more Persons, individually or as
co-partners of a partnership (including, without limitation a limited liability
partnership), as members of a limited liability company or as shareholders of a
professional corporation) or if Tenant's interest in this Lease shall be
assigned to a partnership (including, without limitation, a limited liability
partnership) a limited liability company or a professional corporation (or to
two (2) or more Persons, individually or as co-partners of a partnership, as
members of a limited liability company or shareholders of a professional
corporation) pursuant to Article 12 hereof (any such partnership, professional
corporation and such Persons are referred to in this Article 29 as "Partnership
Tenant"), the following provisions shall apply to such Partnership Tenant: (a)
the liability of each of the parties comprising Partnership Tenant shall be
joint and several; (b) each of the parties comprising Partnership Tenant hereby
consents in advance to, and agrees to be bound by (x) any written instrument
which may hereafter be executed by Partnership Tenant or any successor entity,
changing, modifying, extending or discharging this Lease, in whole or in part,
or surrendering all or any part of the Premises to Landlord, and (y) any
notices, demands, requests or other communications which may hereafter be given
by Partnership Tenant or by any of the parties comprising Partnership Tenant;
(c) any bills, statements, notices, demands, requests or other communications
given or rendered to Partnership Tenant or to any of such parties shall be
binding upon Partnership Tenant and all such parties; (d) if Partnership Tenant
shall admit new partners, shareholders or members, as the case may be,
Partnership Tenant shall give Landlord notice of such event not later than ten
(10) Business Days prior to the admission of such partner(s), shareholder(s) or
member(s) together with an assumption agreement in form and substance
satisfactory to Landlord pursuant to which each of such new partners,
shareholders or members, as the case may be, shall, by their admission to
Partnership Tenant, agree to assume joint and several liability for the
performance of all of the terms, covenants and conditions of this Lease (as the
same may have been or thereafter be amended) on Tenant's part to be observed and
performed; it being expressly understood and agreed that each such new partner,
shareholder or member (as the case may be) shall be deemed to have assumed joint
and several liability for the performance of all of the terms, covenants and
conditions of this Lease (as the same may have been or thereafter be amended),
whether or not such new partner, shareholder or member shall have executed such
assumption agreement, and that
<PAGE>
neither Tenant's failure to deliver such assumption agreement nor the failure of
any such new partner or shareholder, as the case may be, to execute or deliver
any such agreement to Landlord shall vitiate the provisions of this clause (d)
of this Article 29).
ARTICLE 30
VAULT SPACE
Notwithstanding anything contained in this Lease or indicated on any
sketch, blueprint or plan, any vaults, vault space or other space outside the
boundaries of the Real Property are not included in the Premises. Landlord makes
no representation as to the location of the boundaries of the Real Property. All
vaults and vault space and all other space outside the boundaries of the Real
Property which Tenant may be permitted to use or occupy are to be used or
occupied under a revocable license, and if any such license shall be revoked, or
if the amount of such space shall be diminished or required by any Governmental
Authority or by any public utility company, such revocation, diminution or
requisition shall not constitute an actual or constructive eviction, in whole or
in part, or entitle Tenant to any abatement or diminution of Rental, or relieve
Tenant from any of its obligations under this Lease, or impose any liability
upon Landlord. Any fee, tax or charge imposed by any Governmental Authority for
any such vaults, vault space or other space occupied by Tenant shall be paid by
Tenant.
ARTICLE 31
SECURITY
Section 31.1. Tenant shall deposit with Landlord on the signing of this
Lease the Applicable Security Amount, or at Tenant's option, a "clean,"
unconditional, irrevocable and transferable letter of credit (the "Letter of
Credit") in the same amount, satisfactory to Landlord, issued by and drawn on a
bank satisfactory to Landlord and which is a member of the New York Clearing
House Association (which Letter of Credit shall provide that it may be presented
and shall be duly honored for payment by such issuing bank at its office located
in Manhattan), for the account of Landlord, for a term of not less than one (1)
year (it being agreed that Tenant shall be permitted to deposit one (1) Letter
of Credit with Landlord for each of the Tenth Floor Space Security Amount and
the Seventh Floor Space Security Amount, so long as the sum of such Letters of
Credit at any time equals the Applicable Security Amount at such time) (any
reference in this Section 31.1 to "Letter of Credit" shall be deemed to refer to
"Letters of Credit" if applicable) as security for the faithful performance and
observance by Tenant of the terms, covenants, conditions and provisions of this
Lease, including, without limitation, the surrender of possession of the
Premises to Landlord as herein provided. If an Event of Default shall occur and
be continuing, Landlord may apply the whole or any part of the security so
deposited, or present the Letter of Credit for payment and apply the whole or
any part of the proceeds thereof, as the case may be, (i) toward the payment of
any Fixed Rent, Escalation Rent or any other item of Rental as to which Tenant
is in default, (ii) toward any sum which Landlord may expend or be required to
<PAGE>
expend by reason of Tenant's default in respect of any of the terms, covenants
and conditions of this Lease, including, without limitation, any damage,
liability or expense (including, without limitation, reasonable attorneys' fees
and disbursements) incurred or suffered by Landlord, and (iii) toward any damage
or deficiency incurred or suffered by Landlord in the reletting of the Premises,
whether such damages or deficiency accrue or accrues before or after summary
proceedings or other re-entry by Landlord. If Landlord applies or retains any
part of the proceeds of the Letter of Credit or the security so deposited, as
the case may be, Tenant, upon demand, shall deposit with Landlord the amount so
applied or retained so that Landlord shall have the full deposit on hand at all
times during the Term. If Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this Lease, the Letter of
Credit or the security, as the case may be, shall be returned to Tenant after
the Expiration Date and after delivery of possession of the Premises to
Landlord. In the event of a sale or leasing of the Real Property or the
Building, Landlord shall have the right to transfer the Letter of Credit or
security, as the case may be, to the vendee or lessee and Landlord shall
thereupon be released by Tenant from all liability for the return of such
security or the Letter of Credit, as the case may be, and Tenant shall cause the
bank which issued the Letter of Credit to issue an amendment to the Letter of
Credit or issue a new Letter of Credit naming the vendee or lessee as the
beneficiary thereunder. Tenant shall look solely to the new landlord for the
return of the Letter of Credit or the security, as the case may be. The
provisions hereof shall apply to every transfer or assignment of the Letter of
Credit or security made to a new landlord. Except in connection with a permitted
assignment of this Lease, Tenant shall not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and neither Landlord
nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance. Tenant shall renew
any Letter of Credit from time to time, at least thirty (30) days prior to the
expiration thereof, and deliver to Landlord a new Letter of Credit or an
endorsement to the Letter of Credit, and any other evidence reasonably required
by Landlord that the Letter of Credit has been renewed for a period of at least
one (1) year. If Tenant shall fail to renew the Letter of Credit as aforesaid,
Landlord may present the Letter of Credit for payment and retain the proceeds
thereof as security in lieu of the Letter of Credit.
Section 31.2. Tenant shall provide Landlord with the Seventh Floor Space
Security Amount for the period of time commencing on the Seventh Floor Space
Commencement Date on or prior to five (5) Business Days after the occurrence of
the Seventh Floor Space Commencement Date. Provided no Event of Default shall
have occurred and be continuing on any day upon which the Applicable Security
Amount decreases pursuant to the terms of this Lease, Tenant shall be entitled
to replace the Letter of Credit on deposit with Landlord with a Letter of Credit
in the Applicable Security Amount. If the Security pursuant to this Article 31
is held in the form of a cash deposit, then provided no Event of Default shall
have occurred and be continuing on any day upon which the Applicable Security
Amount decreases pursuant to the terms of this Lease, then Landlord shall
promptly refund to Tenant that portion of such cash deposit (if any) that
exceeds the then required Applicable Security Amount.
<PAGE>
ARTICLE 32
CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof.
ARTICLE 33
PARTIES BOUND
The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective legal
representatives, successors, and, except as otherwise provided in this Lease,
their assigns.
ARTICLE 34
BROKER
Each party represents and warrants to the other that it has not dealt with
any broker or Person in connection with this Lease other than Cushman &
Wakefield, Inc. ("Broker"). The execution and delivery of this Lease by each
party shall be conclusive evidence that such party has relied upon the foregoing
representation and warranty. Tenant shall indemnify and hold Landlord harmless
from and against any and all claims for commission, fee or other compensation by
any Person (other than Broker) who shall claim to have dealt with Tenant in
connection with this Lease and for any and all costs incurred by Landlord in
connection with such claims, including, without limitation, reasonable
attorneys' fees and disbursements. Landlord shall indemnify and hold Tenant
harmless from and against any and all claims for commission, fee or other
compensation by the Broker and any Person who shall claim to have dealt with
Landlord in connection with this Lease and for any and all costs incurred by
Tenant in connection with such claims, including, without limitation, reasonable
attorneys' fees and disbursements. The provisions of this Article 34 shall
survive the Expiration Date.
ARTICLE 35
INDEMNITY
Section 35.1. (A) Tenant shall indemnify and save the Indemnitees
harmless from and against (a) all claims of whatever nature against the
Indemnitees arising from any act, omission or negligence of Tenant, its
contractors, licensees, agents, servants, employees, invitees or visitors, (b)
all claims against the Indemnitees arising from any
<PAGE>
accident, injury or damage whatsoever caused to any person or to the property of
any person and occurring during the Term in or about the Premises, (c) all
claims against the Indemnitees arising from any accident, injury or damage
occurring outside of the Premises but anywhere within or about the Real
Property, where such accident, injury or damage results or is claimed to have
resulted from an act, omission or negligence of Tenant or Tenant's contractors,
licensees, agents, servants, employees, invitees or visitors, and (d) any
breach, violation or non-performance of any covenant, condition or agreement in
this Lease set forth and contained on the part of Tenant to be fulfilled, kept,
observed and performed. This indemnity and hold harmless agreement shall include
indemnity from and against any and all liability, fines, suits, demands, costs
and expenses of any kind or nature (including, without limitation, attorneys'
fees and disbursements) incurred in or in connection with any such claim or
proceeding brought thereon, and the defense thereof but except with respect to
claims with respect to bodily injury or death, shall be limited to the extent
any insurance proceeds collectible by Landlord under policies owned by Landlord
or such injured party with respect to such damage or injury are insufficient to
satisfy same. Tenant shall have no liability for any consequential damages
suffered either by Landlord or by any party claiming through Landlord.
(B) Except as provided in Articles 4, 9, 10, 13, 28, 36 and 37
hereof and otherwise as expressly provided herein, Landlord shall indemnify and
save Tenant its shareholders, directors, officers, Partners, employees and
agents harmless from and against all claims against Tenant arising from any
direct damage to the Premises and any bodily injury to Tenant's employees,
agents or invitees resulting from the acts, omissions or negligence of Landlord
or its agents, or any breach, violation or non-performance of any covenant,
condition or agreement in this Lease set forth and contained on the part of
Landlord to be fulfilled, kept, observed and performed. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, fines, suits, demands, costs and expenses of any kind or nature
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
but shall be limited to the extent any insurance proceeds collectible by Tenant
or such injured party with respect to such damage or injury are insufficient to
satisfy same. Landlord shall have no liability for any consequential damages
suffered either by Tenant or by any party claiming through Tenant.
Section 35.2. If any claim, action or proceeding is made or brought
against either party, which claim, action or proceeding the other party shall be
obligated to indemnify such first party against pursuant to the terms of this
Lease, then, upon demand by the indemnified party, the indemnifying party, at
its sole cost and expense, shall resist or defend such claim, action or
proceeding in the indemnified party's name, if necessary, by such attorneys as
the indemnified party shall approve, which approval shall not be unreasonably
withheld, conditioned or delayed. Attorneys for the indemnifying party's insurer
are hereby deemed approved for purposes of this Section 35.2. Notwithstanding
the foregoing, an indemnified party may retain its own attorneys
<PAGE>
to defend or assist in defending any claim, action or proceeding involving
potential liability of Five Million Dollars ($5,000,000) or more, and the
indemnifying party shall pay the reasonable fees and disbursements of such
attorneys. The provisions of this Article 35 shall survive the expiration or
earlier termination of this Lease.
ARTICLE 36
ADJACENT EXCAVATION-SHORING
If an excavation shall be made upon land adjacent to the Premises, or
shall be authorized to be made, Tenant, upon reasonable advance notice, shall
afford to the person causing or authorized to cause such excavation, a license
to enter upon the Premises for the purpose of doing such work as said person
shall deem necessary to preserve the wall or the Building from injury or damage
and to support the same by proper foundations, without any claim for damages or
indemnity against Landlord, or diminution or abatement of Rental, provided that
Tenant shall continue to have access to the Premises and the Building.
ARTICLE 37
MISCELLANEOUS
Section 37.1. This Lease is offered for signature by Tenant and it is
understood that this Lease shall not be binding upon Landlord or Tenant unless
and until Landlord and Tenant shall have executed and unconditionally delivered
a fully executed copy of this Lease to each other.
Section 37.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Building or the Real Property, as the case may be, and in the event of
any such sale, conveyance, assignment or transfer, Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder arising from and after such sale, conveyance, assignment or transfer,
provided that any such transferee of Landlord's interest assumes all obligations
of Landlord to the extent thereafter arising (but subject, nonetheless, to the
provisions of this Section 37.2 with respect to any subsequent transfer made by
any transferee). The partners, shareholders, directors, officers and principals,
direct and indirect, comprising Landlord (collectively, the "Parties") shall not
be liable for the performance of Landlord's obligations under this Lease. Tenant
shall look solely to Landlord to enforce Landlord's obligations hereunder and
shall not seek any damages against any of the Parties. The liability of Landlord
for Landlord's obligations under this Lease shall be limited to Landlord's
interest in the Real Property and the proceeds thereof and Tenant shall not look
to any other property or assets of Landlord or the property or assets of any of
the Parties in seeking either to enforce
<PAGE>
Landlord's obligations under this Lease or to satisfy a judgment for Landlord's
failure to perform such obligations.
Section 37.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Escalation Rent,
additional rent or Rental, shall constitute rent for the purposes of Section
502(b)(7) of the Bankruptcy Code.
Section 37.4. Tenant's liability for all items of Rental shall survive the
Expiration Date.
Section 37.5. Tenant shall reimburse Landlord as additional rent, within
thirty (30) days after rendition of a statement, for all expenditures made by,
or damages or fines sustained or incurred by, Landlord, due to any default by
Tenant under this Lease after notice and the expiration of the applicable grace
period, with interest thereon at the Applicable Rate.
Section 37.6. This Lease shall not be recorded.
Section 37.7. (A) Subject to the terms of Section 37.7(B) hereof, Tenant
hereby waives any claim against Landlord which Tenant may have based upon any
assertion that Landlord has unreasonably withheld, unreasonably delayed or
unreasonably conditioned any consent or approval requested by Tenant (in cases
where Landlord has agreed to not unreasonably withhold, unreasonably delay, or
unreasonably condition Landlord's consent), and Tenant agrees that its sole
remedy shall be an action or proceeding to enforce any related provision or for
specific performance, injunction or declaratory judgment. In the event of a
determination that such consent or approval has been unreasonably withheld or
delayed, the requested consent or approval shall be deemed to have been granted;
however, Landlord shall have no liability to Tenant for its refusal or failure
to give such consent or approval (except as expressly provided in Section
37.7(B)). Tenant's sole remedy for Landlord's unreasonably withholding,
delaying, or conditioning consent or approval shall be as provided in this
Section 37.7.
(B) If there is a dispute between Landlord and Tenant as to (i)
whether Landlord unreasonably withheld, unreasonably delayed or unreasonably
conditioned Landlord's consent to any assignment or subletting or (ii) whether
Landlord unreasonably withheld, unreasonably delayed or unreasonably conditioned
Landlord's consent to any Alteration, in either event where Landlord has agreed
not to unreasonably withhold, condition or delay its consent, Tenant may, at its
option, as its sole and exclusive remedy, submit such dispute to arbitration in
the City of New York under the Expedited Procedures provisions of the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") (presently
Rules E-1 through E-10 and, to the extent applicable, Section R-19; provided,
however, that with respect to any such arbitration, (i) the list of arbitrators
referred to in Rule E-5 shall be returned within five (5) days from the date of
mailing; (ii) the parties shall notify the AAA by telephone,
<PAGE>
within four (4) days of any objections to the arbitrator appointed and will have
no right to object if the arbitrator so appointed was on the list submitted by
the AAA and was not objected to in accordance with the second paragraph of Rule
E-5; (iii) the Notice of Hearing referred to in Rule E-8 shall be four (4) days
in advance of the hearing; (iv) the hearing shall be held within seven (7) days
after the appointment of the arbitrator; (v) the arbitrator shall have no right
to award damages; (vi) the decision and award of the arbitrator shall be final
and conclusive on the parties; and (vii) the losing party shall pay the
reasonable fees and expenses, if any, of both parties in connection with such
arbitration, including the expenses and fees of the arbitrator selected.
(C) If the determination of any such arbitration pursuant to clause
(B) above shall be that Landlord unreasonably withheld, conditioned or delayed
any approval (provided Landlord shall have agreed not to unreasonably withhold,
delay or condition its consent with respect thereto) Tenant's sole remedy
arising out of such arbitrator's determination shall be to proceed on the basis
that the requested approval had been given; provided, however, that nothing
contained in this Section 37.7 shall prohibit Tenant after the final
determination of such arbitration from commencing an action against Landlord in
order to determine whether Landlord acted in bad faith or in an arbitrary,
capricious or malicious fashion and, if so, the damages suffered by Tenant in
connection therewith. If there is a final judicial determination in any such
suit or in any arbitration (with all appeals having been exhausted or expired)
that Landlord has acted in bad faith or in an arbitrary, capricious or malicious
fashion in unreasonably withholding, conditioning or delaying any such consent
or approval, then Tenant shall be entitled to receive any damages from Landlord
therefor provided for in the judgment of the court entertaining such suit or in
such arbitration; provided, however, in no event shall Landlord be liable for,
nor shall Tenant be entitled to recover, any consequential damages.
Section 37.8. This Lease contains the entire agreement between the parties
and supersedes all prior understandings, if any, with respect thereto. This
Lease shall not be modified, changed, or supplemented, except by a written
instrument executed by both parties.
Section 37.9. Tenant hereby (a) irrevocably consents and submits to the
jurisdiction of any Federal, state, county or municipal court sitting in the
State of New York in respect to any action or proceeding brought therein by
Landlord against Tenant concerning any matters arising out of or in any way
relating to this Lease; (b) irrevocably waives personal service of any summons
and complaint and consents to the service upon it of process in any such action
or proceeding by mailing of such process to Tenant at the address set forth
herein and hereby irrevocably designates Robinson Silverman Pearce Aronsohn &
Berman LLP or other law firm located in Manhattan if disclosed to Landlord in
writing (or if not so located, then upon any member of the law firm of Robinson
Silverman Pearce Aronsohn & Berman LLP, or their successor, if so located in
Manhattan), to accept service of any process on Tenant's behalf and hereby
agrees that such service shall be deemed sufficient; (c) irrevocably waives all
objections as to venue and any and all rights it may have to seek a change of
venue with respect
<PAGE>
to any such action or proceedings; (d) agrees that the laws of the State of New
York shall govern in any such action or proceeding and waives any defense to any
action or proceeding granted by the laws of any other country or jurisdiction
unless such defense is also allowed by the laws of the State of New York; and
(e) agrees that any final judgment rendered against it in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by law. Tenant further
agrees that any action or proceeding by Tenant against Landlord in respect to
any matters arising out of or in any way relating to this Lease shall be brought
only in the State of New York, County of New York. In furtherance of the
foregoing, Tenant hereby agrees that its address for notices given by Landlord
and service of process under this Lease shall be as set forth in Article 26.
Notwithstanding the foregoing provisions of this Section 37.9, Tenant may, by
written notice to Landlord, change the designated agent for acceptance of
service of process to any other law firm located in the City, County and State
of New York.
Section 37.10. Unless Landlord shall render written notice to Tenant to
the contrary in accordance with the provisions of Article 26 hereof, MRC
Management LLC is authorized to act as Landlord's agent in connection with the
performance of this Lease, including, without limitation, the receipt and
delivery of any and all notices and consents in accordance with Article 26.
Tenant shall direct all correspondence and requests to, and shall be entitled to
rely upon correspondence received from, MRC Management LLC, as agent for the
Landlord in accordance with Article 26. Tenant acknowledges that MRC Management
LLC is acting solely as agent for Landlord in connection with the foregoing, and
neither MRC Management LLC nor any of its direct or indirect partners, officers,
shareholders, directors or employees shall have any liability to Tenant in
connection with the performance of Landlord's obligations under this Lease and
Tenant waives any and all claims against any such party arising out of, or in
any way connected with, this Lease or the Real Property.
Section 37.11. (A) All of the Schedules and Exhibits attached hereto are
incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Schedules and Exhibits hereto, the terms and provisions of
this Lease shall control. Wherever appropriate in this Lease, personal pronouns
shall be deemed to include the other genders and the singular to include the
plural. All Article and Section references set forth herein shall, unless the
context otherwise specifically requires, be deemed references to the Articles
and Sections of this Lease.
(B) If any term, covenant, condition or provision of this Lease, or
the application thereof to any person or circumstance, shall ever be held to be
invalid or unenforceable, then in each such event the remainder of this Lease or
the application of such term, covenant, condition or provision to any other
Person or any other circumstance (other than those as to which it shall be
invalid or unenforceable) shall not be thereby affected, and each term,
covenant, condition and provision hereof shall remain valid and enforceable to
the fullest extent permitted by law.
<PAGE>
(C) All references in this Lease to the consent or approval of
Landlord shall be deemed to mean the written consent or approval of Landlord and
no consent or approval of Landlord shall be effective for any purpose unless
such consent or approval is set forth in a written instrument executed by
Landlord.
ARTICLE 38
RENT CONTROL
If at the commencement of, or at any time or times during the Term of this
Lease, the Rental reserved in this Lease shall not be fully collectible by
reason of any Requirement, Tenant shall enter into such agreements and take such
other steps (without additional expense to Tenant) as Landlord may request and
as may be legally permissible to permit Landlord to collect the maximum rents
which may from time to time during the continuance of such legal rent
restriction be legally permissible (and not in excess of the amounts reserved
therefor under this Lease). Upon the termination of such legal rent restriction
prior to the expiration of the Term, (a) the Rental shall become and thereafter
be payable hereunder in accordance with the amounts reserved in this Lease for
the periods following such termination, and (b) Tenant shall pay to Landlord, if
legally permissible, an amount equal to (i) the items of Rental which would have
been paid pursuant to this Lease but for such legal rent restriction less (ii)
the rents paid by Tenant to Landlord during the period or periods such legal
rent restriction was in effect.
ARTICLE 39
SATELLITE DISH
Section 39.1. Landlord understands that during the Term Tenant may require
communication services in connection with the operation of Tenant's business
which would necessitate the construction, installation, operation and use by
Tenant of a satellite dish of a size not to exceed twenty (20) inches (DSL),
together with related equipment, mountings and supports (collectively, the
"Satellite Dish") on the roof of the Building. Subject to the terms of this
Section 39.1, Landlord shall make available to Tenant, for Tenant's own use (and
not for resale purposes) sufficient (as reasonably determined by Landlord) space
on the roof of the Building for the Satellite Dish at a location designated by
Landlord. Landlord shall have no obligation to reserve any portion of the roof
for Tenant's use and the use of the roof for such purposes shall be allocated on
a "first come, first served" basis. Tenant's use of the roof of the Building
shall be on a non-exclusive basis. In connection with Tenant's use of the roof
of the Building, and subject to the rights of tenants in the Building pursuant
to leases executed prior to the date hereof, Landlord shall make available to
Tenant access to the roof for the construction, installation, maintenance,
repair, operation and use of the Satellite Dish, as well as reasonable space in
the Building to run electrical and
<PAGE>
telecommunications conduits from the Satellite Dish to the Premises. The
installation of the Satellite Dish shall constitute an Alteration and shall be
performed at Tenant's sole cost and expense (including, without limitation, any
costs and expenses in connection with reinforcing the roof of the Building, if
required) in accordance with and subject to the provisions of Article 3 hereof
and except as otherwise expressly set forth in this Article 39, the Satellite
Dish shall be deemed for all purposes of this Lease to be a Specialty
Alteration. All of the provisions of this Lease with respect to Tenant's
obligations hereunder shall apply to the installation, use and maintenance of
the Satellite Dish, including, without limitation, provisions relating to
compliance with Requirements, insurance, indemnity, repairs and maintenance. The
license granted to Tenant in this Article 39 shall not be assignable by Tenant
separate and apart from this Lease.
Section 39.2. Landlord retains the right to use the portion of the roof on
which the Satellite Dish is located for any purpose whatsoever. Tenant shall use
the Satellite Dish so as not to cause any interference to other tenants or
Landlord in the Building or interference with or disturbance to the reception or
transmission of communication signals by or from any antenna, satellite dishes
or similar equipment previously installed by landlord or any other tenant in the
Building or damage to or interference with the operation of the Building or
Building Systems. Landlord shall use reasonable efforts to cause tenants who
enter into leases with Landlord after the date hereof that have the right to
place equipment on the roof to operate such equipment and, if Landlord has
equipment on the roof, Landlord shall operate such equipment, in a manner so as
not to cause any interference to Tenant or interference with or disturbance to
the reception or transmission of communications signals by or from the Satellite
Dish. If after any Satellite Dish is installed by Tenant it is discovered that
the Satellite Dish causes any such interference, damage or disturbance, then
Tenant, at its sole cost and expense, upon written notice from Landlord shall
relocate its Satellite Dish to another area on the roof reasonably designated by
Landlord provided that such relocation does not cause the transmission or
receipt of communication signals to be materially interrupted or impaired other
than temporarily in connection with such relocation. If such interference or
disturbance still occurs despite such relocation, or if no portion of the roof
is available for such relocation, Tenant, at its sole cost and expense, shall
remove its Satellite Dish from the roof of the Building. In the event Tenant
fails to relocate or remove the Satellite Dish within thirty (30) days after
written notice from Landlord, Landlord may do so, and Tenant shall promptly
reimburse Landlord for any costs incurred by Landlord in connection therewith.
Section 39.3. If Tenant is in default under any provision of this Article
39 and such default continues for thirty (30) days after written notice from
Landlord, then, without limiting Landlord's rights and remedies Landlord may
otherwise have under this Lease the license granted pursuant to this Article 39
shall automatically terminate and, Tenant, upon written notice from Landlord,
shall, at Tenant's sole cost and expense immediately discontinue its use of the
Satellite Dish and remove the same from the roof of the Building.
<PAGE>
Section 39.4. In addition to the right of Landlord to cause Tenant to
relocate the Satellite Dish pursuant to Section 39.2 hereof, Landlord may at its
option, at any time during the Term after reasonable prior notice to Tenant
(except in the event of an emergency) relocate the Satellite Dish to another
area on the roof designated by Landlord, provided that such relocation does not
cause the transmission or receipt of communication signals to be materially
interrupted or impaired other than temporarily in connection with such
relocation and, except as set forth with respect to Landlord's right to cause
Tenant to relocate the Satellite Dish pursuant to Section 39.2 hereof, such
relocation shall be performed at Landlord's sole cost and expense.
Section 39.5. (A) Landlord shall not have any obligations with respect to
the Satellite Dish or compliance with any Requirements relating thereto
(including, without limitation, the obtaining of any required permits or
licenses, or the maintenance thereof), nor shall Landlord be responsible for any
damage that may be caused to Tenant or the Satellite Dish by any other tenant or
occupant of the Building. Landlord makes no representation that the Satellite
Dish will be able to receive or transmit communication signals without
interference or disturbance (whether or not by reason of the installation or use
of similar equipment by others on the roof) and Tenant agrees that Landlord
shall not be liable to Tenant therefor.
(B) Tenant, at Tenant's sole cost and expense, shall maintain the
Satellite Dish and shall install such lightning rods or air terminals on or
about the Satellite Dish as Landlord may reasonably require.
(C) Tenant shall (i) be solely responsible for any damage caused to
Landlord or any other Person or property as a result of the installation,
maintenance or use of the Satellite Dish, (ii) promptly pay any tax, license,
permit or other fees or charges imposed pursuant to any Requirements relating to
the installation, maintenance or use of the Satellite Dish, (iii) promptly
comply with all precautions and safeguards recommended by Landlord's insurance
company and all Governmental Authorities, and (iv) perform all necessary repairs
or replacements to, or maintenance of, the Satellite Dish.
Section 39.6. Tenant acknowledges and agrees that the privileges granted
Tenant under this Article 39 shall merely constitute a license and shall not,
now or at any time after the installation of the Satellite Dish, be deemed to
grant Tenant a leasehold or other real property interest in the Building or any
portion thereof. Landlord shall not terminate the license granted to Tenant
pursuant to this Article 39 other than pursuant to the express provisions of
this Article 39. The license granted to Tenant in this Article 39 shall
automatically terminate and expire upon the expiration or earlier termination of
this Lease and the termination of such license shall be self-operative and no
further instrument shall be required to effect such termination. The foregoing
notwithstanding, upon request by Landlord, Tenant, at Tenant's sole cost and
expense, promptly shall execute and deliver to Landlord, in recordable form, any
certificate or
<PAGE>
other document confirming the termination of Tenant's right to use the roof of
the Building.
ARTICLE 40
TENANT SIGNS
Section 40.1. Subject to the terms of this Article 40, Tenant shall have
the right to erect signs identifying Tenant as an occupant of the Building in
the lobby of the Building as described in, and in accordance with the
specifications described in, Exhibit "J" attached hereto and made a part hereof
(any such signs erected by Tenant being collectively referred to herein as
"Tenant Signs"). Tenant shall not be permitted to erect the Tenant Signs if, at
any time, (x) Tenant is not a LivePerson Party, or (y) Tenant (and/or a
LivePerson Party) does not occupy at least seventy- five percent (75%) of the
then rentable area of the Premises for the conduct of business (other than the
period after the Seventh Floor Space Commencement Date during which Tenant shall
be performing the Seventh Floor Space Initial Alterations and moving its
property and employees into the Seventh Floor Space). Tenant, at Tenant's sole
cost and expense, shall operate, maintain and repair any Tenant Signs that
Tenant erects pursuant to this Section 40.1 in a first-class manner and in
compliance with all applicable Requirements. Tenant shall not have the right to
illuminate any Tenant Sign. Tenant shall have the right to use the signs only to
identify (x) LivePerson, or (y) a LivePerson Party (other than LivePerson).
Tenant, at Tenant's sole cost and expense, shall remove Tenant Signs promptly
upon the earlier to occur of (x) the Expiration Date, and (y) the date that
Tenant has no further right to erect Tenant Signs pursuant to this Section 40.1,
and shall repair any damage caused by the installation of Tenant Signs or such
removal.
Section 40.2. Prior to making any installation of Tenant Signs as
contemplated by this Article 40, Tenant shall (i) at Tenant's expense, obtain
all permits, approvals and certificates required by any Governmental
Authorities, agreed that all filings with Governmental Authorities to
obtain such permits, approvals and certificates shall be made, at Tenant's
expense, by a Person designated by Landlord (it being understood that (x) the
Person initially so designated by Landlord is CR&A, and (y) Tenant shall not
discharge CR&A unless CR&A's fees are not commercially competitive or Tenant in
good faith believes CR&A is not performing its services properly), and (ii)
furnish to Landlord duplicate original policies or certificates thereof of
worker's compensation (covering all persons to be employed by Tenant, and
Tenant's contractors and subcontractors, in either case in connection with the
installation of Tenant Signs) and general commercial public liability (including
property damage coverage) insurance in such form, with such companies, for such
periods and in such amounts as Landlord may reasonably approve, naming Landlord
and its agents, any Lessor and any Mortgagee, as additional insureds. Upon
completion of such installation, Tenant, at Tenant's expense, shall obtain
certificates of final approval of such installation required by any Governmental
Authority and shall furnish Landlord with copies thereof, together with final,
marked drawings and field notes for such installation,
<PAGE>
it being agreed that all filings with Governmental Authorities to obtain such
permits, approvals and certificates shall be made, at Tenant's expense, by a
Person designated by Landlord (it being understood that (x) the Person initially
so designated by Landlord is CR&A, and (y) Tenant shall not discharge CR&A
unless CR&A's fees are not commercially competitive or Tenant in good faith
believes CR&A is not performing its services properly). Such installation shall
be made and performed substantially in accordance with Exhibit "H" attached
hereto, all Requirements, the Rules and Regulations, and all rules and
regulations relating to Alterations promulgated by Landlord in its reasonable
judgment. All materials and equipment to be incorporated in the Building as a
result of any such installation or a part thereof shall be first quality and no
such materials or equipment (other than Tenant's Property) shall be subject to
any lien, encumbrance, chattel mortgage or title retention or security
agreement.
ARTICLE 41
RENTAL VALUE
Section 41.1. (A) As used herein, the term "Rental Value" shall mean an
amount equal to ninety-five percent (95%) of the annual fair market rental value
of the Applicable Area (the "Fair Market Rent") on the Recognition Effective
Date.
(B) As used herein, the term "Applicable Area" shall mean the
portion of the Premises demised under a Major Sublease (other than any Excluded
Space) in connection with the determination of the Rental Value therefor
pursuant to Section 7.8 hereof.
(C) As used herein, the term "Base Rental Amount" shall mean the
greater of (x) the amount described in Section 7.8(i)(A) hereof, and (y) the
amount described in Section 7.8(i)(B) hereof.
(D) The Fair Market Rent shall be determined on the basis of the use
of the Applicable Area as offices assuming that the Applicable Area is free and
clear of all leases and tenancies (including this Lease), that the Applicable
Area is available in the then rental market for comparable office buildings in
Manhattan, that Landlord has had a reasonable time to locate a tenant who rents
with the knowledge of the uses to which the Applicable Area can be adapted, and
that neither Landlord nor the subtenant under the applicable Major Sublease is
under any compulsion to rent, and taking into account:
(1) the fact that the Base Taxes and the Base Operating
Expenses for the Applicable Area shall not change for the purpose of calculating
the Escalation Rent payable pursuant to Article 27 hereof, which payments shall
continue to be made for the remainder of the Term;
(2) the fact that as of the Recognition Effective Date, the
<PAGE>
subtenant under the applicable Major Sublease shall not be required to pay, in
addition to the escalation payments presently provided for under this Lease,
Tenant's Share (as described in Section 7.8(vi) hereof) of such other escalation
payments, if any, which landlords are then charging tenants under leases or
offers for leases in other office buildings which are similar in character or
location to the Building;
(3) that the subtenant under the applicable Major Sublease is
deemed to have received rent concessions or other inducements (in the form of
free rent, work allowance or otherwise) which, in the then current rental market
for comparable office buildings in Manhattan, are given for a lease with a term
comparable to the term with respect to the Applicable Area (regardless of the
fact that such concessions or inducements are not being given under this Lease
for the Applicable Area);
(4) that Landlord is assumed to be obligated to pay a
brokerage commission to the Broker with respect to the Applicable Area; and
(E) For purposes of determining the Rental Value, the following
procedure shall apply:
(1) Landlord and the subtenant under the applicable Major
Sublease shall each contemporaneously deliver to the other, at Landlord's
office, a written notice (each a "Rent Notice"), on a date mutually agreed upon,
but in no event later than ten (10) days after the Recognition Effective Date
with respect to the portion of the Premises demised under a Major Sublease
(other than any Excluded Space), which Rent Notice shall set forth each of their
respective determinations of the Rental Value (Landlord's determination of the
Rental Value is referred to as "Landlord's Determination" and such subtenant's
determination of the Rental Value is referred to as "Tenant's Determination").
If Landlord shall fail or refuse to give such Rent Notice as aforesaid,
Landlord's Determination shall be deemed to be equal to the Base Rental Amount
and if such subtenant shall fail or refuse to give such Rent Notice as
aforesaid, Tenant's Determination shall be deemed to be the same as Landlord's
Determination. If neither Landlord nor the subtenant under the applicable Major
Sublease shall deliver a Rent Notice as aforesaid, the Rental Value shall be
deemed to be equal to the Base Rental Amount. Landlord acknowledges that Tenant
may participate with the subtenant under the applicable Major Sublease in this
process.
(2) If Landlord's Determination and Tenant's Determination are
not equal and Tenant's Determination is lower than Landlord's Determination, and
each of Landlord's Determination and Tenant's Determination exceeds an amount
equal to the Base Rental Amount, Landlord and the subtenant under the applicable
Major Sublease shall attempt to agree upon the Fair Market Rent (and
accordingly, the Rental Value). If Tenant's Determination is higher than
Landlord's Determination, the Rental Value shall be equal to Landlord's
Determination. If Landlord and the subtenant under the applicable Major Sublease
mutually agree upon the determination (the "Mutual
<PAGE>
Determination") of the Rental Value, then their determination shall be final and
binding upon the parties. If Landlord and such subtenant are unable to reach a
Mutual Determination within ten (10) days after delivery of Landlord's
Determination to such subtenant and Tenant's Determination to Landlord, then
Landlord and such subtenant shall jointly select an independent real estate
appraiser (the "Appraiser") whose fee shall be borne equally by Landlord and
such subtenant. If Landlord and such subtenant are unable to jointly agree on
the designation of the Appraiser within ten (10) days after they are requested
to do so by either party, then the parties agree to allow the American
Arbitration Association, or any successor organization, to designate the
Appraiser in accordance with the rules, regulations and/or procedures then
obtaining of the American Arbitration Association or any successor organization.
(3) The Appraiser shall conduct such hearings and
investigations as he or she may deem appropriate and shall, within thirty (30)
days after the date of designation of the Appraiser, choose either Landlord's
Determination or Tenant's Determination, and such choice by the Appraiser shall
be conclusive and binding upon Landlord and the subtenant under the applicable
Major Sublease. Each party shall pay its own counsel fees and expenses, if any,
in connection with any arbitration under this Article. The Appraiser appointed
pursuant to this Article shall be an independent real estate appraiser with at
least ten (10) years' experience in leasing of properties which are similar in
character to the Building, and a member of the American Institute of Appraisers
of the National Association of Real Estate Boards and a member of the Society of
Real Estate Appraisers. The Appraiser shall not have the power to add to, modify
or change any of the provisions of this Lease.
(4) It is expressly understood that any determination of the
Rental Value pursuant to this Article shall be based on the criteria stated in
Section 41.1(D) hereof.
(F) After a determination has been made of the Rental Value, the
parties shall execute and deliver to each other an instrument setting forth the
Fixed Rent for the premises demised under a Major Sublease for the period from
and after the Recognition Effective Date.
(G) If the final determination of the Rental Value shall not be made
on or before the Recognition Effective Date in accordance with the provisions of
this Article 41, then, pending such final determination, the Rental Value shall
be deemed to be an amount equal to the Base Rental Amount, except that from and
after the date that Landlord has submitted Landlord's Determination, and the
subtenant under the applicable Major Sublease has submitted Tenant's
Determination, in either case as contemplated by this Section 41.1, the Rental
Value (pending the final determination thereof) shall be deemed to be Landlord's
Determination. If, based upon the final determination hereunder of the Rental
Value, the payments made by the subtenant on account of the Fixed Rent for the
period prior to the final determination of the Rental Value were less than the
payments for such period as determined pursuant to this
<PAGE>
Article 41, then such subtenant not later than the tenth (10th) day after
Landlord's demand therefor, shall pay to Landlord the amount of such deficiency.
If, based upon the final determination of the Rental Value, the payments made by
such subtenant on account of the Fixed Rent for the period prior to the final
determination of the Rental Value were more than the payments for such period as
determined pursuant to this Article 41, then Landlord, not later than the tenth
(10th) day after such subtenant's demand therefor, shall, at Landlord's option,
pay such excess to such subtenant or, to the extent applicable, credit such
excess against the Rental thereafter coming due hereunder.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
VORNADO 330 WEST 34TH STREET L.L.C.,
Landlord
By: Vornado Realty L.P., member
By: Vornado Realty Trust, general partner
By: /s/ Joseph Macnow
--------------------------------------
Joseph Macnow
Executive Vice President
Officer
LIVEPERSON, INC., Tenant
By:/s/ Dean Margolis
---------------------------------------
Dean Margolis
Chief Operating Officer
Fed. Id. No. 13-3861628
<PAGE>
ACKNOWLEDGMENTS
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of March in the year 2000 before me, the undersigned, a
Notary Public in and said State, personally appeared ____________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of March in the year 2000 before me, the undersigned, a
Notary Public in and said State, personally appeared ____________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
Notary Public
<PAGE>
Schedule A
RULES AND REGULATIONS
(1) The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall not be obstructed or encumbered by Tenant
or used for any purpose other than ingress and egress to and from the Premises
and for delivery of merchandise and equipment in prompt and efficient manner,
using elevators and passageways reasonably designated for such delivery by
Landlord.
(2) No awnings, air-conditioning units, fans or other projections shall be
attached to the outside walls of the Building. No curtains, blinds, shades, or
screens, other than those which conform in all material respects to Building
standards as established by Landlord from time to time, shall be attached to or
hung in, or used in connection with, any window or door of the Premises, without
the prior written consent of Landlord which shall not be unreasonably withheld,
conditioned or delayed. Such awnings, projections, curtains, blinds, shades,
screens or other fixtures must be of a quality, type, design and color, and
attached in the manner reasonably approved by Landlord. All electrical fixtures
hung in offices or spaces along the perimeter of the Premises must be of a
quality, type, design and bulb color approved by Landlord, which consent shall
not be withheld, conditioned or delayed unreasonably unless the prior consent of
Landlord has been obtained for other lamping.
(3) Except as set forth in the Lease, no sign, advertisement, notice or
other lettering shall be exhibited, inscribed, painted or affixed by Tenant on
any part of the outside of the Premises or Building or on the inside of the
Premises if the same can be seen from the ground floor outside of the Premises
without the prior written consent of Landlord except that the name of Tenant may
appear on the entrance door of the Premises. In the event of the violation of
the foregoing by Tenant, if Tenant has refused to remove same after reasonable
notice from Landlord, Landlord may remove same without any liability, and may
charge the expense incurred by such removal to Tenant. Interior signs on doors
and directory tablet shall be of a size, color and style reasonably acceptable
to Landlord.
(4) The exterior windows and doors that reflect or admit light and air
into the Premises or the halls, passageways or other public places in the
Building, shall not be covered or obstructed by Tenant.
(5) No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls, corridors or
vestibules, nor shall any article obstruct any air-conditioning supply or
exhaust without the prior written consent of Landlord.
(6) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings,
<PAGE>
rubbish, rags, acids or other substances shall be deposited therein. All damages
resulting from any misuse of the fixtures shall be borne by Tenant.
(7) Subject to the provisions of Article 3 of this Lease, Tenant shall not
mark, paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires shall be permitted, except
with the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed.
(8) No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction or otherwise.
(9) Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or unreasonably disturb or interfere with occupants of this or
neighboring buildings or premises or those having business with them whether by
the use of any musical instrument, radio, television set, talking machine,
unmusical noise, whistling, singing, or in any other way.
(10) Tenant, or any of Tenant's employees, agents, visitors or licensees,
shall not at any time bring or keep upon the Premises any inflammable,
combustible or explosive fluid, chemical or substance except such as are
incidental to usual office occupancy.
(11) No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes be made in existing locks
or the mechanism thereof, unless Tenant promptly provides Landlord with the key
or combination thereto. Tenant must, upon the termination of its tenancy, return
to Landlord all keys of stores, offices and toilet rooms, and in the event of
the loss of any keys furnished at Landlord's expense, Tenant shall pay to
Landlord the cost thereof.
(12) No bicycles, vehicles or animals of any kind except for seeing eye
dogs shall be brought into or kept by Tenant in or about the Premises or the
Building.
(13) All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place in the manner and
during the hours which Landlord or its agent reasonably may determine from time
to time. Landlord reserves the right to inspect all safes, freight or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
(14) Tenant shall not occupy or permit any portion of the Premises demised
to it to be occupied as an office for a public stenographer or typist, or for
the possession, storage, manufacture, or sale of liquor, narcotics, dope, or as
a barber or manicure
<PAGE>
shop, or as an employment bureau.
(15) Tenant shall not purchase spring water, ice, towels or other like
service, or accept barbering or bootblacking services in the Premises, from any
company or persons not approved by Landlord, which approval shall not be
withheld, conditioned or delayed unreasonably and at hours and under regulations
other than as reasonably fixed by Landlord.
(16) Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon written notice
from Landlord, Tenant shall refrain from or discontinue such advertising.
(17) Landlord reserves the right to exclude from the Building between the
hours of 6 P.M. and 8 A.M. and at all hours on days other than Business Days all
persons who do not present a pass to the Building signed or approved by
Landlord. Tenant shall be responsible for all persons for whom a pass shall be
issued at the request of Tenant and shall be liable to Landlord for all acts of
such persons.
(18) Tenant shall, at its expense, provide artificial light for the
employees of Landlord while doing janitor service or other cleaning, and in
making repairs or alterations in the Premises permitted by the terms of this
Lease.
(19) The requirements of Tenant will be attended to only upon written
application at the office of the Building. Building employees shall not perform
any work or do anything outside of the regular duties, unless under special
instructions from the office of Landlord.
(20) Canvassing, soliciting and peddling in the Building is prohibited and
Tenant shall cooperate to prevent the same.
(21) There shall not be used in any space, or in the public halls of the
Building, either by Tenant or by jobbers or others, in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
side guards.
(22) Except as specifically provided in Section 2.2 of this Lease, Tenant
shall not do any cooking, conduct any restaurant, luncheonette or cafeteria for
the sale or service of food or beverages to its employees or to others, or cause
or permit any odors of cooking or other processes or any unusual or
objectionable odors to emanate from the Premises. Tenant shall not permit the
delivery of any food or beverage to the Premises, except by such persons
delivering the same as shall be approved by Landlord, which approval shall not
be unreasonably withheld, conditioned or delayed.
(23) Landlord shall have the right to require that all messengers and
other Persons delivering packages, papers and other materials to Tenant (i) be
directed to deliver such
<PAGE>
packages, papers and other materials to a Person designated by Landlord who will
distribute the same to Tenant or (ii) be escorted by a person designated by
Landlord to deliver the same to Tenant
(25) Landlord and its agents reserve the right to inspect all packages,
boxes, bags, suitcases, and other large items carried into the Building, and to
refuse entry into the Building to any person who either refuses to cooperate
with such inspection or who is carrying any object which may be dangerous to
persons or property. In addition, Landlord reserves the right to implement such
further measures designed to ensure safety of the Building and the persons and
property located therein as Landlord shall reasonably deem necessary or
desirable.
<PAGE>
Schedule B
CLEANING SPECIFICATIONS
GENERAL CLEANING:
NIGHTLY
General Offices:
1. All hardsurfaced flooring to be swept using approved dustdown
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and window sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste disposal cans and baskets.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
Public Lavatories (Base Building):
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill and clean all soap, towel and toilet tissue dispensers as
needed, supplies therefore to be furnished by Landlord at a
reasonable charge to Tenant. If the Premises consists of a part of a
rentable floor, said charge
<PAGE>
to Tenant shall be that portion of a reasonable charge for such
supplies that is reasonably allocable to Tenant.
8. Empty and clean sanitary disposal receptacles.
WEEKLY:
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvres and other ventilating louvres within a
person's reach.
3. Wipe clean all brass and other bright work.
QUARTERLY:
High dust the Premises complete, including the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings
not reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors
and door bucks and other surfaces not reached in nightly cleaning.
3. Dust all pipes, ventilating and air-conditioning louvres, ducts,
high mouldings and other high areas not reached in nightly cleaning.
4. Dust all venetian blinds.
Wash exterior and interior of windows periodically, subject to weather
conditions and requirements of law.
<PAGE>
Schedule C
LANDLORD'S STANDARD RATES
[See Attached]
<PAGE>
EXHIBIT "A"
EXISTING GROUND LEASE
Lease, dated July 28, 1967, made by and between Massachusetts Mutual
Life Insurance Company ("Mass Mutual"), as lessor, and Stacrat Corp., as lessee,
a memorandum of which was recorded on August 2, 1967 in Record Liber 205, page
355, in the New York County Register's Office ("Register's Office"); the
interest of lessee under which Lease was acquired by Village Resources, Inc.
("VRI"), by virtue of mesne assignments dated November 1, 1968 (recorded
November 13, 1968 in Reel 122, page 1924 in the Register's Office), and May 8,
1978 (recorded on June 13, 1978 in Reel 527, page 752 in the Register's Office),
respectively; which Lease was modified by unrecorded Lease Modification
Agreement dated as of January 1, 1980 between Mass Mutual, as lessor, and VRI,
as lessee; the interest of lessor under which lease was assigned by Mass Mutual
to 330 West 34th Street Associates ("330 Associates") by an unrecorded
assignment dated July 1, 1986 in connection with the sale of the Land (as
described in such Lease) by Mass Mutual to 330 Associates by Deed dated July 1,
1986 and recorded July 7, 1986 in Reel 1084, page 937 in the Register's Office;
and which Lease was amended and restated by Restatement of Lease Agreement (the
"First Lease Restatement") dated as of September 9, 1986, between 330
Associates, as lessor, and VRI, as lessee, a memorandum of which First Lease
Restatement was duly recorded on October 29, 1986 in the Register's Office in
Reel 1136, page 247); the interest of lessee under which Lease was assigned by
VRI to M/H 34th Street Associates ("M/H Associates"), by Assignment of Lease
dated as of December 1, 1986 and recorded in the Register's Office on December
11, 1986 in Reel 1155, Page 1152; and which First Lease Restatement was amended
and restated by Second Restatement of Lease Agreement (the "Second Lease
Restatement") dated as of December 1, 1986 by and between 330 Associates, as
lessor, and M/H Associates, as lessee, a memorandum of which Second Lease
Restatement was recorded in the Register's Office on December 11, 1986 in Reel
1155, Page 1156; the interest of lessee under which Second Lease Restatement was
assigned by M/H Associates to Mendik Real Estate Limited Partnership by an
Assignment and Assumption of Ground Lease, dated as of April 23, 1987, and
recorded in the Register's Office on May 21, 1987 in Reel 1233, Page 2477; and
which Second Lease Restatement was modified pursuant to that certain First
Modification of Ground Lease, dated as of August 13, 1999 between 330
Associates, as landlord, and Vornado 330 West 34th Street L.L.C., as tenant.
<PAGE>
EXHIBIT "B"
SEVENTH FLOOR SPACE PLAN
[See Attached]
<PAGE>
EXHIBIT "C"
TENTH FLOOR SPACE FLOOR PLAN
[See Attached]
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS FOR ALTERATIONS
[See Attached]
<PAGE>
EXHIBIT "E"
APPROVED CONTRACTORS
[See Attached]
<PAGE>
EXHIBIT "F"
STAIRWELLS
[See Attached]
<PAGE>
EXHIBIT "G"
FIXED RENT PER SQUARE FOOT
$34.00 Commencement Date through the day immediately prior to the Third
Anniversary Date.
$37.00 The Third Anniversary Date through the day immediately prior to the
Seventh Anniversary Date.
$40.00 The Seventh Anniversary Date through the Expiration Date.
<PAGE>
EXHIBIT "H"
TENTH FLOOR SPACE LANDLORD'S WORK
o Provide that all perimeter-heating systems will be in good working order
during building standard hours. Landlord to provide manual control valves
on all radiators.
o HVAC - Furnish and install two (58) ton Trane water-cooled units as
described in the specifications that are a part of this Exhibit "H"
(excluding ductwork) and accompanying mechanical equipment rooms.
o Demolish all existing partitions and deliver Premises in "broom clean"
condition.
o Repair and replace damaged or missing fireproof encasement of beams
throughout the entire premises. Patching to be performed in a workmanlike
manner, only in those areas where required for fireproofing purposes, with
resulting finished surfaces flush and smooth and ready for paint.
o Remove all flooring finishes that contain Asbestos Containing Materials
(ACM). Tenant shall remove all finished flooring therefore, Landlord shall
remove any and all finished flooring that contains asbestos.
o Patch and Fireproof two (2) columns and fifteen (15) beams where
necessary.
o Provide sprinkler system in "existing" configuration in good working
order.
o Flash patch floor smooth and level, flush to adjacent surfaces where
necessary.
o Provide a sufficient amount of "Class E" System points at the "Class E"
System located in the lobby of the Building.
o Provide ACP-5 Certificate.
o Remove all unnecessary electrical conduit, receptacles, panel boards and
other non-essential items in the space.
o Replace one (1) window.
o Perform sheetrock or plaster repairs to the perimeter walls where
necessary.
<PAGE>
EXHIBIT "I"
SEVENTH FLOOR SPACE LANDLORD'S WORK o Provide that all perimeter-heating systems
will be in good working order during building standard hours. Landlord to
provide manual control valves on all radiators.
o HVAC - Furnish and install two (58) ton Trane water-cooled units as
described in the specifications that are a part of Exhibit "H" hereof
(excluding ductwork) and accompanying mechanical equipment rooms.
o Demolish all existing partitions and deliver Premises in "broom clean"
condition.
o Repair and replace damaged or missing fireproof encasement of beams
throughout the entire premises. Patching to be performed in a workmanlike
manner, only in those areas where required for fireproofing purposes, with
resulting finished surfaces flush and smooth and ready for paint.
o Remove all flooring finishes that contain Asbestos Containing Materials
(ACM). Tenant shall remove all finished flooring therefore, Landlord shall
remove any and all finished flooring that contains asbestos.
o Patch and Fireproof eighteen (18) beams were necessary. o Provide
sprinkler system in "existing" configuration in good working order. o
Flash patch floor smooth and level, flush to adjacent surfaces where
necessary. o Provide a sufficient amount of "Class E" System points at the
"Class E" System located in the lobby of the Building.
o Provide ACP-5 Certificate.
o Remove all unnecessary electrical conduit, receptacles, panel boards and
other non-essential items in the space.
o Replace five (5) windows.
o Perform sheetrock or plaster repairs to the perimeter walls where
necessary.
<PAGE>
EXHIBIT "J"
TENANT SIGNS
[See Attached]
<PAGE>
AGREEMENT OF LEASE
between
VORNADO 330 WEST 34TH STREET L.L.C.,
Landlord
and
LIVEPERSON, INC.,
Tenant
330 West 34th Street
New York, New York
PROSKAUER ROSE LLP
1585 Broadway
New York, New York 10036-8299
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEMISE, PREMISES, TERM, RENT...................................11
ARTICLE 2 USE AND OCCUPANCY..............................................12
ARTICLE 3 ALTERATIONS....................................................13
ARTICLE 4 REPAIRS-FLOOR LOAD.............................................23
ARTICLE 5 WINDOW CLEANING................................................25
ARTICLE 6 REQUIREMENTS OF LAW............................................25
ARTICLE 7 SUBORDINATION..................................................27
ARTICLE 8 RULES AND REGULATIONS..........................................34
ARTICLE 9 INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT..............35
ARTICLE 10 DESTRUCTION-FIRE OR OTHER CAUSE................................37
ARTICLE 11 EMINENT DOMAIN.................................................41
ARTICLE 12 ASSIGNMENT, SUBLETTING, MORTGAGE, ETC..........................43
ARTICLE 13 ELECTRICITY ..................................................60
ARTICLE 14 ACCESS TO PREMISES.............................................61
ARTICLE 15 CERTIFICATE OF OCCUPANCY.......................................63
ARTICLE 16 DEFAULT........................................................64
ARTICLE 17 REMEDIES AND DAMAGES...........................................67
ARTICLE 18 LANDLORD FEES AND EXPENSES.....................................69
ARTICLE 19 NO REPRESENTATIONS BY LANDLORD.................................70
ARTICLE 20 END OF TERM....................................................72
ARTICLE 21 QUIET ENJOYMENT................................................73
<PAGE>
ARTICLE 22 FAILURE TO GIVE POSSESSION.....................................73
ARTICLE 23 NO WAIVER......................................................74
ARTICLE 24 WAIVER OF TRIAL BY JURY........................................75
ARTICLE 25 INABILITY TO PERFORM...........................................76
ARTICLE 26 BILLS AND NOTICES..............................................76
ARTICLE 27 ESCALATION.....................................................77
ARTICLE 28 SERVICES.......................................................87
ARTICLE 29 PARTNERSHIP TENANT.............................................91
ARTICLE 30 VAULT SPACE....................................................92
ARTICLE 31 SECURITY.......................................................92
ARTICLE 32 CAPTIONS.......................................................94
ARTICLE 33 PARTIES BOUND..................................................94
ARTICLE 34 BROKER.........................................................94
ARTICLE 35 INDEMNITY......................................................94
ARTICLE 36 ADJACENT EXCAVATION-SHORING....................................96
ARTICLE 37 MISCELLANEOUS..................................................96
ARTICLE 38 RENT CONTROL...................................................99
ARTICLE 39 SATELLITE DISH................................................100
ARTICLE 40 TENANT SIGNS..................................................102
ARTICLE 41 RENTAL VALUE..................................................103
<PAGE>
Schedule A - Rules and Regulations
Schedule B - Cleaning Specifications
Schedule C - Landlord's Standard Rates
EXHIBIT "A" Existing Ground Lease
EXHIBIT "B" - Seventh Floor Space Floor Plan
EXHIBIT "C" - Tenth Floor Space Floor Plan
EXHIBIT "D" - Rules and Regulations For Alterations
EXHIBIT "E" Approved Contractors
EXHIBIT "F" Stairwells
EXHIBIT "G" - Fixed Rent Per Square Foot
EXHIBIT "H" - Tenth Floor Space Landlord's Work
EXHIBIT "I" - Seventh Floor Space Landlord's Work
EXHIBIT "J" - Tenant Signs
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Live Person, Inc.:
We consent to the use of our report included herein and to the
reference to our firm under the heading "Experts" in the Prospectus.
KPMG LLP
New York, New York
March 10, 2000
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<PAGE>
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<NAME> LIVEPERSON, INC.
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