<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common stock, par value $0.001 per share.................... $57,500,000 $15,180
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
------------------------
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 JANUARY 28, 2000
PROSPECTUS
SHARES
[LOGO]
COMMON STOCK
This is an initial public offering of common stock by LivePerson, Inc.
LivePerson is selling shares of common stock. The estimated initial
public offering price is between $ and $ per share.
--------------
Prior to this offering, there has been no public market for our common
stock. We intend to apply for listing of our common stock 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 additional shares of our common stock.
--------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-------------
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]
[COLOR ARTWORK TO BE DESCRIBED IN AMENDMENT]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Forward-Looking Statements.................................. 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Capitalization.............................................. 21
Dilution.................................................... 23
Selected Financial Data..................................... 25
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 33
Management.................................................. 45
Certain Transactions........................................ 54
Principal Stockholders...................................... 56
Description of Capital Stock................................ 58
Shares Eligible for Future Sale............................. 62
Underwriting................................................ 64
Legal Matters............................................... 67
Experts..................................................... 67
Where You Can Find More Information......................... 67
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 provides technology that facilitates real-time sales and customer
service for companies doing business on the Internet. We are an Application
Service Provider (ASP), and we offer our proprietary real-time interaction
technology as an outsourced service. The LivePerson service 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 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, rapid deployment, automatic
upgrades and the ability to add capacity upon request.
We currently have contracts with 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 Beauty.com, EarthLink, E-LOAN, GMAC's
ditech.com, Intuit, iQVC, LookSmart, ShopNow and Webvan.
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.
Our business was incorporated in the State of Delaware in November 1995
under the name Sybarite Interactive Inc. Following our introduction of the
LivePerson service in November 1998, we changed our name in January 1999 to Live
Person, Inc. and on February , 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.
3
<PAGE>
RECENT DEVELOPMENTS
On January 27, 2000, we completed a private placement of 3,157,895 shares of
our series D redeemable convertible preferred stock with certain affiliates of
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. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
------------------------
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by LivePerson........... shares
Common stock to be outstanding after this
offering................................... 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 January 28, 2000 and excludes:
- shares of common stock reserved for issuance under our 2000
Stock Incentive Plan, of which 3,160,980 shares are issuable upon the
exercise of stock options outstanding as of January 28, 2000 with a
weighted average exercise price of $2.51 per share;
- 63,000 shares of common stock reserved for issuance upon the exercise of
stock options with an exercise price of $2.40 per share granted outside
of the predecessor to our 2000 Stock Incentive Plan;
- shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
- 479,166 shares of common stock issuable upon the exercise of warrants
outstanding as of January 28, 2000, with a weighted average exercise
price of $2.40 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, on a one-for-one basis into 11,974,852
shares of our common stock upon the closing of this offering;
- 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.
4
<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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue.......................... $ -- $ -- $ 1 $ -- $ 186
Programming revenue...................... 11 245 378 315 36
---------- ---------- ---------- ---------- ----------
Total revenue............................ 11 245 379 315 222
---------- ---------- ---------- ---------- ----------
Total operating expenses................... 42 251 399 315 3,784
---------- ---------- ---------- ---------- ----------
Loss from operations....................... (31) (6) (20) -- (3,562)
Net loss................................... (30) (6) (20) -- (3,306)
========== ========== ========== ========== ==========
Basic and diluted net loss per share....... $ (0.01) $ 0.00 $ 0.00 $ 0.00 $ (0.70)
========== ========== ========== ========== ==========
Weighted average basic and diluted shares
outstanding.............................. 4,728,000 4,728,000 4,728,000 4,728,000 4,728,000
========== ========== ========== ========== ==========
Pro forma basic and diluted net loss per
share.................................... $ (0.36)
==========
Shares used in pro forma basic and diluted
net loss per share....................... 9,172,051
==========
</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 on a one-for-one basis 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) on a one-for-one basis 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
shares of common stock offered hereby at an assumed initial public offering
price of $ per share, after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ---------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $19,378 $37,278 $
Working capital........................................... 19,309 37,209
Total assets.............................................. 21,427 39,327
Redeemable convertible preferred stock.................... 18,990 --
Total stockholders' equity................................ 1,406 38,296
</TABLE>
5
<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 AND EXPECT TO ENCOUNTER DIFFICULTIES FACED
BY EARLY STAGE COMPANIES IN NEW AND RAPIDLY EVOLVING MARKETS.
We have only a limited operating history 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 do not have
historical financial data for a significant number of periods 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) 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.
WE LACK SIGNIFICANT REVENUE, HAVE A HISTORY OF SIGNIFICANT LOSSES SINCE OUR
INCEPTION AND 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 $3.3 million for the nine months ended
September 30, 1999. As of September 30, 1999, our accumulated deficit was
approximately $3.4 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
6
<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.
IF WE ARE NOT SUCCESSFUL IN SELLING THE LIVEPERSON SERVICE, OUR REVENUE WILL NOT
INCREASE AND MAY DECLINE.
The success of our business currently depends, and for the immediate future
will continue to substantially depend, on the sale of the LivePerson service.
Therefore, we believe that initial sales, ongoing monthly fees and the sale of
additional seats to existing clients will account for substantially all of our
revenue for the immediate future. We introduced our LivePerson service in
November 1998, and we currently have signed contracts with 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 were to terminate these service agreements, reduce the number of
seats purchased or fail to purchase additional seats, our results may be
negatively 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, many of which are
outside our control. These factors include:
- 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;
- the amount and timing of capital expenditures and other costs relating to
the expansion of our operations, including those related to acquisitions;
7
<PAGE>
- 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.
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 and retaining 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. As we expand our operations, we
intend to replace our existing accounting and other back-office systems. 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 6
at December 31, 1998 to 73 at December 31, 1999. We also plan to significantly
expand our personnel, particularly in the area of technology. 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, we have recently hired certain members of our senior management
team, who do not have significant experience working with us or together. 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 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,
8
<PAGE>
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 first-mover
advantages and 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 and interruptions in service. Even when these problems are not
caused by the LivePerson service, our clients or their customers may attribute
the problem to us, which 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 a limited number of Web hosting services which 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 third party hardware and software, which 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 volume of simultaneous dialogues to increase
significantly as we expand our operations. Our network hardware and software may
not 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.
9
<PAGE>
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 or client 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 our online services. Our success will depend, in
part, on our ability to:
- enhance our existing services;
- develop and offer new services that address the increasingly
sophisticated and varied needs of our prospective clients and users; 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 software upgrades, do not meet our
clients' 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.
OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONAL FACTORS AFFECTING OUR
CLIENTS.
Many of our clients' businesses are seasonal. Our clients' demand for
real-time sales and customer service technology in general and, in particular,
their demand for seats, may be seasonal as well. As a result, the revenue and
profits of our LivePerson service may in the future vary from quarter to
quarter.
OUR BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY INCREASED
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
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<PAGE>
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.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE POTENTIAL FUTURE ACQUISITIONS.
In the future, we may acquire or invest in complementary companies, products
or technologies. Acquisitions and investments involve numerous risks, including:
- difficulties in integrating operations, technologies, products and
personnel;
- diversion of financial and management resources from existing operations;
- risks of entering new markets;
- potential loss of key employees; and
- 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 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.
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<PAGE>
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 a common law trademark, "LivePerson", and three
pending U.S. trademark applications. It is possible that these applications will
not be approved. 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. 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.
Our future success depends to a significant extent on the continued services
of our senior management, including Robert P. LoCascio, our founder and Chief
Executive Officer, and other key personnel. 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 if we were unable to find a qualified replacement.
WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE PERSONAL INFORMATION BELONGING
TO OUR CLIENTS' CUSTOMERS.
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 claims for impersonation or other similar fraud claims, as well as
for other misuses of personal information, such as for unauthorized marketing
purposes. 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
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<PAGE>
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. These
data and projections are imprecise and you should not rely on them.
RISKS RELATED TO OUR INDUSTRY
WE ARE DEPENDENT ON CONTINUED GROWTH IN THE USE OF THE INTERNET AND COMMERCIAL
ONLINE SERVICES AS MEDIA FOR COMMERCE.
We cannot be sure that a sufficiently broad base of consumers will adopt,
and continue to use, the Internet and commercial online services as media for
commerce. Even if consumers adopt the Internet or commercial online services as
media for commerce, we cannot be sure that the necessary infrastructure will be
in place to process such transactions. Our long-term viability depends
substantially upon the widespread acceptance and development of the Internet or
commercial online services as effective media for consumer commerce. Use of the
Internet or commercial online services 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.
Demand for recently introduced services and products over the Internet and
commercial online services is subject to a high level of uncertainty. Few proven
services and products exist.
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<PAGE>
The development of the Internet and commercial online services into a viable
commercial marketplace is subject to a number of factors, including:
- continued growth in the number of users of such services;
- 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 AND
OTHER COMMERCIAL ONLINE SERVICES.
To the extent that the Internet and other online services continue 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 and other online services will be able to
support the demands placed upon them. The Internet and other online services
have experienced outages and delays as a result of damage to portions of their
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 or other online services could lose their
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet or other online
service activity or to increased governmental regulation. Insufficient
availability of telecommunications services to support the Internet or other
online services also could result in slower response times and negatively impact
use of the Internet and other online services generally, and our clients' sites
(including the LivePerson pop-up dialogue window) in particular. If the use of
the Internet and other online services fails to grow or grows more slowly than
expected, if the infrastructure for the Internet and other online services do
not effectively support growth that may occur or if the Internet and other
online services do 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. Laws and regulations may
be adopted covering issues such as user privacy, content, pricing, taxation and
quality of products and services. Any new legislation could hinder the growth in
use of the Internet and other online services generally and decrease the
acceptance of the Internet and other online services as media of communications,
commerce and advertising. The governments of states and foreign countries might
attempt to regulate our clients' and their customers' transmissions or levy
sales or other taxes. 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, both in
the U.S. and abroad, which may impose additional burdens on companies conducting
business online. Our business, results of
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<PAGE>
operations and financial condition could be materially and adversely affected by
the adoption or modification of laws or regulations relating to the Internet.
In addition, a component of the LivePerson service, the "Browser / IP
Address Tracker," allows our clients to capture and save information about their
customers (possibly without their knowledge), which information is commonly
referred to as a "cookie." To the extent that legislation regarding Internet
user privacy is enacted, including legislation limiting the collection and use
of information regarding Internet users (as has been proposed), the
effectiveness of the LivePerson service, including that of our "Browser / IP
Address Tracker," could be impaired. This could hinder the growth of the
Internet and other online services generally and decrease the acceptance of the
Internet and other online services as media of communications, commerce and
advertising. Any of 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 SIGNIFICANT 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 will, in the
aggregate, beneficially own approximately % 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, ARE RESTRICTED FROM IMMEDIATE
RESALE 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 shares of common
stock. Of these shares, the 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. The
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remaining shares will become available for resale in the public
market at various times in the future. This information is summarized in the
chart below.
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OF AVAILABILITY FOR RESALE INTO THE PUBLIC MARKET
- ---------------- ------------------------------------------------------
<S> <C>
Immediately.
90 days after the date of this prospectus in compliance with
the requirements of the federal securities laws.
180 days after the date of this prospectus due to an
agreement these stockholders have with the underwriters.
However, the underwriters can waive this restriction and
allow these stockholders to sell their shares at any time
without prior notice.
After 181 days after the date of this prospectus in
compliance with the requirements of the federal securities
laws.
</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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<PAGE>
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, our
amended and restated bylaws and Delaware law could make it more difficult for a
third party to acquire us, even if doing so might be beneficial to our
stockholders.
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 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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<PAGE>
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.
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<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 $ million, assuming an initial public
offering price of $ per share 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 $ million.
We presently intend to use a portion of the proceeds for general corporate
purposes, including working capital. 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.
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<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents, and
capitalization as of September 30, 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) on a one-for-one basis upon the closing
of this offering;
- on a pro forma as adjusted basis to give effect to the sale of shares
of common stock by us in this offering at an assumed initial public
offering price of $ per share, 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 September 30, 1999, and excludes:
- shares of common stock reserved for issuance under our 2000
Stock Incentive Plan, of which 3,160,980 shares are issuable upon the
exercise of stock options outstanding as of January 28, 2000 with a
weighted average exercise price of $2.51 per share;
- 63,000 shares of common stock reserved for issuance upon the exercise of
stock options with an exercise price of $2.40 per share granted outside
of the predecessor to our 2000 Stock Incentive Plan;
- shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
- 479,166 shares of common stock issuable upon the exercise of warrants
outstanding as of January 28, 2000, with a weighted average exercise
price of $2.40 per share.
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This information should be read in conjunction with our financial statements
and the related notes to those statements included in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................. $19,378 $37,278 $
======= ======= =======
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:
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-- shares authorized and no
shares issued or outstanding........................... -- --
Common stock, $.001 par value; actual--30,000,000 shares
authorized and 4,728,000 shares issued and outstanding;
pro forma-- shares authorized and 16,702,852
shares issued and outstanding; pro forma as adjusted--
shares authorized and shares issued and
outstanding............................................ 5 17
Additional paid-in capital............................... 4,767 41,649
Deferred compensation.................................... (8) (8)
Accumulated deficit...................................... (3,362) (3,362)
------- ------- -------
Total stockholders' equity............................. 1,406 38,296
------- ------- -------
Total capitalization................................... $20,396 $38,296 $
======= ======= =======
</TABLE>
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<PAGE>
DILUTION
Our pro forma net tangible book value as of September 30, 1999 was
approximately $38.3 million, or approximately $2.29 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 on a one-for-one basis 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 shares offered hereby at an assumed initial public offering
price of $ per share 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
September 30, 1999 would have been $ , or $ per share. This
represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in pro
forma net tangible book value of $ per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $
Pro forma net tangible book value per share at
September 30, 1999.................................. $
Increase per share attributable to new investors......
-------
Pro forma net tangible book value per share after this
offering..............................................
-------
Dilution per share to new investors..................... $
=======
</TABLE>
The following table sets forth, on a pro forma basis as of September 30,
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
$ per share:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ % $ % $
New investors....................
------ ----- ------- -----
Total.................... 100.0% $ 100.0%
====== ===== ======= =====
</TABLE>
The foregoing tables and calculations assume no exercise of any stock
options or warrants outstanding as of September 30, 1999. Specifically, these
tables and calculations exclude:
- shares of common stock reserved for issuance under our 2000
Stock Incentive Plan, of which 3,160,980 shares are issuable upon the
exercise of stock options outstanding as of January 28, 2000 with a
weighted average exercise price of $2.51 per share;
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<PAGE>
- 63,000 shares of common stock reserved for issuance upon the exercise of
stock options with an exercise price of $2.40 per share granted outside
of the predecessor to our 2000 Stock Incentive Plan;
- shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
- 479,166 shares of common stock issuable upon the exercise of warrants
outstanding as of January 28, 2000, with a weighted average exercise
price of $2.40 per share.
To the extent that any of these options or warrants are exercised, there
will be further dilution to new investors.
24
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The selected balance sheet data as of December 31, 1997 and 1998, and the
selected statement of operations data for each of the years in the three-year
period ended December 31, 1998 have been derived from our audited financial
statements included elsewhere in this prospectus. The balance sheet data as of
December 31, 1996 have been derived from our audited financial statements not
included in this prospectus. The statement of operations data for the nine
months ended September 30, 1998 and 1999, and the balance sheet data as of
September 30, 1999 have been derived from unaudited financial statements
included in this prospectus. In our opinion, the unaudited financial statements
have been prepared on substantially the same basis as the audited financial
statements appearing elsewhere in this prospectus and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the data. 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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -----------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue...................... $ -- $ -- $ 1 $ -- $ 186
Programming revenue.................. 11 245 378 315 36
----------- ----------- ----------- ----------- -----------
Total revenue...................... $ 11 $ 245 $ 379 $ 315 $ 222
----------- ----------- ----------- ----------- -----------
Operating expenses:
Cost of revenue...................... 6 121 70 56 248
Product development.................. -- -- 93 59 778
Sales and marketing.................. -- -- 33 22 1,880
General and administrative........... 36 130 203 178 878
----------- ----------- ----------- ----------- -----------
Total operating expenses........... 42 251 399 315 3,784
----------- ----------- ----------- ----------- -----------
Loss from operations............... (31) (6) (20) 0 (3,562)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income...................... 1 -- -- -- 257
Interest expense..................... -- -- -- -- (1)
----------- ----------- ----------- ----------- -----------
Total other income (expense),
net.............................. 1 -- -- -- 256
----------- ----------- ----------- ----------- -----------
Net loss................................. $ (30) $ (6) $ (20) $ -- $ (3,306)
=========== =========== =========== =========== ===========
Basic and diluted net loss per share..... $ (0.01) $ 0.00 $ 0.00 $ 0.00 $ (0.70)
=========== =========== =========== =========== ===========
Weighted average basic and diluted shares
outstanding............................ 4,728,000 4,728,000 4,728,000 4,728,000 4,728,000
=========== =========== =========== =========== ===========
Pro forma basic and diluted net loss per
share.................................. $ (0.36)
===========
Shares used in pro forma basic and
diluted net loss per share............. 9,172,051
===========
</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 on a one-for-one basis as if the conversion
occurred at the date of their original issuance.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 2 $ 10 $ 107 $ 19,378
Working capital (deficiency)............. (29) (35) (30) 19,309
Total assets............................. 2 30 142 21,427
Redeemable convertible preferred stock... -- -- -- 18,990
Total stockholders' equity (deficit)..... (29) (35) (30) 1,406
</TABLE>
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<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 provide technology that facilitates real-time sales and customer service
for companies doing business on the Internet. We are an Application Service
Provider (ASP), 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 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. We introduced the LivePerson service in November 1998.
REVENUE
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. 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.
OPERATING EXPENSES
Prior to our offering the LivePerson service, our cost of revenue associated
with programming activity consisted primarily of outsourced programming and
design and related expenses. Since November 1998, our cost of revenue associated
with the LivePerson service has consisted of:
- internal client service and network support staff compensation, 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, allocated occupancy costs
and related overhead, expenses for testing new versions of our software and
depreciation of equipment. 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, allocated occupancy costs
and related overhead, advertising,
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<PAGE>
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,
allocated occupancy costs and related overhead, professional fees, provision for
doubtful accounts and other general corporate expenses.
COMPENSATION EXPENSE
Through September 30, 1999, we recorded an aggregate of $96,000 of
compensation expense in connection with our grants to consultants of options to
acquire an aggregate of 205,340 shares of common stock. The expenses were
determined using a Black-Scholes pricing model.
In May 1999, we issued options to purchase 63,000 shares of common stock at
an exercise price of $2.40 per share to a client. These options will vest in or
before May 2001 if the client meets certain defined revenue targets. We account
for these options 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, we valued the option using a Black-Scholes pricing
model. The $43,000 value ascribed to these options reflects their estimated
market value at September 30, 1999, and has been recorded as deferred cost. This
cost is being ratably amortized over the two-year vesting period, as we believe
that the achievement of the revenue targets is probable. The value ascribed to
these options will be adjusted at each balance sheet date, to bring the total
charge up to the then current market value. We had amortized $6,000 of the
deferred costs as of September 30, 1999.
During the fourth quarter of 1999 and for the period from January 1, 2000
through January 28, 2000, we granted stock options to purchase 381,500 and
815,750 shares of common stock, respectively, to employees, at a weighted
average exercise price of $3.00 and $4.01 per share, respectively.
In December 1999, we recorded compensation expense in connection with the
options granted to an advisor to purchase 100,000 shares of common stock at an
exercise price of $3.00 per share.
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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
REVENUE. Revenue decreased to $222,000 in the nine months ended
September 30, 1999, from $315,000 in the comparable period in 1998. Revenue for
the nine months ended September 30, 1999 related primarily to sales of the
LivePerson service, while revenue in the comparable period in 1998 related
primarily to revenue associated with Web-based community programming and media
design; accordingly, we believe period-to-period comparisons are not meaningful.
COST OF REVENUE. Cost of revenue increased to $248,000 in the nine months
ended September 30, 1999, from $56,000 in the comparable period in 1998. This
increase was primarily attributable to costs associated with the addition of
client services staff as well as depreciation of computer hardware and software.
PRODUCT DEVELOPMENT. Product development costs increased to $778,000 for
the nine months ended September 30, 1999, from $59,000 in the comparable period
in 1998. This increase was
27
<PAGE>
primarily attributable to an increase in the number of LivePerson service
product development personnel, and technology development activities related to
the LivePerson service.
SALES AND MARKETING. Sales and marketing expenses increased to
$1.9 million for the nine months ended September 30, 1999, from $22,000 in the
comparable period in 1998. This increase was primarily attributable to an
increase in salaries and related expenses resulting from the hiring of
additional sales and marketing employees and to an increase in advertising and
promotional expenses, both of which related to the LivePerson service.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $878,000 for the nine months ended September 30, 1999, from $178,000 in the
comparable period in 1998. This increase was due primarily to increases in
personnel expenses related to support and administration, occupancy costs, and,
to a lesser extent, an increase in recruitment costs.
OTHER INCOME. Interest income amounted to $257,000 for the nine months
ended September 30, 1999, and consists of interest earned on cash and cash
equivalents.
NET LOSS. Our net loss increased to $3.3 million for the nine months ended
September 30, 1999, from $0 in the comparable period in 1998.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUE. Revenue increased to $379,000 in fiscal 1998 from $245,000 in
fiscal 1997. This increase was due primarily 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 fiscal 1998 from
$121,000 in fiscal 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
fiscal 1998 from $0 in fiscal 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
fiscal 1998 from $0 in fiscal 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
$203,000 in fiscal 1998 from $130,000 in fiscal 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 fiscal 1998 from $6,000 in
fiscal 1997.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUE. Revenue increased to $245,000 in fiscal 1997 from $11,000 in
fiscal 1996. This increase was primarily due to the initial growth of our
programming services and number of projects.
COST OF REVENUE. Cost of revenue increased to $121,000 in fiscal 1997 from
$6,000 in fiscal 1996. This increase was primarily due to an increase in
outsourced programming and design and related expenses.
PRODUCT DEVELOPMENT. We did not incur any product development costs in
fiscal 1997 or in fiscal 1996.
SALES AND MARKETING. We did not incur any sales and marketing expenses in
fiscal 1997 or in fiscal 1996.
28
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative costs increased to
$130,000 in fiscal 1997 from $36,000 in fiscal 1996. This increase was primarily
due to increases in support personnel expenses and occupancy costs associated
with our programming services.
NET LOSS. Our net loss decreased to $6,000 in fiscal 1997 from $30,000 in
fiscal 1996.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our financial
information for the three most recent quarters ended September 30, 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.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1999 1999 1999
--------------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Service revenue........................................... $ 15 $ 26 $ 145
Programming revenue....................................... 9 23 4
------- ------- -------
Total revenue........................................... 24 49 149
------- ------- -------
Operating expenses:
Cost of revenue........................................... 24 51 173
Product development....................................... 186 145 447
Sales and marketing....................................... 51 397 1,432
General and administrative................................ 161 239 478
------- ------- -------
Total operating expenses.................................... 422 832 2,530
------- ------- -------
Loss from operations........................................ (398) (783) (2,381)
------- ------- -------
Other income (expense):
Interest income........................................... 20 38 199
Interest expense.......................................... (1) -- --
------- ------- -------
Total other income (expense), net....................... 19 38 199
------- ------- -------
Net loss.................................................... $ (379) $ (745) $(2,182)
======= ======= =======
</TABLE>
Our revenue from the LivePerson service has increased in each of the last
three quarters 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 represents income from business activities which we are
no longer actively 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 three quarters. 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.
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<PAGE>
Product development costs increased significantly in absolute dollar terms
over the last three quarters principally as a result of increased headcount and
increased depreciation expense related to computer equipment. As a percentage of
revenue, however, product development costs in each of the three quarters
declined.
In particular, our sales and marketing expense has increased significantly
in each of the previous three quarters 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.
General and administrative costs increased in absolute dollar terms over the
last three quarters 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 three quarters
ended September 30, 1999. The increase, particularly in the third quarter, 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.
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
September 30, 1999, we have raised a total of $23.5 million in aggregate net
proceeds in three private placements. As of September 30, 1999, we had
$19.4 million in cash and cash equivalents, an increase of $19.3 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 $17.9 million.
Net cash used in operating activities was $3.6 million for the nine months
ended September 30, 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 nine months ended September 30, 1999
consisted primarily of net operating losses, depreciation expense, non-cash
compensation and changes in our operating assets and liabilities. Net cash
provided by operating activities for the years ended December 31, 1998 and 1997
was primarily due to changes in our operating assets and liabilities, partially
offset by net operating losses and non-cash compensation charges.
Net cash used in investing activities was $593,000 for the nine months ended
September 30, 1999 and $0 for each of the years ended December 31, 1998 and
1997. Net cash used in investing activities for the nine months ended
September 30, 1999 was related to purchases of property and equipment. There
were no investments in fixed assets for the years ended December 31, 1998 or
1997.
30
<PAGE>
Net cash provided by financing activities was $23.5 million for the nine
months ended September 30, 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 nine months
ended September 30, 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 September 30, 1999, our principal commitments consisted of obligations
outstanding 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.
We have incurred significant net losses and negative cash flows from
operations since inception, and as of September 30, 1999, had an accumulated
deficit of $3.4 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.
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.
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<PAGE>
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 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.
32
<PAGE>
BUSINESS
OVERVIEW
LivePerson provides 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.
Currently, Internet users have 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 (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 offer low start-up costs and reasonable ongoing monthly fees, short set-up
times, automatic upgrades and the ability to add capacity upon request.
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.
Our technology was recently recognized by PC COMPUTING magazine as "the
easiest to set up and manage" of several Web-based tools evaluated, and was
awarded the top 5-star rating. We currently have signed contracts with more than
450 clients, including numerous online retailers, online service providers and
traditional offline businesses with a Web presence. Our clients include
Beauty.com, EarthLink, E-LOAN, GMAC's ditech.com, Intuit, iQVC, LookSmart,
ShopNow and Webvan.
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. 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
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<PAGE>
feedback provides Web site owners with input on product and service offerings,
customer preferences and Web site usability.
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 (FAQs) 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.
FAQs, 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 FAQs 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 customer service representatives (CSRs) 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 CSR then engage in a real-time online conversation in this dialogue
window. The CSR may incorporate graphics and links to Web pages into the
dialogue window. Our service enables this live
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conversation by linking the Internet user and our clients' CSRs through our
proprietary technology, which resides on our servers.
We create and store conversation transcripts and related data and provide
our clients with tools to analyze the stored information. We also enable our
clients to generate optional customer exit surveys, which our clients can use to
collect additional information about their customers.
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 FAQ
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 (PFRs) to customer questions, allowing
them to improve response time and operator efficiency. An operator can
simply choose and, where appropriate, slightly modify a PFR 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. 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 signed contracts
with 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
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 PFRs 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 engines 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
Engine", "Direct Marketing Engine", "Operator Control Engine", "Administrator
Control Engine" and "Customer Data Collection Engine" and a sixth cube titled
"Future Engines" 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 ENGINE. The customer interaction engine 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 ENGINE. The direct marketing engine 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 ENGINE. The operator control engine 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 CSR or to an administrator with unique
skills or knowledge.
- PFRS. The operator can use and modify PFRs to assist in
responding to a customer, rather than manually typing a
response. PFRs 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 may
edit PFRs 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 ENGINE. The administrator control engine
enables administrators to manage operators.
- OPERATOR EVALUATION TOOL. The administrator can view operator
call activity by date, time, length and number of dialogues,
and CSR 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 ENGINE. The customer data collection
engine 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 signed contracts with 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.
The following is a selected list of clients using the LivePerson service as
of December 31, 1999:
<TABLE>
RETAILERS SERVICE PROVIDERS
<S> <C>
APC AirTouch Cellular
Beauty.com CarFinance.com
CollegeClub.com Digital Tsunami
Gifts.com EarthLink
iQVC E-LOAN
Miadora Financial Times
Neiman Marcus GMAC's ditech.com
Playboy Intuit
Proflowers.com LookSmart
ShopNow National Discount Brokers
Timex ScreamingMedia
Webvan Verio
</TABLE>
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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 several 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.
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.
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.
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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 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.
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
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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 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 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
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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.
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 three
pending U.S. trademark applications. The trademark examiner assigned to examine
our applications has issued an office action rejecting each of our applications.
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
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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 December 31, 1999, we had 73 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.
FACILITIES
We currently lease approximately 17,000 square feet at our headquarters
location in New York City, expiring in October 2006, and an additional
approximately 6,000 square foot location in New York City, expiring in
April 2009. We also have a sales office in San Francisco, in space subleased to
us by one of our investors, and have executed a lease for an approximately 6,000
square foot location, commencing in March 2000 and expiring in March 2005. We
are currently evaluating our space requirements to accommodate our growth in the
New York area.
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 January 28, 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
Lixuan An....................... 31 Senior Vice President, Strategic Marketing
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................... 28 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.
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
the 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.
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 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 Development, with the Universal Music
Group. Prior to that, Mr. Bixby spent three years in Credit Suisse First
Boston's mergers and acquisitions group.
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<PAGE>
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 Executives and Manager of Business Development at
New World Communications Inc. and Director of Real Estate at Revlon Consumer
Products Corporation.
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.
LIXUAN AN has been our Senior Vice President, Strategic Marketing since
January 2000 and was our Senior Vice President, Marketing from June 1999 through
January 2000. Before joining us, Ms. An was Senior Vice President for Strategic
Marketing at Blau Marketing Technologies, Inc., a direct marketing agency, from
June 1998 to December 1998. Prior to this, Ms. An was Director of Worldwide
Marketing and Electronic Commerce from June 1996 to June 1998 for Atlas
Editions, U.S.A., a direct marketing company. From August 1994 to May 1996,
Ms. An was Deputy Director for Economic Development for the City of Stamford,
Connecticut.
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.
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.
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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<PAGE>
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.
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.
RICHARD L. FIELDS has been a director since July 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 Omnipoint
Corporation.
WYCLIFFE K. GROUSBECK has been a director since July 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.
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. Before joining Young & Rubicam, Mr. Lavan held various
positions at Viacom Inc., including Controller, and Chief Financial Officer for
Viacom's subsidiary, MTV Networks.
EDWARD G. SIM has been a director since January 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 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.
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
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<PAGE>
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. Bixby.
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 options to purchase common stock upon completion of this
offering. In addition, non-employee directors will be granted options to
purchase common stock on each anniversary of their election to the board of
directors.
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 340,000 shares
of common stock at a purchase price of $5.00 per share. These options will begin
vesting on July 1,
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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 135,000 shares of common stock at a purchase price
of $1.00 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 65,000 shares of common stock at a purchase price
of $3.00 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 50,000 shares of common stock at a purchase price of $5.00
per share. These options 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
392,640 shares of common stock at a purchase price of $1.20 each. Fifty percent
of those options will vest on March 31, 2000 with the remainder vesting on
March 31, 2001. If (i) Mr. Cohen is terminated following a sale or a change in
control of our company or (ii) 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
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<PAGE>
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 200,000 shares of common stock at a purchase price of
$3.00 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 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 -- 200,000
Chief Financial Officer
Scott E. Cohen(2)....................................... 138,250 -- 392,640
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 $185,000.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding exercisable and
unexercisable stock options granted to each of the named executive officers in
the last fiscal year. No stock appreciation rights were granted to the named
executive officers during the year ended December 31, 1999. Potential realizable
values are computed by (1) multiplying the number of shares of common stock
subject to a given option by the assumed market value on the date of grant,
(2) assuming that the aggregate stock value derived from that calculation
compounds annually for the entire term of the option and (3) subtracting from
that result the aggregate option exercise price.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
--------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM (2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) YEAR (%) ($/SH) DATE 5% ($) 10% ($)
- ---- ----------- ---------- ----------- ---------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert P. LoCascio........ -- -- -- -- -- --
Timothy E. Bixby.......... 135,000 6.7 1.00 June 23, 2009 84,901 215,155
65,000 3.2 3.00 October 25, 2009 122,634 310,780
Scott E. Cohen............ 392,640 19.4 1.20 March 31, 2004 29,951 161,183
</TABLE>
- ----------------------------
(1) Each option represents the right to purchase one share of common stock.
Mr. Bixby's 135,000 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 65,000 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 ($1.00 per share for
options which were granted prior to June 30, 1999, and $3.00 per share for
options granted subsequent to June 30, 1999. Actual gains, if any, on stock
option exercises are dependent on the future performance of our common
stock. The amounts reflected in the table may not necessarily be achieved.
See "Risk Factors."
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AGGREGATED OPTION EXERCISES IN THE YEAR
ENDED DECEMBER 31, 1999 AND YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1999 by each of the named executive officers. No
options were exercised during fiscal 1999 by any of the named executive
officers. The value of the unexercised in-the-money options at December 31, 1999
is based on the assumed fair market value of our common stock at December 31,
1999, less the exercise price of the option, multiplied by the number of shares
underlying the options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1999 (#) AT DECEMBER 31, 1999 ($) (1)
--------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Robert P. LoCascio............... -- -- -- --
Timothy E. Bixby................. -- 135,000 -- 540,000
-- 65,000 -- 130,000
Scott E. Cohen................... -- 392,640 -- 1,492,032
</TABLE>
- ------------------------
(1) There was no public trading market for our common stock as of December 31,
1999. The assumed fair market value of our common stock on that date, as
determined by our board of directors, was $5.00 per share.
2000 STOCK INCENTIVE PLAN
We intend to adopt the 2000 Stock Incentive Plan (the "2000 Plan"), which is
intended to serve (along with the 2000 Employee Stock Purchase Plan) as a
successor 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. At that time, all outstanding
options under our existing plan will be transferred to the 2000 Plan, and no
further option grants will be made under the 1998 Plan. The transferred options
will continue to be governed by their existing terms, unless our plan
administrator decides to extend one or more features of the 2000 Plan to those
options.
shares of our common stock have been authorized for issuance under
the 2000 Plan. This share reserve consists of the number of shares we estimate
will be carried over from the 1998 Plan plus an additional increase of
approximately shares. The share reserve under our 2000 Plan will
automatically increase on the first trading day in January each calendar year,
beginning with calendar year 2001, by an amount equal to % of the total
number of shares of our common stock outstanding on the last trading day of
December in the prior calendar year, but in no event will this annual increase
exceed shares. In addition, no participant in the 2000 Plan may be
granted stock options or direct stock issuances for more than
shares of common stock in total in any calendar year. The individuals eligible
to participate in our 2000 Plan will include our officers and other employees,
our board members and any consultants we hire. Our board of directors may amend
or modify the 2000 Plan at any time, subject to any required stockholder
approval. The 2000 Plan will terminate no later than , 2010.
2000 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 become effective upon its adoption by our board of
directors and ratification by our stockholders. The ESPP is designed to allow
our eligible employees and the eligible employees of our participating
subsidiaries, if any, to purchase shares of common stock, at semiannual
intervals,
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with their accumulated payroll deductions. shares of our common
stock will initially be reserved for issuance. The reserve will automatically
increase on the first trading day in January each calendar year, beginning in
calendar year 2001, by an amount equal to % of the total number of
outstanding shares of our common stock on the last trading day in the prior
calendar year. In no event will any such annual increase exceed
shares.
The ESPP will have a series of successive offering periods, each with a
maximum duration of months. Individuals scheduled to work more than
hours per week for more than calendar months per year may join an offering
period on the start date or any semiannual entry date within that period.
Semiannual entry dates will occur on the first business day of and
each year. Individuals who become eligible employees after the
start date of an offering period may join the ESPP on any subsequent semiannual
entry date within that offering period. A participant may contribute up to
% of his or her through payroll deductions, and the accumulated
deductions will be applied to the purchase of shares on each semiannual purchase
date. The purchase price per share will be equal to 85% of the fair market value
per share on the participant's entry date into the offering period or, if lower,
85% of the fair market value per share on the semiannual purchase date.
Semiannual purchase dates will occur on the last business day of and
each year. However, a participant may not purchase more than
shares on any purchase date, and not more than shares may be purchased in
total by all participants on any purchase date. Our plan administrator will have
the authority to change these limitations for any subsequent offering period.
The ESPP will terminate no later than the last business day of ,
2010. Our board of directors may at any time amend, suspend or discontinue the
ESPP. However, certain amendments may require stockholder approval.
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CERTAIN 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 is contained in the
footnotes to the Principal Stockholders Table, to the extent not described
below. Each share of convertible preferred stock will automatically convert into
common stock upon closing of this offering on a one-for-one basis.
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; 416,667 shares to
Sterling Payot Capital, LP; and 208,333 shares to SAVP Sidecar One LLC, an
entity affiliated with 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 $2.40 per
share. These warrants had a purchase price of $0.005 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 Hambrecht & Quist LLC that they do not intend
to do so. These warrants are exercisable for 117,187 shares by Dawntreader Fund
I LP; 117,187 shares by FG-LP; 52,083 shares by Sterling Payot Capital, LP; and
26,042 shares by SAVP Sidecar One 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 $2.40 per share. These warrants had a purchase price of $0.005
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 adversely affect this offering; however, we have been informed
by Hambrecht & Quist LLC that they do not intend to do so. These warrants are
exercisable for 130,209 shares by Allen & Company Incorporated; 5,208 shares by
Alan Braverman; and 31,250 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; 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, L.P.; 48,649 shares to SAVP Sidecar I-B LLC and
72,973 shares to Silicon Alley Ventures, LP, an entity affiliated with Silicon
Alley Venture Partners, LLC; 50,000 shares to Hambrecht & Quist California,
50,000 shares to Hambrecht & Quist Employee Venture Fund,
54
<PAGE>
L.P. II, and 8,108 shares to Access Technology Partners Brokers Fund, L.P., all
three of which are affiliates of Hambrecht & Quist LLC; 432,432 shares to Access
Technology Partners, L.P., a fund of outside investors that is managed by an
affiliate of Hambrecht & Quist LLC; 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 approximately
$18 million. In these transactions, we sold 1,754,386 shares to Dell USA, L.P.;
350,878 shares to entities associated 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 10,710 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.
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."
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our outstanding common stock as of January 28, 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 January 28, 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>
PERCENTAGE OF SHARES
NUMBER OF SHARES BENEFICIALLY OWNED (1)
BENEFICIALLY OWNED ----------------------------------------
HOLDERS BEFORE THE OFFERING BEFORE THE OFFERING AFTER THE OFFERING
- ------- ------------------- ------------------- ------------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Highland Capital Partners IV......... 2,162,162 12.9%
Limited Partnership and an
affiliated entity(2)
2 International Place
Boston, Massachusetts 02110
Dell USA, L.P........................ 1,754,386 10.5%
c/o Dell Computer Corporation
One Dell Way
Round Rock, Texas 78682
Entities affiliated with FGII(3)..... 1,662,795 9.9%
20 Dayton Avenue
Greenwich, Connecticut 06830
Dawntreader Fund I LP(4)............. 1,595,227 9.5%
118 West 22nd Street, 11th Floor
New York, New York 10011
Allen & Company Incorporated(5)...... 1,090,634 6.5%
711 Fifth Avenue
New York, New York 10022
NBC Interactive Media, Inc........... 1,052,631 6.3%
30 Rockefeller Plaza
New York, New York 10112
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF SHARES BENEFICIALLY OWNED (1)
BENEFICIALLY OWNED ----------------------------------------
HOLDERS BEFORE THE OFFERING BEFORE THE OFFERING AFTER THE OFFERING
- ------- ------------------- ------------------- ------------------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Robert P. LoCascio................... 4,557,142 27.3%
Dean Margolis........................ -- *
Timothy E. Bixby(6).................. 33,750 *
Scott E. Cohen....................... -- *
James L. Reagan...................... -- *
Wycliffe K. Grousbeck(2)............. 2,162,162 12.9%
Edward G. Sim(4)..................... 1,595,227 9.5%
Richard L. Fields(5)................. 1,090,634 6.5%
Kevin C. Lavan(7).................... 10,710 *
Directors and Executive Officers as
a Group (9 persons) (8).............. 9,449,625 55.6%
</TABLE>
- --------------------------
* Less than one percent.
(1) Percentage of beneficial ownership prior to this offering is based on
16,702,852 shares of common stock outstanding at January 28, 2000.
Percentage of beneficial ownership after this offering is based on
shares of common stock outstanding, which includes the foregoing plus
shares of common stock to be sold in this offering.
(2) Includes 2,075,675 shares of common stock owned by Highland Capital Partners
IV Limited Partnership ("Highland Capital Partners IV") and 86,487 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 937,500 shares of common stock owned by FG-LP and 608,108 shares of
common stock owned by FG-LPC. Also includes 117,187 shares of common stock
issuable upon exercise of warrants owned by FG-LP. FGII is the general
partner of both limited partnerships.
(4) Includes 117,187 shares of common stock issuable upon exercise of warrants.
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 130,209 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, 746,118 shares and 98,951 shares issuable
upon exercise of warrants which are held by Allen & Company, other of its
officers and related persons. Allen & Company disclaims beneficial ownership
of 335,425 shares and 39,063 shares issuable upon exercise of warrants which
are beneficially owned by certain officers of Allen & Company and related
persons.
(6) Consists of 33,750 shares of common stock issuable upon exercise of options
exercisable within 60 days of January 28, 2000.
(7) Consists of 10,710 shares of common stock issuable upon exercise of options
exercisable within 60 days of January 28, 2000.
(8) Includes 247,396 shares of common stock issuable upon exercise of warrants.
Also includes 44,460 shares of common stock issuable upon exercise of
options exercisable within 60 days of January 28, 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 shares of common stock, par value $0.001 per share, and
shares of preferred stock, par value $0.001 per share.
COMMON STOCK
As of January 28, 2000, there were 4,728,000 shares of our common stock
outstanding held of record by five 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
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. For more information, see "--Anti-Takeover Effects of Provisions of
Delaware Law and Our Certificate of Incorporation and Bylaws."
OPTIONS
We have shares of our common stock reserved for issuance, upon
exercise of stock options, under our 2000 Stock Incentive Plan. As of
January 28, 2000, there were outstanding options to purchase a total of
3,160,980 shares of common stock, of which options to purchase approximately
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
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<PAGE>
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."
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 17,154,018 shares of 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 will be entitled to piggyback
registration rights, subject to various limitations. 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.
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.
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<PAGE>
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 will
provide 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 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 certificate of
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<PAGE>
incorporation further provides that special meetings of our stockholders may be
called only by the chairman of the board of directors, our chief executive
officer or a majority 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 120 days nor more than 150 days prior to the first
anniversary of the date of our notice of 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 60 calendar days after this anniversary, notice by the
stockholder, to be timely, must be so received not more than 90 days prior to
the annual meeting of stockholders nor later than the later of:
- 60 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 given to stockholders or made public,
whichever occurs first.
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.
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless a
corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
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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
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 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
- ---------------- ----
<S> <C>
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
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
After 180 days from the date of this prospectus, the 180-day
lock-up is released and these shares are saleable under Rule
144, Rule 144(k) or Rule 701
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 not to transfer or dispose of, directly or indirectly, any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for shares of our common stock for 180 days after the date of this prospectus.
Transfers can be made sooner with the prior written consent of Hambrecht & Quist
LLC, in the case of certain transfers to affiliates, or can be made sooner under
certain other circumstances.
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 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
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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 17,154,018 shares of our 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.
STOCK PLANS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 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 January 28, 2000, options to purchase 3,223,980 shares of common stock
were issued and outstanding, of which are exercisable within 60 days of
January 28, 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.
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UNDERWRITING
Hambrecht & Quist LLC, 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>
Hambrecht & Quist LLC.......................................
Thomas Weisel Partners LLC..................................
PaineWebber Incorporated....................................
---------
Total.....................................................
=========
</TABLE>
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. 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 $ .
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.
We have granted to the underwriters an option, exercisable no later than
30 days after the date of this prospectus, to purchase up to
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
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
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<PAGE>
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.
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.
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.
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 Hambrecht & Quist LLC 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; and
- 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.
Without the prior written consent of Hambrecht & Quist LLC, any options
granted outside of our 2000 Plan shall not be exercisable during this 180-day
period. In addition, if Hambrecht & Quist LLC agrees to release any of our
stockholders (except any employee or consultant that is not one of our officers,
directors or executives) 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.
65
<PAGE>
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.
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.
At our request, the underwriters have reserved up to shares of common
stock for sale at the initial public offering price to our directors, officers,
employees, business associates and related persons. 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.
Persons associated with Hambrecht & Quist LLC beneficially own 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 Hambrecht & Quist LLC, 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, on a one-for-one basis.
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
110 filed public offerings of equity securities, of which 79 have been
completed, and has acted as a syndicate member in an additional 54 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.
66
<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, 1997 and
1998 and for each of the years in the three-year period ended December 31, 1998
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, will also be available to you on the Securities and
Exchange Commission's Web site at http://www.sec.gov.
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.
67
<PAGE>
LIVEPERSON, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report .............................. F-2
Balance Sheets as of December 31, 1997 and 1998, and
September 30, 1999 (unaudited)............................ F-3
Statements of Operations for the years ended December 31,
1996, 1997 and 1998, and for the nine months ended
September 30, 1998 (unaudited) and September 30, 1999
(unaudited) ............................................. F-4
Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1996, 1997 and 1998, and for the nine
months ended September 30, 1999 (unaudited)............... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998, and for the nine months ended
September 30, 1998 (unaudited) and September 30, 1999
(unaudited)............................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
LivePerson, Inc.:
We have audited the accompanying balance sheets of LivePerson, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LivePerson, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.
New York, New York
January 27, 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))
------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
-------- -------- ------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 10 $107 $19,378 $37,278
Accounts receivable, less allowance for doubtful
accounts of $0, $15, and $38, as of December 31, 1997
and 1998 and September 30, 1999 and $38 pro forma..... 17 10 206 206
Prepaid expenses and other current assets............... -- -- 731 731
Due from officer........................................ 3 25 25 25
---- ---- ------- -------
Total current assets................................ 30 142 20,340 38,240
Property and equipment, net............................. -- -- 573 573
Security deposits....................................... -- -- 477 477
Deferred costs, net..................................... -- -- 37 37
---- ---- ------- -------
Total assets........................................ $ 30 $142 $21,427 $39,327
==== ==== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................ $ 40 $ 17 $ 791 $ 791
Accrued expenses........................................ 25 55 177 177
Note payable............................................ -- 100 -- --
Deferred revenue........................................ -- -- 63 63
---- ---- ------- -------
Total current liabilities........................... 65 172 1,031 1,031
---- ---- ------- -------
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; 3,157,895 shares authorized, no shares
issued and outstanding actual and no shares issued and
outstanding 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; 30,000,000 shares
authorized; 4,728,000 shares issued and outstanding
actual; shares authorized pro forma;
16,702,852 shares issued and outstanding pro forma.... 5 5 5 17
Additional paid-in capital.............................. (4) 21 4,767 41,649
Deferred compensation................................... -- -- (8) (8)
Accumulated deficit..................................... (36) (56) (3,362) (3,362)
---- ---- ------- -------
Total stockholders' equity (deficit)................ (35) (30) 1,406 38,296
---- ---- ------- -------
Commitments and contingencies
Total liabilities and stockholders' equity.......... $ 30 $142 $21,427 $39,327
==== ==== ======= =======
</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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -------------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Service revenue........... $ -- $ -- $ 1 $ -- $ 186
Programming revenue....... 11 245 378 315 36
---------- ---------- ---------- ---------- ----------
Total revenue......... 11 245 379 315 222
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of revenue........... 6 121 70 56 248
Product development....... -- -- 93 59 778
Sales and marketing....... -- -- 33 22 1,880
General and
administrative.......... 36 130 203 178 878
---------- ---------- ---------- ---------- ----------
Total operating
expenses............ 42 251 399 315 3,784
---------- ---------- ---------- ---------- ----------
Loss from
operations.......... (31) (6) (20) -- (3,562)
---------- ---------- ---------- ---------- ----------
Other income (expense):
Interest income........... 1 -- -- -- 257
Interest expense.......... -- -- -- -- (1)
---------- ---------- ---------- ---------- ----------
Total other income
(expense), net...... $ 1 -- -- -- 256
---------- ---------- ---------- ---------- ----------
Net loss...................... $ (30) $ (6) $ (20) $ -- $ (3,306)
========== ========== ========== ========== ==========
Basic and diluted net loss per
share....................... $ (0.01) $ 0.00 $ 0.00 $ 0.00 $ (0.70)
========== ========== ========== ========== ==========
Weighted average shares
outstanding used in basic
and diluted net loss per
share calculation........... 4,728,000 4,728,000 4,728,000 4,728,000 4,728,000
========== ========== ========== ========== ==========
Pro forma basic and diluted
net loss per share.......... $ (0.36)
==========
Weighted average shares
outstanding used in pro
forma basic and diluted net
loss per share
calculation................. 9,172,051
==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
LIVEPERSON, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (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, 1995............ -- $ -- -- $ -- -- $ -- $ --
Issuance of common stock to founder..... -- -- -- -- 4,728,000 5 (4)
Net loss................................ -- -- -- -- -- -- --
--------- ---- --------- ---- --------- ---- ------
Balance at December 31, 1996............ -- -- -- -- 4,728,000 5 (4)
Net loss................................ -- -- -- -- -- -- --
--------- ---- --------- ---- --------- ---- ------
Balance at December 31, 1997............ -- -- -- -- 4,728,000 5 (4)
Issuance of stock options in lieu of
payment for services.................. -- -- -- -- -- -- 25
Net loss................................ -- -- -- -- -- -- --
--------- ---- --------- ---- --------- ---- ------
Balance at December 31, 1998............ -- -- -- -- 4,728,000 5 21
Issuance of stock options in lieu of
payment for services.................. -- -- -- -- -- -- 79
Amortization of deferred compensation... -- -- -- -- -- -- --
Issuance of stock options to a client... -- -- -- -- -- -- 43
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 September 30, 1999
(unaudited)........................... 2,541,667 $ 3 1,142,857 $ 1 4,728,000 $ 5 $4,767
========= ==== ========= ==== ========= ==== ======
<CAPTION>
TOTAL
DEFERRED ACCUMULATED STOCKHOLDERS'
COMPENSATION DEFICIT EQUITY (DEFICIT)
------------ ----------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1995............ $ -- $ -- $ --
Issuance of common stock to founder..... -- -- 1
Net loss................................ -- (30) (30)
---- ------- -------
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.................. (53) -- 26
Amortization of deferred compensation... 45 -- 45
Issuance of stock options to a client... -- -- 43
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................................ -- (3,306) (3,306)
---- ------- -------
Balance at September 30, 1999
(unaudited)........................... $ (8) $(3,362) $ 1,406
==== ======= =======
</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>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ -------------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (30) $ (6) $ (20) $ -- $ (3,306)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Non-cash compensation............................... -- -- 25 -- 127
Depreciation........................................ -- -- -- -- 20
Provision for doubtful accounts..................... -- -- 15 -- 38
Changes in operating assets and liabilities:
Accounts receivable..................................... -- (17) (8) (61) (234)
Prepaid expenses and other current assets............... -- -- -- (21) (731)
Security deposits....................................... -- -- -- -- (477)
Accounts payable........................................ -- 40 (23) 42 774
Accrued expenses........................................ -- 25 30 30 122
Deferred revenue........................................ -- -- -- -- 63
------ ------ ----- ---- --------
Net cash (used in) provided by operating
activities........................................ (30) 42 19 (10) (3,604)
------ ------ ----- ---- --------
Cash flows from investing activities:
Purchases of property and equipment..................... -- -- -- -- (593)
------ ------ ----- ---- --------
Net cash used in investing activities............... -- -- -- -- (593)
------ ------ ----- ---- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock to
founders.............................................. 1 -- -- -- --
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................................... 31 (34) (22) -- --
------ ------ ----- ---- --------
Net cash provided by (used in) financing
activities........................................ 32 (34) 78 -- 23,468
------ ------ ----- ---- --------
Net increase (decrease) in cash and cash
equivalents....................................... 2 8 97 (10) 19,271
Cash and cash equivalents at the beginning of the
period................................................ -- 2 10 10 107
------ ------ ----- ---- --------
Cash and cash equivalents at the end of the period...... $ 2 $ 10 $ 107 $ -- $ 19,378
====== ====== ===== ==== ========
</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 nine months ended September 30, 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, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 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 LivePerson,
Inc. in February 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, on a
one-for-one basis, into 11,974,852 shares of common stock.
The accompanying pro forma balance sheet as of September 30, 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 11,974,852 shares of common stock upon the closing
of this offering.
(C) UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial statements of the Company as of September 30, 1999,
and for the nine months ended September 30, 1998 and 1999, are unaudited.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the SEC
relating to interim financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the Company's financial position and the results of its
operations and its cash flows have been included in such unaudited financial
statements. The results of operations for the nine months ended September 30,
1998 and 1999 are not necessarily indicative of the results to be expected for
the entire year.
F-7
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) 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.
(E) 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) 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.
(G) 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.
(H) 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.
F-8
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) 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 current estimate of the expected term of a
client relationship. This estimate may change in the future. We recognize
monthly service revenue fees as services are provided.
The Company 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'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.
(J) 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
September 30, 1999, all development costs have been charged to product
development expense in the accompanying statements of operations.
(K) ADVERTISING COSTS
The Company expenses the cost of advertising and promoting its services as
incurred. Such costs totaled approximately $0, $0 and $1, for the years ending
December 31, 1996, 1997, and 1998, respectively, and $1 and $925 for the nine
month periods ended September 30, 1998 and 1999, respectively.
F-9
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) 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, 1997 and 1998,
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. No single
customer accounted for or exceeded 10% of either revenue or accounts receivable
for any period presented.
(M) 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 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.
(N) 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. SEAS No. 128 replaced the
presentation of primary and fully diluted earnings (loss) per share (EPS), with
a presentation of basic EPS and diluted EPS. 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
for the nine months ended September 30, 1998 and 1999, does not include the
effects of options to purchase 131,400, 29,300 and 1,926,730 shares of common
stock, respectively, 0, 0 and 479,166 common stock warrants, respectively, and
0, 0 and 8,816,957 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 1996 or 1997.
F-10
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The pro forma net loss per share for the nine months ended September 30,
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 8,816,957, as if such conversion occurred at the date of original
issuance during 1999. For purposes of determining the number of pro forma
weighted average shares outstanding, the shares of Series A, Series B and
Series C convertible preferred stock were calculated from their original date of
issuance.
(O) 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.
(P) 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.
(Q) 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 year ended December 31, 1998 and the nine month period ended
September 30, 1999.
F-11
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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, 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>
SEPTEMBER 30,
1999
-------------
(UNAUDITED)
<S> <C>
Computer equipment and software............................. $405
Furniture and equipment..................................... 188
----
593
Less accumulated depreciation............................... 20
----
Total................................................... $573
====
</TABLE>
F-12
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(2) BALANCE SHEET COMPONENTS (CONTINUED)
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- -------------
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Professional services and consulting fees...... $25 $55 $118
Sales commissions.............................. -- -- 24
Travel and entertainment....................... -- -- 20
Other.......................................... -- -- 15
--- --- ----
Total...................................... $25 $55 $177
=== === ====
</TABLE>
Prepaid expenses and other current assets at September 30, 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 September 30, 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.
In January 1999, the Company completed a private placement of 2,500,000
shares of Series A Convertible Preferred Stock ("Series A") with 312,500 common
stock warrants at a combined offering price of $1.205 per share ($1.20 per
Series A share and $0.005 per warrant). 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 options 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 at $1.20 per share to a financial advisor. The Company recorded
compensation expense of $50 in connection with the issuance of the shares.
In May 1999, the Company completed a private placement of 1,142,857 shares
of Series B Convertible Preferred Stock ("Series B") with 166,667 common stock
warrants at a combined offering price of $1.405 per share ($1.40 per Series B
share and $0.005 per warrant). The
F-13
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(4) CAPITALIZATION (CONTINUED)
warrants are exercisable at a price of $2.40 per common share and have a term of
5 years. None of these options 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.
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 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 $17.9 million.
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 on a one-for-one basis
into 11,974,852 shares of common stock.
(5) STOCK OPTIONS
During 1998, the Company established the Stock Option and Restricted Stock
Purchase Plan (the "1998 Stock Option Plan"). Under the Plan, the Board of
Directors may issue incentive stock options or nonqualified stock options to
purchase up to 2,800,000 common shares as of September 30, 1999.
F-14
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 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............................................. 131,400 $1.00
Options cancelled........................................... -- --
Options outstanding at December 31, 1998.................... 131,400 $1.00
Options granted............................................. 1,820,330 $1.78
Options cancelled........................................... (25,000) $1.00
---------
Options outstanding at September 30, 1999 (unaudited)....... 1,926,730 $1.74
=========
Options exercisable at December 31, 1998.................... -- --
Options exercisable at September 30, 1999 (unaudited)....... 152,607 --
</TABLE>
F-15
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 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 options issued to employees. Under APB No. 25, because the exercise
price of the Company's employee stock options equals the fair value of the
underlying common stock on the date of grant, no compensation cost has been
recognized for its stock option grants to employees and directors. 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 in 1996 or 1997.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Net loss:
As reported............................................. $ (20)
======
Pro forma............................................... $ (28)
======
Basic and diluted net loss per share:
As reported............................................. $ 0.00
======
Pro forma............................................... $(0.01)
======
</TABLE>
The resulting effect on the pro forma net loss disclosed for the year ended
December 31, 1998 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 for the nine months ended September 30, 1999, was $0.39 and $0.69,
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: dividend yield of zero percent,
risk-free interest rate of 5.4% and expected life of 10 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 1996 or 1997.
F-16
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(5) STOCK OPTIONS (CONTINUED)
During December 1998, the Company granted options to purchase 62,500 shares
of common stock at an exercise price of $1.00 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.
During April 1999, the Company granted options to purchase an aggregate of
42,840 shares of common stock at an exercise price of $1.00 per share, at the
then fair market value of the Company's common stock, to four consultants for
services performed. These options are exercisable for a period of 10 years. The
Company recorded an expense of $26 in connection with the issuance of the fully
vested options using a Black-Scholes pricing model.
During May 1999, the Company issued options to purchase 63,000 shares of
common stock at an exercise price of $2.40 per share to a client. These options
will vest in or before May 2001 if the client meets certain defined revenue
targets and are exercisable for a period of 3 years from the date of grant. The
Company accounts for these options 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 using a
Black-Scholes pricing model. The $43 ascribed to the option reflects the market
value at September 30, 1999 and has been recorded as deferred cost. This cost is
being ratably amortized over the two-year vesting period, as the Company
believes that the achievement of the revenue targets is probable. The value
ascribed to these options will be adjusted at each balance sheet date to bring
the total charge up to the then current market value. The Company has amortized
$6 of the deferred costs as of September 30, 1999.
During June 1999, the Company granted options to purchase 100,000 shares of
common stock to an advisor at an exercise price of $1.00 per share, the then
fair market value of the Company's common stock. These options are exercisable
for a period of 10 years. The Company has recorded deferred compensation of $53
using the Black-Scholes pricing model. 60,000 shares were immediately vested
upon the grant with the remaining options vesting 8,000 per month commencing on
July 31, 1999. The Company has recorded $45 of expense for the nine months ended
September 30, 1999. The Company will recognize an additional $8 of expense over
the remaining vesting period of two months.
During the fourth quarter of 1999 and for the period January 1, 2000 through
January 28, 2000, the Company granted stock options to purchase 381,500 and
815,750 shares of common stock, respectively, to employees, at a weighted
average exercise price of $3.00 and $4.01 per share, respectively.
In December 1999, the Company recorded compensation expense in connection
with the options granted to an advisor to purchase 100,000 shares of common
stock at an exercise price of $3.00 per share.
F-17
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(5) STOCK OPTIONS (CONTINUED)
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 AVERAGE NUMBER
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISE PRICE OUTSTANDING
- -------------- ----------- ---------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
$1.00 131,400 7.43 $1.00 -- --
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------ ---------------------------
WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE
NUMBER REMAINING AVERAGE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING PRICE
- -------------- ----------- ---------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$1.00 845,340 9.21 $1.00 152,607 $1.00
$1.20 392,640 4.49 $1.20 -- --
$2.40 63,000 2.63 $2.40 -- --
$3.00 625,750 9.97 $3.00 -- --
--------- ------- -----
1,926,730 152,607 $1.00
========= ======= =====
</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, 1996, 1997, and 1998 and for
the nine months ended September 30, 1998 and 1999 were approximately $14, $14,
$26, $27 and $119, respectively.
F-18
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 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>
1999.................................................... $ 161
2000.................................................... 648
2001.................................................... 665
2002.................................................... 683
2003.................................................... 702
Thereafter.............................................. 2,676
------
Total minimum lease payments........................ $5,535
======
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with 4 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 up to $615 of
salary payable during the year following termination.
(7) INCOME TAXES
There is no provision for federal, state or local income taxes for all
periods presented, since the Company has incurred losses since inception. At
December 31, 1998, the Company did not have any significant net operating loss
carryforwards available to offset future taxable income. 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.
F-19
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(7) INCOME TAXES (CONTINUED)
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, 1997 and 1998 are presented below.
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable principally due to allowance for
doubtful accounts..................................... $ 26 $ 29
Non-cash compensation................................... -- 51
Other................................................... -- 19
---- ----
Gross deferred tax assets........................... 26 99
Less: valuation allowance........................... (13) (67)
---- ----
Net deferred tax assets............................. 13 32
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation.......................................... -- (32)
Other................................................... (13) --
---- ----
Gross deferred tax liabilities...................... (13) (32)
---- ----
$ -- $ --
==== ====
</TABLE>
F-20
<PAGE>
LIVEPERSON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 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, 1996:
Allowance for doubtful accounts............... $ -- $ -- $ -- $ --
==== ==== ==== ====
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 nine months ended September 30, 1999:
Allowance for doubtful accounts (unaudited)... $ 15 $ 38 $ 15 $ 38
==== ==== ==== ====
</TABLE>
(9) SUBSEQUENT EVENTS--UNAUDITED
The Company intends to increase the number of authorized shares of its
common stock. Upon the closing of this offering, the Company also intends to
authorize shares of preferred stock.
Subsequent to September 30, 1999, the Company increased the maximum number
of options authorized under its 1998 Stock Option Plan.
F-21
<PAGE>
[INSIDE BACK COVER]
[COLOR ARTWORK TO BE DESCRIBED IN AMENDMENT]
<PAGE>
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 COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE 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...................................... $15,180
NASD filing fee........................................... 6,250
Nasdaq National Market listing fee........................ *
Legal fees and expenses................................... *
Accounting fees and expenses.............................. *
Printing and engraving expenses........................... *
Blue Sky fees and expenses................................ *
Transfer agent and registrar fees and expenses............ *
Miscellaneous............................................. *
Total................................................. *
-------
$ *
=======
</TABLE>
- ------------------------
* To be filed by amendment.
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
II-1
<PAGE>
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, 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
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 4,255,200 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. 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
11,974,852 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 One 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., 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
II-2
<PAGE>
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 479,166 shares of Common Stock consisting of (i) warrants
issued in January 1999 exercisable for 312,499 shares of Common Stock, at a
purchase price per warrant of $0.005, for gross proceeds of $1,562.50, to
Dawntreader Fund I LP, FG-LP, Sterling Payot Capital, LP, and SAVP Sidecar One
LLC, which are presently exercisable at an exercise price per share of $2.40 and
which expire in January 2004; and (ii) warrants issued in May 1999 exercisable
for 166,667 shares of Common Stock, at a purchase price per warrant of $0.005,
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 $2.40 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
Hambrecht & Quist LLC 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.
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 54,000 shares of Common Stock were
cancelled in 1999 and options to purchase a total of 3,160,980 shares of Common
Stock at a weighted average exercise price of $2.51 per share remain
outstanding. 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
4.1* Specimen Common Stock certificate
4.2* Amended and Restated Registration Rights Agreement
4.3* See Exhibits 3.1, 3.2, 3.3 and 3.4 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
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.
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 indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
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 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 28th day of January, 2000.
<TABLE>
<S> <C> <C>
LIVEPERSON, INC.
BY: /S/ ROBERT P. LOCASCIO
----------------------------------------------
Robert P. LoCascio
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and/or officers of LivePerson, Inc. (the
"Company"), hereby severally constitute and appoint Robert P. LoCascio and
Timothy E. Bixby, each of them individually, with full powers of substitution
and resubstitution, our true and lawful attorneys, with full powers to them and
each of them to sign for us, in our names and in the capacities indicated below,
the Registration Statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Company, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or
substitutes, shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
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
/s/ ROBERT P. LOCASCIO Officer and Chairman of the
-------------------------------------- Board of Directors (principal January 28, 2000
Robert P. LoCascio executive officer)
Executive Vice President, Chief
/s/ TIMOTHY E. BIXBY Financial Officer, Secretary
-------------------------------------- and Director (principal January 28, 2000
Timothy E. Bixby financial and accounting
officer)
/s/ RICHARD L. FIELDS Director
-------------------------------------- January 28, 2000
Richard L. Fields
/s/ WYCLIFFE K. GROUSBECK Director
-------------------------------------- January 28, 2000
Wycliffe K. Grousbeck
/s/ KEVIN C. LAVAN Director
-------------------------------------- January 28, 2000
Kevin C. Lavan
/s/ EDWARD G. SIM Director
-------------------------------------- January 28, 2000
Edward G. Sim
</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
4.1* Specimen Common Stock certificate
4.2* Amended and Restated Registration Rights Agreement
4.3* See Exhibits 3.1, 3.2, 3.3 and 3.4 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
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.
<PAGE>
Exhibit 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LIVE PERSON, INC.
Pursuant to Sections 242 and 245
of the General Corporation Law of
the State of Delaware
---------------------
Live Person, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "General Corporation Law"), hereby certifies as follows:
1. The name of the corporation is Live Person, Inc. The corporation was
originally incorporated under the name "Sybarite Interactive Inc." on November
29, 1995.
2. On January 25, 2000, at a meeting of the Board of Directors of the
Corporation, in accordance with Sections 242 and 245 of the General Corporation
Law, the Board of Directors duly adopted and declared advisable this Third
Amended and Restated Certificate of Incorporation, which restates, integrates
and further amends the Second Amended and Restated Certificate of Incorporation
of the Corporation. The stockholders of the Corporation duly approved said
proposed Third Amended and Restated Certificate of Incorporation by written
consent in accordance with Sections 228 and 242 of the General Corporation Law,
and written notice of such consent has been given to all stockholders who have
not consented in writing to said Amended and Restated Certificate of
Incorporation. This Third Amended and Restated Certificate of Incorporation was
approved by the holders of a majority of the outstanding capital stock of the
Corporation and by the holders of at least 60% of the outstanding Series A
Convertible Preferred Stock, $.001 par value per share, of the Corporation, at
least 60% of the outstanding Series B Convertible Preferred Stock, $.001 par
value per share, of the Corporation and at least 60% of the outstanding Series C
Convertible Preferred Stock, $.001 par value per share, of the Corporation. The
resolution setting forth this Third Amended and Restated Certificate of
Incorporation is as follows:
RESOLVED: That the Second Amended and Restated Certificate of Incorporation of
the Corporation, as amended, be and hereby is amended and restated in its
entirety so that the same shall read as follows:
FIRST. The name of the Corporation is Live Person, Inc.
SECOND. The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The
name of the Corporation's registered agent at such address is: Corporation
Service Company.
<PAGE>
THIRD. The nature of the business and purposes to be conducted or
promoted by the Corporation are to engage in, carry on and conduct any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 47,274,852 shares, which shall be
comprised of 35,000,000 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"), (iii) 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 (iv) 300,000 shares shall be undesignated.
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK
1. GENERAL.
The voting, dividend and liquidation rights of the holders of the
Common Stock are subject to and qualified by the rights of the holders of the
Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. VOTING.
The holders of the Common Stock are entitled to one vote for each share
held at all meetings of stockholders (and written actions in lieu of meetings).
There shall be no cumulative voting.
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, voting together as a single class, irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of the State of
Delaware.
3. 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.
2
<PAGE>
4. LIQUIDATION.
Upon the dissolution or liquidation of the Corporation, whether
voluntary or involuntary, holders of Common Stock will be entitled to receive
all assets of the Corporation available for distribution to its stockholders,
subject to any preferential rights of any then outstanding Preferred Stock.
B. UNDESIGNATED PREFERRED STOCK
Undesignated Preferred Stock may be issued from time to time in one or
more series, each of such series to have such terms as stated or expressed
herein and in the resolution or resolutions providing for the issue of such
series adopted by the Board of Directors of the Corporation as hereinafter
provided. Any shares of Undesignated Preferred Stock which may be redeemed,
purchased or acquired by the Corporation may be reissued except as otherwise
provided by law or by the terms of any series of Preferred Stock. Different
series of Preferred Stock shall not be construed to constitute different classes
of shares for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Undesignated Preferred Stock in one or more series,
and in connection with the creation of any such series, by resolution or
resolutions providing for the issue of the shares thereof, to determine and fix
such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, special voting rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. Except as otherwise specifically provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Undesignated Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
C. SERIES PREFERRED STOCK
The rights, preferences, powers, privileges and restrictions,
qualifications and limitations granted to or imposed upon the shares of Series
Preferred Stock shall be as set forth in this Part C.
1. DIVIDENDS.
The Corporation shall not declare or pay any cash dividends on
shares of Common Stock until the holders of the Series Preferred Stock then
outstanding shall have first received, or simultaneously receive, a cash
dividend on each outstanding share of Series Preferred Stock in an
3
<PAGE>
amount at least equal to the product of (i) the per share amount, if any, of the
dividends or other distributions to be declared, paid or set aside for the
Common Stock, multiplied by (ii) the number of whole shares of Common Stock into
which such share of Series Preferred Stock is then convertible.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
(a) THRESHOLD LIQUIDATIONS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation in which
the cash or the value of the property, rights or securities to be distributed to
the holders of shares of Common Stock, assuming solely for purposes of this
calculation, conversion of all shares of issued and outstanding Preferred Stock
(including any shares of Preferred Stock reserved for issuance upon exercise of
warrants, options or other rights then outstanding) and all other issued and
outstanding debt or equity securities convertible into Common Stock, and the
exercise of any warrants, options or other rights to acquire shares of Common
Stock or Preferred Stock then outstanding, is equal to or greater than $11.10
per share (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such
shares):
(i) SERIES D PREFERRED STOCK. The holders of shares
of Series D Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be
made to the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Common Stock or
any other class or series of stock ranking on liquidation
junior to the Series D Preferred Stock by reason of their
ownership thereof, an amount equal to $5.70 per share (subject
to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization
affecting such shares), plus any dividends declared but unpaid
thereon, and no more. If upon any such liquidation,
dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of
shares of Series D Preferred Stock the full amount to which
they shall be entitled under this subparagraph (i), the
holders of shares of Series D Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the
Series D Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which
would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(ii) SERIES C PREFERRED STOCK. After the payment of
all preferential amounts required to be paid to the holders of
Series D Preferred Stock and any other class or series of
stock of the Corporation ranking on liquidation on a parity
with the Series D Preferred Stock, the holders of shares of
Series C Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be
made to the holders of Series A Preferred Stock,
4
<PAGE>
Series B Preferred Stock, Common Stock or any other class or
series of stock ranking on liquidation junior to the Series C
Preferred Stock by reason of their ownership thereof, an
amount equal to $3.70 per share (subject to appropriate
adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such
shares), plus any dividends declared but unpaid thereon, and
no more. If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series C
Preferred Stock the full amount to which they shall be
entitled under this subparagraph (ii), the holders of shares
of Series C Preferred Stock and any class or series of stock
ranking on liquidation on a parity with the Series C Preferred
Stock shall share ratably in any distribution of the remaining
assets and funds of the Corporation in proportion to the
respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in
full.
(iii) SERIES B PREFERRED STOCK. After the payment of
all preferential amounts required to be paid to the holders of
Series C Preferred Stock and Series D Preferred Stock and any
other class or series of stock of the Corporation ranking on
liquidation on a parity with the Series C Preferred Stock or
Series D Preferred Stock, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be
made to the holders of Series A Preferred Stock, Common Stock
or any other class or series of stock ranking on liquidation
junior to the Series B Preferred Stock by reason of their
ownership thereof, an amount equal to $1.40 per share (subject
to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization
affecting such shares), plus any dividends declared but unpaid
thereon, and no more. If upon any such liquidation,
dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of
shares of Series B Preferred Stock the full amount to which
they shall be entitled under this subparagraph (iii), the
holders of shares of Series B Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the
Series B Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which
would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(iv) SERIES A PREFERRED STOCK. After the payment of
all preferential amounts required to be paid to the holders of
Series B Preferred Stock Series C Preferred Stock and Series D
Preferred Stock and any other class or series of stock of the
Corporation ranking on liquidation on a parity with the Series
B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, the holders of shares of Series A Preferred
Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its
stockholders, before any payment shall be made to the holders
of Common Stock or any other class or series of stock ranking
on liquidation junior to the Series A
5
<PAGE>
Preferred Stock by reason of their ownership thereof, an
amount equal to $1.20 per share (subject to appropriate
adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such
shares), plus any dividends declared but unpaid thereon, and
no more. If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series A
Preferred Stock the full amount to which they shall be
entitled under this subparagraph (iv), the holders of shares
of Series A Preferred Stock and any class or series of stock
ranking on liquidation on a parity with the Series A Preferred
Stock shall share ratably in any distribution of the remaining
assets and funds of the Corporation in proportion to the
respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in
full.
(v) COMMON STOCK. After the payment of all
preferential amounts required to be paid to the holders of
Series Preferred Stock and any other class or series of stock
of the Corporation ranking on liquidation on a parity with any
series of the Series Preferred Stock, upon the dissolution,
liquidation or winding up of the Corporation, the holders of
shares of stock ranking on liquidation junior to the Series
Preferred Stock then outstanding shall be entitled to receive
the remaining assets and funds of the Corporation available
for distribution to its stockholders.
(b) OTHER LIQUIDATIONS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation in which
the cash or the value of the property, rights or securities to be distributed to
the holders of shares of Common Stock, assuming solely for purposes of this
calculation, conversion of all shares of issued and outstanding Preferred Stock
(including any shares of Preferred Stock reserved for issuance upon exercise of
warrants, options or other rights then outstanding) and all other issued and
outstanding debt or equity securities convertible into Common Stock, and the
exercise of any warrants, options or other rights to acquire shares of Common
Stock or Preferred Stock then outstanding, is less than $11.10 per share
(subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares):
(i) SERIES D PREFERRED STOCK. The holders of shares
of Series D Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be
made to the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Common Stock or
any other class or series of stock ranking on liquidation
junior to the Series D Preferred Stock by reason of their
ownership thereof, an amount equal to $5.70 per share (subject
to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization
affecting such shares), plus any dividends declared but unpaid
thereon. If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series D
Preferred Stock the
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full amount to which they shall be entitled under this
subparagraph (i), the holders of shares of Series D Preferred
Stock and any class or series of stock ranking on liquidation
on a parity with the Series D Preferred Stock shall share
ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts
which would otherwise be payable in respect of the shares held
by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full.
(ii) SERIES C PREFERRED STOCK. After the payment of
all preferential amounts required to be paid to the holders of
Series D Preferred Stock and any other class or series of
stock of the Corporation ranking on liquidation on a parity
with the Series C Preferred Stock, the holders of shares of
Series C Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be
made to the holders of Series A Preferred Stock, Series B
Preferred Stock, Common Stock or any other class or series of
stock ranking on liquidation junior to the Series C Preferred
Stock by reason of their ownership thereof, an amount equal to
$3.70 per share (subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any
dividends declared but unpaid thereon. If upon any such
liquidation, dissolution or winding up of the Corporation the
remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders
of shares of Series C Preferred Stock the full amount to which
they shall be entitled under this subparagraph (ii), the
holders of shares of Series C Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the
Series C Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which
would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(iii) SERIES B PREFERRED STOCK. After the payment of
all preferential amounts required to be paid to the holders of
Series C Preferred Stock and Series D Preferred Stock and any
other class or series of stock of the Corporation ranking on
liquidation on a parity with the Series C Preferred Stock or
Series D Preferred Stock, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be
made to the holders of Series A Preferred Stock, Common Stock
or any other class or series of stock ranking on liquidation
junior to the Series B Preferred Stock by reason of their
ownership thereof, an amount equal to $1.40 per share (subject
to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization
affecting such shares), plus any dividends declared but unpaid
thereon. If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series B
Preferred Stock the full amount to which they shall be
entitled under this subparagraph (iii), the holders of shares
of Series B Preferred Stock and any class or series of stock
ranking on liquidation on a parity with the Series B Preferred
Stock shall
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share ratably in any distribution of the remaining assets and
funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full.
(iv) SERIES A PREFERRED STOCK. After the payment of
all preferential amounts required to be paid to the holders of
Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock and any other class or series of stock of
the Corporation ranking on liquidation on a parity with the
Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock, the holders of shares of Series A Preferred
Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its
stockholders, before any payment shall be made to the holders
of Common Stock or any other class or series of stock ranking
on liquidation junior to the Series A Preferred Stock by
reason of their ownership thereof, an amount equal to $1.20
per share (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar
recapitalization affecting such shares), plus any dividends
declared but unpaid thereon. If upon any such liquidation,
dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of
shares of Series A Preferred Stock the full amount to which
they shall be entitled under this subparagraph (iv), the
holders of shares of Series A Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the
Series A Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which
would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(v) OTHER DISTRIBUTIONS. After the payment of all
preferential amounts required under subparagraphs (i)-(iv)
above of this paragraph (b) to be paid to the holders of
Series Preferred Stock and any other class or series of stock
of the Corporation ranking on liquidation on a parity with any
series of Series Preferred Stock, the remaining assets and
funds of the Corporation available for distribution to its
stockholders shall be distributed among the holders of shares
of Series Preferred Stock, Common Stock and any other class or
series of stock entitled to participate in liquidation
distributions with the holders of Common Stock, pro rata based
on the number of shares of Common Stock held by each (assuming
conversion into Common Stock of all such shares).
(c) MERGER, CONSOLIDATION OR CHANGE OF CONTROL. Any merger or
consolidation (or other change-of-control transaction which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be paid by any entity or affiliate
thereof), in which either the Corporation or a subsidiary is a constituent party
and the Corporation issues shares of its capital stock pursuant to such merger,
consolidation or change of control transaction (except any such merger,
consolidation or change-of-control transaction involving the Corporation or a
subsidiary in which the holders of capital stock of the Corporation immediately
prior to such merger, consolidation or change-of-control transaction continue to
hold
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immediately thereafter at least 51% by voting power of the capital stock of
(A) the surviving or resulting corporation or (B) if the surviving or resulting
corporation is a wholly owned subsidiary of another corporation immediately
following such merger, consolidation or change-of-control transaction, the
parent corporation of such surviving or resulting corporation), or any sale of
all or substantially all the assets of the Corporation, shall be deemed to be a
liquidation of the Corporation for purposes of this Section 2, subject to the
right of each holder of Series Preferred Stock to exercise its right of
conversion under Section 4 below. In the case of a merger, consolidation or sale
that is deemed to be a liquidation for purposes of this Section 2, the agreement
or plan of merger or consolidation with respect to such merger or consolidation
or sale shall provide that the consideration payable to the stockholders of the
Corporation (in the case of a merger or consolidation), or consideration payable
to the Corporation, together with all other available assets of the Corporation
(in the case of an asset sale) shall be distributed to the holders of capital
stock of the Corporation in accordance with Subsections 2(a) or 2(b) above. The
amount deemed distributed to the holders of Series Preferred Stock upon any such
merger, consolidation or sale shall be the cash or the value of the property,
rights or securities distributed to such holders by the Corporation or the
acquiring person, firm or other entity. The value of such property, rights or
other securities shall be determined in good faith in accordance with Section
2(d) below.
(d) VALUATION. Whenever the distribution provided for in this
Section 2 shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board of Directors of the Corporation; provided that in the
event that a distribution pursuant to Section 2(c) is payable in securities that
are listed on a national securities exchange, the NASDAQ National Market System,
the NASDAQ system or any other nationally recognized exchange or trading system
("Listed Securities"), the value of such securities shall be deemed to be the
last reported sale price of such securities on the date of the consummation of
such liquidation, dissolution, winding up, merger or consolidation.
Notwithstanding the foregoing, if, in the case of any such liquidation in which
the consideration to be paid is other than cash or Listed Securities, the Board
of Directors shall have determined the value of a distribution and holders of a
majority of the shares of all series of the Series Preferred Stock, voting
together as a single class (the "Contesting Holders") notify the Board of
Directors within five business days after receiving written notification of such
determination of fair market value that they disagree with such determination,
then the Board of Directors and the Contesting Holders shall have 30 days to
agree upon a fair market value of the relevant property. If, by the end of such
30-day period they are unable to agree on a fair market value, the fair market
value shall be determined by an appraisal to be paid for by the Corporation. All
appraisals shall be undertaken by two appraisers, one selected by the
Corporation and one selected by the Contesting Holders, which selections must be
made within 10 days after the expiration of the 30-day period described above.
If one selecting party fails to timely select its appraiser, the other selecting
party shall select both appraisers. The fair market value shall be the fair
market value arrived at by those appraisers within 60 days following the
appointment of the last appraiser to be appointed. In the event that the two
appraisers cannot agree on such fair market value within such a period of time,
(i) if the appraisers' valuations are within 10% of each other the fair market
value shall be the average of the two valuations and (ii) if the differences in
the valuations are greater, the appraisers shall elect a third appraiser who
will calculate fair market value independently, and, except as provided in the
next sentence, the fair
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<PAGE>
market value of the property shall in each case be the average of the two fair
market values arrived at by the appraisers who are closest in amount. If one
appraiser's valuation is the average of the other two valuations, the average
valuation shall be the fair market value. In the event that the two original
appraisers cannot agree upon a third appraiser within 30 days following the end
of the 60-day period referred to above, then the third appraiser shall be
appointed by the American Arbitration Association.
3. VOTING.
(a) Each holder of outstanding shares of Series Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law or by the provisions of Subsections
3(b), 3(c) or 3(d) below, holders of Series Preferred Stock shall vote together
with the holders of Common Stock as a single class.
(b) In addition to any other rights provided by law or by this
Certificate of Incorporation, for so long as 3,000,000 shares of Series
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval of the holders of at least sixty percent (60%) of the
then-outstanding shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, voting together as a
single class, authorize or issue any new or existing class or classes or series
of capital stock having any preference or priority as to dividends or assets
superior to or on a parity with any such preference or priority of the Series D
Preferred Stock, or authorize or issue shares of stock of any class, or any
bonds, debentures or notes convertible into any shares of stock of any class, or
any shares of stock of the Corporation having any preference or priority as to
dividends or assets superior to or on a parity with any such preference or
priority of the Series D Preferred Stock (any such securities ranking superior
to or on a parity with the Series D Preferred Stock being hereinafter referred
to as "Senior Preferred Stock"), or reclassify any outstanding shares of capital
stock into shares of Senior Preferred Stock.
(c) In addition to any other rights provided by law or by this
Certificate of Incorporation, for so long as 3,000,000 shares of Series
Preferred Stock are outstanding, the Corporation shall not take any of the
following actions with respect to any series of Series Preferred Stock without
first obtaining the approval of the holders of at least fifty-one percent (51%)
of the then-outstanding shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, voting together as
a single class:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation, including without
limitation Article Fourth hereof, or Bylaws;
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(ii) pay or declare any dividend or distribution on any shares
of its capital stock (except dividends payable solely in shares of
Common Stock), or apply any of its assets to the redemption,
retirement, purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any shares of its capital stock (other
than as provided under Section 6 below and the repurchase of Common
Stock upon termination of employment or service);
(iii) merge or consolidate into or with any other corporation
or other entity, or otherwise engage in a change of control
transaction, except for such mergers for which the sole purpose is to
change the Company's jurisdiction of incorporation or a reorganization
pursuant to the provisions of Section 251(g) of the Delaware General
Corporation Law;
(iv) do any act or thing not authorized or contemplated by
this Certificate of Incorporation which would result in taxation of the
holders of shares of Series Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision
of the Internal Revenue Code as hereafter from time to time amended);
(v) incur any debt outside the ordinary course of business in
excess of $2,000,000 (such debt not in excess of $2,000,000 being
referred to in this Certificate of Incorporation as "Permitted
Indebtedness);
(vi) sell, lease or otherwise dispose of all or substantially
all of its assets or properties; or
(vii) voluntarily liquidate, wind up or dissolve.
(d) In addition to any other rights provided by law or by this
Certificate of Incorporation, for so long as any shares of Series A Preferred
Stock, Series B Preferred Stock Series C Preferred Stock or Series D Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval of the holders of at least sixty percent (60%) of the then-outstanding
shares of the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, or seventy percent (70%) of the then outstanding shares of the
Series D Preferred Stock, as applicable, each voting as a separate class,
(i) authorize or issue any new or existing class or classes or
series of capital stock having any preference or priority as to
dividends or assets superior to or on a parity with any such preference
or priority of such series of Series Preferred Stock, except for Senior
Preferred Stock, or, except for Senior Preferred Stock, authorize or
issue shares of stock of any class, or any bonds, debentures or notes
convertible into any shares of stock of any class, or any shares of
stock of the Corporation having any preference or priority as to
dividends or assets superior to or on a parity with any such preference
or priority of such series of Series Preferred Stock;
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<PAGE>
(ii) reclassify any Common Stock into shares having any
preference or priority as to dividends or assets superior to or on a
parity with any such preference or priority of such series of Series
Preferred Stock;
(iii) increase the authorized amount of such series of Series
Preferred Stock; or
(iv) (A) alter or change the rights, preferences or privileges
of (x) such series of Series Preferred Stock or (y) any existing class
or series of capital stock into a class or series of capital stock
having any preference or priority as to dividends or assets superior to
or on a parity with the preference or priority of such series of Series
Preferred Stock (but junior to the Senior Preferred Stock), or (B)
otherwise amend the Certificate of Incorporation or Bylaws of the
Corporation (other than to authorize, create or issue any Senior
Preferred Stock), if any such amendment to the Certificate of
Incorporation or Bylaws of the Corporation under this clause (iv)(B)
would disproportionately adversely affect such series of Series
Preferred Stock.
4. OPTIONAL CONVERSION.
The holders of the Series Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time (provided that upon a liquidation under Section 2, the right of
conversion shall terminate at the close of business on the business day fixed
for payment of the amount distributable on the Series Preferred Stock upon such
liquidation), and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $1.20 in the case of the Series A Preferred Stock,
$1.40 per share in the case of the Series B Preferred Stock, $3.70 in the case
of the Series C Preferred Stock and $5.70 per share in the case of the Series D
Preferred Stock, by the Applicable Conversion Price (as defined below) in effect
at the time of conversion. The "Applicable Conversion Price" shall initially be
$1.20 in the case of the Series A Preferred Stock, $1.40 per share in the case
of the Series B Preferred Stock, $3.70 in the case of the Series C Preferred
Stock and $5.70 in the case of the Series D Preferred Stock. Each such initial
Applicable Conversion Price, and the rate at which shares of each series of
Series Preferred Stock may be converted into shares of Common Stock, shall be
subject to adjustment as provided below.
In the event of a notice of redemption of any shares of Series Preferred
Stock pursuant to Section 6 hereof, the Conversion Rights of the shares
designated for redemption shall terminate at the close of business on the first
full day preceding the date fixed for redemption, unless the redemption price is
not paid on such redemption date, in which case the Conversion Rights for such
shares shall continue until such price is paid in full. In the event of a
liquidation of the Corporation, the Conversion Rights shall terminate at the
close of business on the first full day preceding the date
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fixed for the payment of any amounts distributable on liquidation to the holders
of Series Preferred Stock.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Applicable Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series Preferred Stock
to convert shares of Series Preferred Stock into shares of Common
Stock, such holder shall surrender the certificate or certificates for
such shares of Series Preferred Stock, at the office of the transfer
agent for the Series Preferred Stock (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or
any number of the shares of the Series Preferred Stock represented by
such certificate or certificates. Such notice shall state such holder's
name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If
required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly executed by
the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the
transfer agent (or by the Corporation if the Corporation serves as its
own transfer agent) shall be the conversion date ("Conversion Date"),
and the shares of Common Stock issuable upon conversion of the shares
represented by such certificate shall be deemed to be outstanding of
record as of such date. The Corporation shall, promptly after the
Conversion Date, issue and deliver at such office to such holder of
Series Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such
holder shall be entitled, together with cash in lieu of any fraction of
a share.
(ii) The Corporation shall at all times when any
Series Preferred Stock shall be outstanding, reserve and keep available
out of its authorized but unissued stock, for the purpose of effecting
the conversion of the Series Preferred Stock, such number of its duly
authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series Preferred
Stock. Before taking any action which would cause an adjustment
reducing any Applicable Conversion Price below the then par value of
the shares of Common Stock issuable upon conversion of any series of
the Series Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Applicable
Conversion Price.
(iii) Upon any such conversion, no adjustment to any
Applicable Conversion Price shall be made for any declared but unpaid
dividends on the Series Preferred Stock surrendered for conversion or
on the Common Stock delivered upon conversion.
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(iv) All shares of Series Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer
be deemed to be outstanding and all rights with respect to such shares,
including the rights, if any, to receive notices and to vote, shall
immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in
exchange therefor and payment of any dividends declared but unpaid
thereon. Any shares of Series Preferred Stock so converted shall be
retired and canceled and shall not be reissued, and the Corporation
(without the need for stockholder action) may from time to time take
such appropriate action as may be necessary to reduce the authorized
number of shares of the applicable series of Series Preferred Stock
accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery
of shares of Common Stock upon conversion of shares of Series Preferred
Stock pursuant to this Section 4. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares of Common
Stock in a name other than that in which the shares of Series Preferred
Stock so converted were registered, and no such issuance or delivery
shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has
been paid.
(vi) Upon receipt by the Corporation of evidence of
the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series Preferred Stock, or (in the
case of loss, theft or destruction) of an affidavit or lost security
and indemnity from the Holder reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Series
Preferred Stock certificates, if mutilated, the Corporation shall
execute and deliver new Series Preferred Stock certificates of like
tenor and date. However, the Corporation shall not be obligated to
re-issue any lost or stolen Series Preferred Stock Certificates if
Holder contemporaneously requests the Corporation to convert such
Preferred Stock into Common Stock.
(d) ADJUSTMENTS TO APPLICABLE CONVERSION PRICE FOR DILUTING
ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section
4, the following definitions shall apply:
(A) "OPTION" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities, excluding options described in
subsection 4(d)(i)(D)(IV) below.
(B) "ORIGINAL ISSUE DATE" shall mean the date on
which a share of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock,
as the case may be, was first issued.
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(C) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common Stock,
but excluding Options.
(D) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Subsection
4(d)(iii) below, deemed to be issued) by the Corporation after
the Original Issue Date of the Series D Preferred Stock, other
than:
(1) shares of Common Stock issued or
issuable upon conversion or exchange of any
Convertible Securities or exercise of any Options
outstanding on the Original Issue Date of the Series
D Preferred Stock;
(2) shares of Common Stock issued or
issuable as a dividend or distribution on Series
Preferred Stock;
(3) shares of Common Stock issued or
issuable by reason of a dividend, stock split,
split-up or other distribution on shares of Common
Stock that is covered by Subsection 4(e) or 4(f)
below; or
(4) up to 3,963,000 shares of Common Stock
(or options with respect thereto, but subject in
either case to appropriate adjustment in the event of
any stock dividend, stock split, combination or other
similar recapitalization affecting such shares),
issued or issuable to employees or directors of, or
consultants to, the Corporation pursuant to a plan or
arrangement approved by the Board of Directors of the
Corporation (provided that any options for such
shares that expire or terminate unexercised shall not
be counted toward such maximum number unless the
terms of such options (whether set forth in a plan or
definitive agreement) expressly provide otherwise).
(ii) NO ADJUSTMENT OF APPLICABLE CONVERSION PRICE. No
adjustment in the number of shares of Common Stock into which
the Series Preferred Stock is convertible shall be made, by
adjustment in any Applicable Conversion Price thereof: (a)
unless the consideration per share (determined pursuant to
Subsection 4(d)(v)) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than
such Applicable Conversion Price in effect immediately prior
to the issue of such Additional Shares, or (b) if prior to
such issuance, the Corporation receives written notice from
the holders of at least sixty percent (60%) of the then
outstanding shares of the affected class of Series Preferred
Stock, in the case of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, or at least
seventy percent (70%) of the then outstanding shares of the
affected class of Series Preferred Stock, in the case of
Series D Preferred Stock, agreeing
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that no such adjustment shall be made as the result of the
issuance of Additional Shares of Common Stock.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL
SHARES OF COMMON STOCK. If the Corporation at any time or from
time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date
for the determination of holders of any class of securities
entitled to receive any such Options or Convertible
Securities, then the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business
on such record date, provided that Additional Shares of Common
Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Subsection
4(d)(v) hereof) of such Additional Shares of Common Stock
would be less than any Applicable Conversion Price in effect
on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided further that in
any such case in which Additional Shares of Common Stock are
deemed to be issued:
(A) No further adjustment in any Applicable
Conversion Price shall be made upon the subsequent
issue of such Convertible Securities or shares of
Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage
of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, then
upon the exercise, conversion or exchange thereof,
the Applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be
recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of
conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of
any such unexercised Option or unconverted
Convertible Security, the Applicable Conversion Price
shall not be readjusted, but the Additional Shares of
Common Stock deemed issued as the result of the
original issue of such Option or Convertible Security
shall not be deemed issued for the purposes of any
subsequent adjustment of the Applicable Conversion
Price;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such Option or
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<PAGE>
Convertible Security, including, but not limited to,
a change resulting from the anti-dilution provisions
thereof, the Applicable Conversion Price then in
effect shall forthwith be readjusted to such
Applicable Conversion Price as would have obtained
had the adjustment which was made upon the issuance
of such Option or Convertible Security not exercised,
converted or exchanged prior to such change been made
upon the basis of such change; and
(E) No readjustment pursuant to clause (B)
or (D) above shall have the effect of increasing any
Applicable Conversion Price to an amount which
exceeds the lower of (i) such Applicable Conversion
Price on the original adjustment date, or (ii) such
Applicable Conversion Price that would have resulted
from any issuances of Additional Shares of Common
Stock between the original adjustment date and such
readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any such Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) ADJUSTMENT OF APPLICABLE CONVERSION PRICE UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event
the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant
to Subsection 4(d)(iii)), without consideration or for a
consideration per share less than any Applicable Conversion
Price in effect immediately prior to such issue, then and in
such event, such Applicable Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Applicable
Conversion Price by a fraction, (A) the numerator of which
shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares
of Common Stock which the aggregate consideration received or
to be received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at
such Applicable Conversion Price; and (B) the denominator of
which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of
such Additional Shares of Common Stock so issued; PROVIDED
THAT, (i) for the purpose of this Subsection 4(d)(iv),
all shares of Common Stock issuable upon conversion
or exchange of Convertible Securities outstanding immediately
prior to such issue shall be deemed to be outstanding, and
(ii) the number of shares of Common Stock deemed issuable upon
conversion or exchange of such outstanding Convertible
Securities shall not give effect to any adjustments to the
conversion or exchange price or conversion or exchange rate of
such Convertible Securities resulting from the issuance of
Additional Shares of Common Stock that is the subject of this
calculation.
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<PAGE>
(v) DETERMINATION OF CONSIDERATION. For purposes of
this Subsection 4(d), the consideration received by the
Corporation for the issue of any Additional Shares of Common
Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration
shall:
(1) insofar as it consists of cash, be
computed at the aggregate of cash received by the
Corporation, excluding amounts paid or payable for
accrued interest;
(2) insofar as it consists of property other
than cash, be computed at the fair market value
thereof at the time of such issue, as determined in
good faith by the Board of Directors; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation for
consideration which covers both, be the proportion of
such consideration so received, computed as provided
in clauses (I) and (II) above, as determined in good
faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Subsection 4(d)(iii), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the
issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or
in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and
the conversion or exchange of such Convertible
Securities, by
(y) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of
such Convertible Securities.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Applicable Conversion
Price then in effect immediately before that subdivision
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<PAGE>
shall be proportionately decreased. If the Corporation shall at any time or from
time to time after the Original Issue Date combine the outstanding shares of
Common Stock, the Applicable Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Applicable
Conversion Price then in effect immediately before such event shall be decreased
as of the time of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date, by multiplying the
Applicable Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the
total number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record
date, and
(2) the denominator of which shall be the
total number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in
payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Applicable Conversion Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the Applicable
Conversion Price shall be adjusted pursuant to this paragraph as of the time of
actual payment of such dividends or distributions; and provided further,
however, that no such adjustment shall be made if the holders of Series
Preferred Stock simultaneously receive (i) a dividend or other distribution of
shares of Common Stock in a number equal to the number of shares of Common Stock
as they would have received if all outstanding shares of Series Preferred Stock
had been converted into Common Stock on the date of such event or (ii) a
dividend or other distribution of shares of Series Preferred Stock which are
convertible, as of the date of such event, into such number of shares of Common
Stock as is equal to the number of additional shares of Common Stock being
issued with respect to each share of Common Stock in such dividend or
distribution.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation (other than shares of Common Stock) or in cash or
other property (other than cash out of earnings or earned surplus, determined in
accordance with generally accepted accounting principles), then and in each such
event provision shall be made so
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<PAGE>
that the holders of the Series Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation that they would have
received had the Series Preferred Stock been converted into Common Stock on the
date of such event and had they thereafter, during the period from the date of
such event to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, giving application to all
adjustments called for during such period under this paragraph with respect to
the rights of the holders of the Series Preferred Stock; and provided further,
however, that no such adjustment shall be made if the holders of Series
Preferred Stock simultaneously receive a dividend or other distribution of such
securities in an amount equal to the amount of such securities as they would
have received if all outstanding shares of Series Preferred Stock had been
converted into Common Stock on the date of such event.
(h) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. Subject to
the provisions of Subsection 2(c), if there shall occur any reorganization,
recapitalization, consolidation or merger involving the Corporation in which the
Common Stock is converted into or exchanged for securities, cash or other
property (other than a transaction covered by paragraphs (e), (f) or (g) of this
Section 4), then, following any such reorganization, recapitalization,
consolidation or merger, each share of Series Preferred Stock shall be
convertible into the kind and amount of securities, cash or other property which
a holder of the number of shares of Common Stock of the Corporation issuable
upon conversion of one share of Series Preferred Stock immediately prior to such
reorganization, recapitalization, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of the Series Preferred Stock,
to the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Applicable Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Series Preferred Stock.
(i) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Applicable Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series Preferred Stock, furnish or cause to be furnished
to such holder a certificate setting forth (i) the Applicable Conversion Price
then in effect, and (ii) the number of shares of Common Stock and the amount, if
any, of other securities, cash or property which then would be received upon the
conversion of Series Preferred Stock.
(j) NOTICE OF RECORD DATE. In the event:
(i) the Corporation shall take a record of the holders of its
Common Stock (or other stock or securities at the time issuable upon
conversion of the Series
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<PAGE>
Preferred Stock) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for a purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(ii) of any capital reorganization of the Corporation, any
reclassification of the Common Stock of the Corporation, any
consolidation or merger of the Corporation with or into another
corporation (other than a consolidation or merger in which the
Corporation is the surviving entity and its Common Stock is not
converted into or exchanged for any other securities or property), or
any transfer of all or substantially all of the assets of the
Corporation; or
(iii) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Corporation,
then, and in each such case, the Corporation will mail or cause to be mailed to
the holders of the Series Preferred Stock a notice specifying, as the case may
be, (i) the record date for such dividend, distribution or right, and the amount
and character of such dividend, distribution or right, or (ii) the effective
date on which such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock (or
such other stock or securities at the time issuable upon the conversion of the
Series Preferred Stock) shall be entitled to exchange their shares of Common
Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 10 days prior to the record date or effective date for the event specified
in such notice.
5. MANDATORY CONVERSION.
(a) Upon the closing of the sale of shares of Common Stock, at
a price to the public of at least $11.10 per share (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), in a public offering conducted by a
nationally recognized (as determined by the Board of Directors) underwriter
(pursuant to an effective registration statement under the Securities Act of
1933, as amended, resulting in at least $20,000,000 of gross proceeds to the
Corporation (the "Mandatory Conversion Date"), (i) all outstanding shares of
Series Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective conversion rate and (ii) the number of authorized
shares of Preferred Stock shall be automatically reduced by the number of shares
of Preferred Stock that had been designated as Series Preferred Stock, and all
provisions included under the caption "Series Preferred Stock", and all
references to the Series Preferred Stock, shall be deleted and shall be of no
further force or effect.
(b) All holders of record of shares of Series Preferred Stock
shall be given written notice of the Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Series Preferred Stock
pursuant to this Section 5. Such notice need not be given in
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<PAGE>
advance of the occurrence of the Mandatory Conversion Date. Such notice shall be
sent by first class or registered mail, postage prepaid, to each record holder
of Series Preferred Stock at such holder's address last shown on the records of
the transfer agent for the Series Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Common Stock to which such holder is entitled pursuant
to this Section 5. On the Mandatory Conversion Date, all outstanding shares of
Series Preferred Stock shall be deemed to have been converted into shares of
Common Stock, which shall be deemed to be outstanding of record, and all rights
with respect to the Series Preferred Stock so converted, including the rights,
if any, to receive notices and vote (other than as a holder of Common Stock)
will terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series Preferred Stock has been
converted, and payment of any declared but unpaid dividends thereon. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series Preferred
Stock which are required to be surrendered for conversion in accordance with
the provisions hereof shall, from and after the Mandatory Conversion Date, be
deemed to have been retired and canceled and the shares of Series Preferred
Stock represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender
such certificates on or prior to such date. Such converted Series Preferred
Stock may not be reissued, and the Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be
necessary to reduce the authorized number of shares of Series Preferred Stock
accordingly.
6. REDEMPTION.
(a) The Corporation will, subject to the conditions set forth
below, on January 27, 2005 and on each of the first and second anniversaries
thereof (each such date being referred to hereinafter as a "Mandatory Redemption
Date"), upon receipt not less than 60 nor more than 120 days prior to the
applicable Mandatory Redemption Date of written request(s) for redemption (an
"Initial Redemption Request") from holders of any shares of Series C Preferred
Stock or Series D Preferred Stock (collectively referred to in this Section 6 as
the "Redeemable Preferred Stock") then outstanding, redeem from each holder of
shares of Redeemable Preferred Stock that requests redemption pursuant to the
Initial Redemption Request or pursuant to a subsequent election made in
accordance with Section 6(b) below (a "Requesting Holder"), at a price equal to
(i) $3.70 per
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share, in the case of Series C Preferred Stock, or (ii) $5.70, in the case of
Series D Preferred Stock, plus, in either case, any dividends declared but
unpaid thereon, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares (the "Mandatory Redemption Price"), the number of shares of
Redeemable Preferred Stock requested to be redeemed by each Requesting Holder,
but not more than the following respective portions of the number of shares of
Redeemable Preferred Stock held by such Requesting Holder on the applicable
Mandatory Redemption Date.
<TABLE>
<CAPTION>
Mandatory Redemption Date Maximum Portion of Shares of Redeemable
- ------------------------- Preferred Stock To Be Redeemed
From each Requesting Holder
---------------------------
<S> <C>
January 27, 2005 33%
January 27, 2006 50%
January 27, 2007 100%
</TABLE>
(b) The Corporation shall provide notice of its receipt of an
Initial Redemption Request, specifying the time, manner and place of redemption
and the Mandatory Redemption Price (a "Redemption Notice"), by first class or
registered mail, postage prepaid, to each holder of record of Redeemable
Preferred Stock at the address for such holder last shown on the records of the
transfer agent therefor (or the records of the Corporation, if it serves as its
own transfer agent), not less than 45 days prior to the applicable Mandatory
Redemption Date. Each holder of Redeemable Preferred Stock (other than a holder
who has made the Initial Redemption Request) may elect to become a Requesting
Holder on such Mandatory Redemption Date by so indicating in a written notice
mailed to the Company, by first class or registered mail, postage prepaid, at
least 30 days prior to the applicable Mandatory Redemption Date. Except as
provided in Subsections 6(c) and (d) below, each Requesting Holder shall
surrender to the Corporation on the applicable Mandatory Redemption Date the
certificate(s) representing the shares to be redeemed on such date, in the
manner and at the place designated in the Redemption Notice. Thereupon, the
Mandatory Redemption Price shall be paid to the order of each such Requesting
Holder and upon such payment each certificate surrendered for redemption shall
be canceled.
(c) If the funds of the Corporation legally available for
redemption on any Mandatory Redemption Date are insufficient to redeem the
number of shares of Series C Preferred Stock and Series D Preferred Stock
required under this Section 6 to be redeemed on such date from Requesting
Holders, those funds which are legally available will be used to first to redeem
the maximum possible number of such shares of Series D Preferred Stock ratably
on the basis of the number of shares of Series D Preferred Stock which would be
redeemed on such date if the funds of the Corporation legally available therefor
had been sufficient to redeem all shares of Series D Preferred Stock required to
be redeemed on such date. At any time thereafter when additional funds of the
Corporation become legally available for the redemption of Series D Preferred
Stock as provided in this Section 6, such funds will be used, at the end of the
next succeeding fiscal quarter, to redeem the balance of such shares which the
Corporation was theretofore obligated to redeem,
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<PAGE>
ratably on the basis set forth in the preceding sentence. After all shares of
Series D Preferred Stock for which redemption on a Mandatory Redemption Date
have been redeemed, then any funds of the Corporation legally available for
redemption on such Mandatory Redemption Date shall be used to redeem shares of
Series C Preferred Stock for which redemption has been requested, ratably on the
basis of the number of shares of Series C Preferred Stock which would be
redeemed on such date if the funds of the Corporation legally available therefor
had been sufficient to redeem all shares of Series C Preferred Stock required to
be redeemed on such date. At any time thereafter when additional funds of the
Corporation become legally available for the redemption of Series C Preferred
Stock as provided in this Section 6, such funds will be used, at the end of the
next succeeding fiscal quarter, to redeem the balance of such shares which the
Corporation was theretofore obligated to redeem, ratably on the basis set forth
in the preceding sentence.
(d) Unless there shall have been a failure to pay the
Mandatory Redemption Price, on the Mandatory Redemption Date all rights of the
holder of each share redeemed on such date as a stockholder of the Corporation
by reason of the ownership of such share will cease, except the right to receive
the Mandatory Redemption Price of such share, without interest, upon
presentation and surrender of the certificate representing such share, and such
share will not from and after such Mandatory Redemption Date be deemed to be
outstanding.
(e) Any Redeemable Preferred Stock redeemed pursuant to this
Section 6 will be canceled and will not under any circumstances be reissued,
sold or transferred and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized shares of either
series of Redeemable Preferred Stock accordingly.
FIFTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend
or repeal the By-Laws of the Corporation.
SIXTH. Except to the extent that the General Corporation Law of the
State of Delaware 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. 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.
SEVENTH. The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, 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 reason
of the fact that he is or was, or has agreed to become, a director or officer of
the Corporation,
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<PAGE>
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 or on
behalf of an Indemnitee in connection with such action, suit or proceeding and
any appeal therefrom.
An Indemnitee must notify the Corporation in writing as soon as
practicable of any action, suit, proceeding or investigation involving him for
which indemnity will or could be sought, provided that the failure to so
promptly notify shall not relieve the Corporation of its obligation to indemnify
hereunder except and only to the extent that such failure shall prejudice the
Corporation's ability to indemnify therefor. With respect to any action, suit,
proceeding or investigation of which the Corporation is so notified, the
Corporation will be entitled to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Indemnitee.
In the event that the Corporation does not assume the defense of any
action, suit, proceeding or investigation of which the Corporation receives
notice under this Article, the Corporation shall pay in advance of the final
disposition of such matter any expenses (including attorneys' fees) incurred by
an Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom; PROVIDED, HOWEVER, that the payment of
such expenses incurred by an Indemnitee in advance of the final disposition of
such matter shall be made only upon receipt of an undertaking by or on behalf of
the Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation as authorized in this Article, which undertaking shall be
accepted without reference to the financial ability of the Indemnitee to make
such repayment.
The Corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such Indemnitee unless the initiation thereof was approved by the Board of
Directors of the Corporation. In addition, the Corporation shall not indemnify
an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of
insurance, and in the event the Corporation makes any indemnification payments
to an Indemnitee and such Indemnitee is subsequently reimbursed from the
proceeds of insurance, such Indemnitee shall promptly refund such
indemnification payments to the Corporation to the extent of such insurance
reimbursement.
All determinations hereunder as to the entitlement of an Indemnitee to
indemnification or advancement of expenses shall be made in each instance by (a)
a majority vote of the directors of the Corporation consisting of persons who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not a quorum, (b) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or
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<PAGE>
proceeding in question, (c) independent legal counsel (who may, to the extent
permitted by law, be regular legal counsel to the Corporation), or (d) a court
of competent jurisdiction.
The indemnification rights provided in this Article (i) shall not be
deemed exclusive of any other rights to which an Indemnitee may be entitled
under any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of the Indemnitees. 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.
EIGHTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
NINTH. The books of the Corporation may be kept (subject to any
provision contained in the General Corporation Law of the State of Delaware)
outside the State of Delaware at such place as may be designated from time to
time by the Board of Directors or the By-laws of the Corporation.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its President this 27th day of January 2000.
LIVE PERSON, INC.
/s/ Robert LoCascio
---------------------------------
Robert LoCascio, President
<PAGE>
Exhibit 3.3
BYLAWS OF
SYBARITE INTERACTIVE INC.
Adopted as of November 29, 1995
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of
the above-named corporation shall be located at 1013 Centre
Road, City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE. All meetings of the stockholders for any purpose
shall be held at such time and 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 or in a duly executed waiver of notice
thereof.
Section 2. ANNUAL MEETING. Annual meetings of stockholders, commencing
with the year 1996, shall be held on the first Tuesday in November if not a
legal holiday, and, if a legal holiday, then on the next business day
following, at 10:00 A.M., or at such other date and time as shall be
designated from time to time by the Board of Directors. For the purposes of
these by-laws a "business day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the City of New York, New
York are authorized or obligated by law or executive order to be closed. At
the annual meeting, holders of the corporation's voting stock, shall elect,
by a plurality vote, a Board of Directors and transact such other business as
may properly be brought before the meeting.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting,
stating the place, date and time of the meeting, shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
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Section 4. LIST OF STOCKHOLDERS. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least five (5) 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 five (5) 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. Special meetings of the stockholders for any
purpose or purposes, unless otherwise prescribed by statute, by the certificate
of incorporation or by an agreement by and among the stockholders, may be called
by the President and shall be called by the President or the Secretary at the
request in writing of a majority of the Board of Directors or at the request in
writing of stockholders owning a majority in amount of the entire capital stock
of the corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.
Section 6. NOTICE OF SPECIAL MEETINGS. Written notice of a special meeting,
stating the place, date and time of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, to each stockholder entitled to
vote at such meeting.
Section 7. LIMIT ON BUSINESS AT SPECIAL MEETINGS. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 8. QUORUMS. The holders of a majority 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 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 of the time and place of such adjourned meeting, until a quorum
shall be
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present by proxy or represented by proxy. At any adjourned meeting at
which a quorum shall be present or represented by proxy, any business may be
transacted which might have been transacted at the meeting as originally called.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. VOTING AT MEETINGS. 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 statutory provision,
provision of the certificate of incorporation or provision of an agreement by
and among the stockholders a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 10. VOTING POWER. Unless otherwise provided in the certificate of
incorporation or an agreement by and among the stockholders, each stockholder
shall at every meeting of the stockholders be entitled to one (1) 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 (3) years from its date,
unless the proxy provides for a longer period.
Section 11. WRITTEN CONSENT WITHOUT MEETING. Unless otherwise provided in
the certificate of incorporation or an agreement by and among the stockholders,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business of the corporation
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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, the certificate of incorporation, these bylaws or
an agreement by and among the stockholders directed or required to be exercised
or done by the stockholders.
Section 2. ELECTION AND TENURE. The number of directors which shall
constitute the whole board shall be not less than one (1) and not more than
seven (7). The first board shall consist of one (1) director. Thereafter the
number of directors shall be determined by the Board of Directors or by the
stockholders at any meeting or in an agreement by and among the stockholders.
Except as provided in Section 3 of this Article III or in an agreement by and
among the stockholders, each director shall hold office until his successor or
successors are elected and shall qualify or until his earlier resignation or
removal.
Section 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority 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 for the remainder of the term of the directors whom they
replaced and until their successors are duly elected and qualified, or until
their earlier resignation or removal. If there are no directors in office, then
an election of directors may be held in the manner provided by statute or by an
agreement by and among the stockholders.
Section 4. PLACE OF MEETINGS. The Board of Directors of
the corporation may hold meetings, both regular and special,
either within or without the State of Delaware.
Section 5. ANNUAL MEETINGS. The first meeting of each newly elected Board
of Directors shall be held immediately after the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present.
Section 6. REGULAR MEETINGS. 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.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the President on two (2) days' notice to each director, either
personally, by mail, by telegram, by telex or by facsimile transmission; special
meetings shall be called by the President in like manner and on like notice upon
the written request of a majority of the directors then in
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office. Unless otherwise required by the laws of the State of Delaware, any two
directors shall have the right to call a meeting of the Board of Directors. Any
notice may be given by the Secretary and need not state the purpose or purposes
of the meeting unless otherwise required by these bylaws.
Section 8. QUORUM AND ADJOURNMENTS. At all meetings of the board, a
majority of the directors 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, by the certificate of
incorporation or by an agreement by and among the stockholders. At all
meetings of the Board of Directors, a majority of the directors, which
majority must include at least one designee of Robert LoCascio, so long as he
shall be entitled to designate directors pursuant to the Second Amended and
Restated Stockholders Agreement dated as of July 19, 1999, as the same may be
amended from time to time (as so amended, the "Stockholders Agreement"),
among the Company and the stockholders of the Company named therein, and at
least one designee appointed by Investors (as such term is defined in the
Stockholders Agreement") holding Preferred Stock. 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 9. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all members of the Board of Directors or committee,
as the case may be, consent thereto in writing and the writing is filed with the
minutes of the proceedings of the board or committee.
Section 10. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT.
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.
Section 11. COMPENSATION. Unless otherwise restricted by the certificate of
incorporation, these bylaws or by an agreement by and among the stockholders,
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.
Section 12. REMOVAL OF DIRECTORS. Unless otherwise restricted by statute,
by the certificate of incorporation or by an agreement by and among the
stockholders, any director or the
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entire Board of Directors may be removed, with or without cause, by the holders
of a majority of shares entitled to vote at an election of directors.
Section 13. RESIGNATION OF DIRECTORS. Any director may resign at any time
by giving written notice to the Board of Directors, the President or the
Secretary of the corporation. Unless otherwise specified in such notice, a
resignation shall take effect upon the delivery thereof to the Board of
Directors or the designated officer. It shall not be necessary for a resignation
to be accepted before it becomes effective.
ARTICLE IV
COMMITTEES
Section 1. DESIGNATION. The Board of Directors may, by resolution passed by
a majority of the whole board, designate one (1) or more committees, each
committee to consist of one (1) or more of the directors of the corporation. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they 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.
Section 2. POWERS. 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 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
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided in Section 151(a) of the State of Delaware General
Corporation Law, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation), adopting an agreement of
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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 provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock or to adopt a certificate of ownership and merger. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 3. MINUTES AND REPORTS. Each committee shall keep
regular minutes of its meetings and report the same to the Board
of Directors when required.
ARTICLE V
NOTICES
Section 1. FORM AND DELIVERY. Whenever, under the provisions of statutes,
the certificate of incorporation or 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 his address as it appears 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 telegram, telex or facsimile
transmission at such director's address as it appears in the corporation's
records.
Section 2. WAIVER. Whenever any notice is required to be given under the
provisions of statutes, the certificate of incorporation or 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 to receipt of the notice.
Section 3. ATTENDANCE AT MEETINGS AS WAIVER OF NOTICE. Any stockholder who
attends a meeting of stockholders in person or is represented at that meeting by
proxy without protesting, at the commencement of the meeting, the lack of notice
to him or any director who attends a meeting of the Board of Directors without
protesting, at the commencement of the meeting, the lack of notice to him shall,
in each case, be conclusively deemed to have waived notice of that meeting.
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ARTICLE VI
OFFICERS
Section 1. DESIGNATION. Subject to the terms of any agreement by and among
the stockholders, the officers of the corporation shall be chosen by the Board
of Directors and shall be a President, a Treasurer and a Secretary. The Board of
Directors may also choose one or more Vice Presidents and one or more Assistant
Treasurers and Assistant Secretaries. Any number of offices may be held by the
same person, unless the certificate of incorporation or these bylaws otherwise
provide.
Section 2. ELECTION. Subject to the terms of any agreement by and among the
stockholders, the Board of Directors at its annual meeting shall choose a
President, a Treasurer and a Secretary and may choose such other officers as it
deems appropriate.
Section 3. POWERS AND OTHER DUTIES. The officers shall exercise such powers
and perform such duties as shall be determined from time to time by the Board of
Directors.
Section 4. SALARIES. The salaries of all officers and
agents of the corporation shall be fixed by the Board of
Directors.
Section 5. TERM OF, AND REMOVAL FROM, OFFICE. The officers of the
corporation shall hold office until their successors are chosen and qualified.
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.
Section 6. THE PRESIDENT. The President shall be the chief executive
officer and chairman of the Board of Directors of the corporation. The President
shall preside at all meetings of the stockholders and the Board of Directors,
shall have general and active management of the day-to-day operations of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
The President shall, under the seal of the corporation, execute bonds,
mortgages and other contracts requiring a seal 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 some other officer or agent of the corporation.
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Section 7. THE TREASURER. 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. 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 the Treasurer's transactions and of the financial condition of the
corporation.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond (which shall be renewed every six (6) 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 the Treasurer's office and for the
restoration to the corporation, in case of the Treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under the Treasurer's
control belonging to the corporation.
Section 8. VICE PRESIDENTS. The Vice Presidents, if any,
shall perform such duties and have such powers as the Board of
Directors may from time to time prescribe.
Section 9. THE SECRETARY. 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 Board of Directors and of the stockholders in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors and shall perform such other duties as may be prescribed by
the Board of Directors or the President, under whose supervision he shall be.
The Secretary shall have custody of the corporate seal of the corporation and
the Secretary 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 the
Secretary's 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 the Secretary's signature.
Section 10. THE ASSISTANT TREASURERS AND SECRETARIES. The
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Assistant Treasurer and Assistant Secretary (or, if there is more than one, the
Assistant Treasurers and Assistant Secretaries in the order designated by the
Board of Directors or, if there be no such designation, then in the order of
their election) shall, in the absence of the Treasurer or Secretary, or in the
event of the Treasurer's or Secretary's inability or refusal to act, perform the
duties and exercise the powers of the Treasurer or Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE VII
CERTIFICATES FOR SHARES
Section 1. FORM AND SIGNATURES. The shares of the corporation shall be
represented by a certificate or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the President or any Vice
President and the Treasurer or Secretary or an Assistant Treasurer or Assistant
Secretary of the corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares, or upon the books and records of the corporation in the case
of uncertificated partly paid shares, shall be set forth the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
If the corporation shall be authorized to issue more than one (1) class of
stock or more than one (1) 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 of 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 State of Delaware General Corporation
Law, in lieu of the foregoing requirements, there may be set forth on the face
or faces 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.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information
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required to be set forth or stated on certificates pursuant to Sections 151,
156, 202(a) or 218(a) of the State of Delaware General Corporation Law or a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. SIGNATURE ON CERTIFICATES. Any or all of the signatures on a
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 he were such officer, transfer agent or registrar at the date of issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates or uncertificated shares to be issued in place of
any certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates or uncertificated shares, the Board of Directors may
require the owner or his legal representative to give the corporation a bond in
such sum as it may direct as indemnity against the corporation with respect to
the certificate alleged to have been lost, stolen or destroyed.
Section 4. TRANSFERS OF STOCK. 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. Upon receipt of proper transfer instruments from the
registered owner of uncertificated shares, such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
Section 5. RECORD DATE. 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, to express consent to corporate action in writing
without a meeting, to receive payment of any dividend or other distribution or
allotment of any rights, 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,
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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.
Section 6. REGISTERED STOCKHOLDERS. 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 statute.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE
Section 1. INTENTIONALLY DELETED.
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SECTION 2. INSURANCE FOR INDEMNIFICATION. 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 him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of Section
145 of the General Corporation Law.
ARTICLE IX
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the outstanding capital stock of the
corporation, subject to the provisions of the statutes, the certificate of
incorporation or any agreement by and among the stockholders, may be declared by
the Board of Directors at any regular or special meeting of directors and
dividends may be paid in cash, property or in shares of the capital stock.
Section 2. RESERVES. 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 directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, for equalizing dividends, for
repairing or maintaining any property of the corporation or for such other
purpose as the directors shall think conducive to the interest of the
corporation and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. ANNUAL STATEMENT. The Board of Directors shall present at each
annual meeting or special meeting of the stockholders, when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
Section 4. CHECKS. 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.
Section 5. FISCAL YEAR. The fiscal year of the
corporation shall be the calendar year ending December 31.
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Section 6. CORPORATE SEAL. The corporate seal shall have 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, affixed, reproduced or otherwise.
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ARTICLE X
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws is contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the certificate of incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Employment Agreement") dated as of
January 1, 1999, by and among Sybarite Interactive Inc., a Delaware corporation
(the "Company"), and Robert LoCascio (the "Employee").
WITNESSETH:
WHEREAS, the employee is currently employed by the Company and
serves as President of the Company; and
WHEREAS, the Company desires to induce the Employee to
continue in the employ of the Company for the period provided in this Agreement,
and the Employee is willing to accept such employment with the Company on a
full-time basis, all in accordance with the terms and conditions set forth
below;
NOW, THEREFORE, for and in consideration of the premises
hereof and the mutual covenants contained herein, the parties hereto hereby
covenant and agree as follows:
1. EMPLOYMENT. (a) The Company hereby employs the Employee,
and the Employee hereby accepts such employment with the Company, for the period
set forth in Section 2 hereof, all upon the terms and conditions hereafter set
forth.
(b) The Employee affirms and represents that he is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, the Employee's
acceptance of employment hereunder with the Company, the employment of the
Employee by the Company, or the Employee's undertakings under this Agreement.
2. TERM OF EMPLOYMENT. (a) Unless (i) earlier terminated as
hereinafter provided or (ii) extended as provided in Section 2 (b) below, the
term of the Employee's employment under this Agreement shall be for a period
beginning on the date hereof and ending on January 1, 2002 (such period from the
date hereof until January 1, 2002 or, if the Employee's employment hereunder is
earlier terminated or extended as provided herein, such shorter or longer
period, as the case may be, being hereinafter called the "Employment Term").
(b) The Employment Term shall be extended automatically on
each of January 1, 2002 and January 1, 2003 (the "Extension Date") for an
additional one-year period unless the Company or Employee gives notice to the
other party hereto not less than 120 days prior to the Extension Date of its or
his election not to extend the Employment Term, in which event the Employment
Term shall terminate on such Extension Date.
(c) In the event that the Employee continues in the full-time
employ of the Company after the end of the Employment Term (it being expressly
understood and agreed that the Company does not now, not hereafter shall have,
any obligation to continue the Employee in
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its employ whether or not on a full-time basis, after said Employment Term
ends), then, unless otherwise expressly agreed to by the Employee and the
Company in writing, the Employee's continued employment by the Company shall,
notwithstanding anything to the contrary expressed or implied herein, be
terminable by the Company at will, but shall in all other respects be subject
to the terms and conditions of this Agreement.
3. DUTIES. The employee shall be employed as President of the
Company, and shall perform such duties as he currently performs or such other
duties as the Board of Directors of the Company shall from time to time
determined, subject to the prior consent of the Employee. The Employee shall
perform his duties at such places and times as the Board of Directors of the
Company may reasonably prescribe. Except as may otherwise be approved in advance
by the Board of Directors of the Company, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or other
disability, the Employee shall devote his full time throughout the Employment
Term to the services required of him hereunder. The Employee shall render his
services exclusively to the Company during the Employment Term and shall use his
best efforts, judgment and energy to improve and advance the business and
interests of the Company and its subsidiaries in a manner consistent with the
duties of this position.
4. SALARY AND BONUS. (a)SALARY. As compensation for the
performance by the Employee of the services to be performed by the Employee
hereunder during the Employment Term, the Company shall pay the Employee a base
salary at the annual rate of not less than One Hundred Twenty-Five Thousand
Dollars ($125,000) (said amount, together with any incremental increases thereto
as may be determined from time to time by the Board of Directors of the Company
in its sole discretion, being hereinafter referred to as the "Salary"). Any
Salary payable hereunder shall be paid in regular intervals in accordance with
the Company's payroll practices, except as shall otherwise be mutually agreed to
by the Employee and the Board of Directors of the Company.
(b) BONUS. The Employee shall also be eligible for bonus
compensation up to an amount of Fifty-Thousand Dollars ($50,000) (the "Bonus")
in respect of each fiscal year (or portion thereof) occurring during the
Employment Term as may be determined annually by the Board of Directors of the
Company based upon the achievement of performance objectives to be determined by
mutual agreement of the Employee and the Board of Directors of the Company.
(c) WITHHOLDING, ETC.The payment of any Salary and Bonus
hereunder shall be subject to applicable withholding and payroll taxes, and such
other deductions as may be required under the Company's the Employee benefit
plans.
5. BENEFITS. During the Employment Term, the Employee shall:
(a) be eligible to participate in all the Employee fringe
benefits and any pension and/or profit sharing plans that may be provided by the
Company for its key executives
<PAGE>
the Employees in accordance with the provisions of any such plans, as the same
may be in effect on and after the date hereof;
(b) be eligible to participate in any medical and health plans
or other the Employee welfare benefit plans that may be provided by the Company
for its key executive the Employee in accordance with the provisions of any such
plans, at the same may be in effect on and after the date hereof;
(c) be entitled to annual paid vacation in accordance with the
Company policy that may be applicable on and after the date hereof to key the
Employees.
(d) be entitled to sick leave, sick pay and disability
benefits in accordance with any Company policy that may be applicable on and
after the date hereof to key executive the Employees; and
(e) be entitled to reimbursement for all reasonable and
necessary out-of-pocket business expenses incurred by the Employee in the
performance of his duties hereunder in accordance with the Company's policies
applicable (on and after the date hereof) thereto.
6. CONFIDENTIAL INFORMATION. The Company and the Employee
acknowledge the provisions of the confidentiality Agreement dated as of January
8, 1999, between the Company and the Employee, the provisions of which are
incorporated herein in their entirety.
7. TERMINATION. (a) The Employee's employment hereunder shall
be terminated upon the occurrence of any of the following:
(i) death of the Employee;
(ii) termination of the Employee's employment hereunder by the
Company because of the Employee's inability to perform his duties on
account of disability or incapacity for a period of one hundred eighty
(180) or more days, whether or not consecutive, occurring within any
period of twelve (12) consecutive months;
(iii) termination of the Employee's employment hereunder by the
Company at any time "for cause" (as defined below), such termination to
take effect immediately upon written notice from the Company to the
Employee;
(iv) termination of the Employee's employment hereunder by the
Company at any time, other than termination by reason of disability or
incapacity as contemplated by clause (ii) above or termination by the
Company "for cause" as contemplated by clause (iii) above or
termination by reason of liquidation, dissolution or shutdown of the
business then conducted by the Company as contemplated by clause (v)
below;
(v) termination of the Employee's employment hereunder by reason
of the liquidation or dissolution of the Company or other shutdown of
the business then
<PAGE>
conducted by the Company other than as a result of a Change of Control
(as hereinafter define); and
(vi) termination of the Employee's employment hereunder by the
Employee for Good Reason (as defined below), provided, however, that
the Employee shall have provided the Company written notice of his
desire to terminate for Good Reason under this clause (vi) within
thirty (30) days following the occurrence of the event constituting
Good Reason, such termination to take effect upon not less than thirty
(30) days' advance written notice by the Employee to the Company.
The following actions, failures or events by or affecting the
Employee shall constitute "cause" for termination within the meaning of clause
(iv) above: (i) an act or acts of dishonesty, moral turpitude or intentional
felonious behavior which are materially detrimental to the Company and/or its
Affiliates, (ii) failure by the Employee to obey the reasonable and lawful
orders of the Board of Directors, (iii) gross negligence by the Employee in the
performance of, or willful disregard by the Employee of his obligations
hereunder, or (iv) a conviction of the Employee (including entry of a guilty or
nolo contendre plea) of a crime involving fraud, dishonesty or moral turpitude
or a felony.
The following events affecting the Employee shall constitute
"Good Reason" within the meaning of clause (vi) above: (i) if the Employee, at
any time during the Employment Term (except during a period of disability or
incapacity as contemplated in clause (ii) or paragraph 7 above), has suffered a
material change or diminution in duties and responsibilities from those
contemplated under Section 3 above, (ii) if the Board of Directors of the
Company shall at any time during the Employment Term reduce the Salary or Bonus
to which the Employee is entitled under this Employment Agreement, (iii) if the
Company shall consummate a sale of all or substantially all of its assets to a
third party (other than in connection with a plan of liquidation, winding up or
dissolution of the Company) and such third party shall not assume the
obligations of the Company under this Employment Agreement or (iv) if the
Employee shall be relocated by the Company or a successor thereto to a location
outside the New York Metropolitan area.
For purposes of this Employment Agreement, a "Change of Control" shall
mean the happening of any of the following:
(A) the acquisition by any person or group deemed a person
under Sections 3 (a) (9) and 13 (d) (3) of the
Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company and its subsidiaries as
determined immediately prior to that date) of beneficial
ownership, directly or indirectly (with beneficial
ownership determined as provided in Rule 13d-3, or any
successor rule, under the Exchange Act), of a majority
of the total combined voting power of all classes of
stock of the Company having the right under ordinary
circumstances to vote at an election of the Board of
Directors of the Company, if such person or group deemed
a person was not a beneficial owner of at least five
percent (5%) of such
<PAGE>
total combined voting power of the Company on the date
of this Employment Agreement (provided that the equity
financing with Dawntreader L.P. and certain other
investors contemplated by the letter of intent dated
December 10, 1998, shall not constitute a Change of
Control for purposes of this Agreement);
(B) an action or event as a result of which either (x) a
majority of the members of the Board of Directors shall
consist of persons who were not members of the Board of
Directors prior to such action or event or (y) the right
to designate a majority of the members of the Board of
Directors shall belong to a person or group (as defined
under clause (A) above) that was not entitled prior to
such action or event to designate a majority of the
members of the Board of Directors;
(C) the date of approval by the stockholders of the Company
of an agreement providing for the merger or
consolidation of the Company with another corporation or
other entity where (x) stockholders of the Company
immediately prior to such merger or consolidation would
not beneficially own following such merger or
consolidation shares entitling such stockholder to 50%
or more of all votes (without consolidation of the
rights of any class of stock to elect directors by a
separate class vote) to which all stockholders of the
surviving corporation would be entitled in the election
of directors, or (y) where the members of the Board of
Directors, immediately prior to such merger or
consolidation, would not, immediately after such merger
or consolidation, constitute a majority of the board of
directors of the surviving corporation; or
(D) the sale of all or substantially all of the assets of
the Company (other than in connection with a plan of
liquidation, winding up or dissolution of the Company).
(b) (1) In the event that the Employee's employment is
terminated pursuant to clause (iv) or (vi) of paragraph 7 (a) above at any time
during the Employment Term then, as severance pay or liquidated damages or both,
the Company shall pay to the Employee the amount of (x) Salary, if any, that the
Employee would have been entitled to receive pursuant to Section 4 hereof from
the date of termination had the Employee's employment not been so terminated
until twelve (12) months following the date of such termination and (y) the pro
rata portion of Bonus, if any, the Employee would have been entitled to receive
with respect to the applicable fiscal year pursuant to Section 4 up to the date
of termination. Any amounts payable under clauses (x) and (y) above shall be
paid by the Company in three (3) equal monthly installments, with the first
installment payable within 30 days after the date of termination.
(2) Except as required by applicable law, the payments set
forth in the first sentence of this paragraph 7 (b) with respect to the events
of termination of employment set forth therein shall represent the entire
obligation of the Company and its Affiliates to make payments
<PAGE>
to the Employee or on his behalf upon the Employee's cessation of employment,
other than (i) such amounts, if any, of his Salary and Bonus as shall have
accrued and remained unpaid as of the date of said cessation and (ii) such other
amounts which may be then otherwise payable to the Employee from the Company's
benefits plans or reimbursement policies, if any.
(c) No interest shall accrue on or be paid with respect to any
portion of any payments hereunder.
8. ASSIGNMENT. (a) Neither this Employment Agreement nor any
right or interest hereunder shall be assignable by the Employee, his
beneficiaries, or legal representatives without the Company's prior written
consent, PROVIDED, HOWEVER, that nothing in this Section 8 (a) shall preclude
the Employee from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
(b) Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
9. COMPETITION, ETC. During the Employee's employment by the
Company and during the one (1) year period following the termination of the
Employee's employment hereunder for any reason whatsoever:
(a) the employee will not make any statement or perform any
act intended to advance an interest of any competitor of the Company or
any of its Affiliates in any way that will or may injure an interest of
the Company or any of its Affiliated in its relationship and dealings
with customers or clients, or solicit or encourage any other the
Employee of the Company or any of its Affiliates to do any act that is
disloyal to the Company or any of its Affiliates or inconsistent with
the interest of the Company or any of its Affiliate's interests or in
violation of any provision of this Agreement;
(b) the Employee will not discuss with any customers or
clients of the Company or any of its Affiliates the present or future
availability of services or products of a competitive business, if the
Employee has or expects to acquire a proprietary interest in such
competitive business or is or expects to be an the Employee, officer or
director of such business, where such services or products are (i)
competitive with services or products which the Company or any of its
Affiliates provides and (ii) available in any geographic area where the
Company or any of its Affiliates presently carry on business or where
any business shall be hereafter, during the period of the Employee's
employment by the Company, carried on by the Company or any of its
Affiliates, if such business is then being carried on by the Company or
any of its Affiliates;
(c) The Employee will not directly or indirectly (as a
director, officer, the Employee, manager, consultant, independent
contractor, advisor or otherwise) engage in
<PAGE>
competition with, or own or acquire any interest in, perform any
services for, participate in or be connected with any business or
organization which engages in competition with the Company or any of
its Affiliates in any geographic area where any business is carried on
presently by the Company or any of its Affiliates or where any business
shall be hereafter, during the period of the Employee's employment by
the Company, carried on by the Company or any of its Affiliates, if
such business is then being carried on by the Company or any of its
Affiliates in such geographic area, PROVIDED, HOWEVER, that the
provisions of this Section 9 (c) shall not be deemed to prohibit the
Employee's ownership of not more than 1% of the total shares of all
classes of stock outstanding of any publicly held company; and
(d) the Employee will not directly or indirectly solicit for
employment, or advise or recommend to any other person that they employ
or solicit for employment, any the Employee of the Company or any of
its Affiliates, PROVIDED, HOWEVER, that the Employee shall be permitted
to respond to requests for references received from prospective
employers with respect to any the Employee of the Company or any of its
Affiliates.
For the purposes of this Agreement, the term "Affiliate" or "Affiliates" shall
mean any corporation or other entity (i) which owns the Company in whole or in
plurality, or which controls the Company directly or indirectly, whether through
common control or otherwise, (ii) which is owned by the Company in whole or in
majority, or which is controlled, directly or indirectly, by the Company or
(iii) which is under the common control, directly or indirectly, of the Company
and any person or entity.
For purposes of this Section 9, the Company and its Affiliates shall be deemed
to be conducting business in any geographic area in which the Company or any of
its Affiliates operates as a corporation principally engaged in the business of
providing on-line customer support.
10. RIGHTS AND REMEDIES FOR BREACHES OF SECTION 6 AND SECTION
9. The Employee acknowledges and agrees that a remedy at law for any breach or
threatened breach of the provisions of Section 6 or Section 9 would be
inadequate and, therefore, agrees that the Company and any of its affiliates
shall be entitled to injunctive relief in addition to any other available rights
and remedies in cases of any such breach or threatened breach; PROVIDED,
HOWEVER, that nothing contained herein shall be construed as prohibiting the
Company or any of its Affiliates from pursuing any other rights and remedies
available for any such breach or threatened breach.
11. BINDING EFFECT. Without limiting or diminishing the effect
of Section 8 hereof, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and the Employee's respective heirs, legal
representatives and assigns and the Company's successors, legal representatives
and assigns.
12. NOTICES. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and either delivered in
person or sent by first class
<PAGE>
certified or registered mail, postage prepaid, if to the Company, at the
Company's principal place of business, and if to the Employee, at this home
address most recently filed with the Company, or to such other address or
addresses as either party shall have designated in writing to the other party
hereto.
13. LAW GOVERNING. This Agreement shall be governed by an
construed in accordance with the laws of the State of New York.
14. SEVERABILITY. The Employee agrees that in the event that
any court of competent jurisdiction shall finally hold that any provision of
Section 6 or Section 9 hereof is void or constitutes an unresonable restriction
against the Employee, the provisions of such Section 6 or Section 9 shall not be
rendered void but shall apply with respect to such extent as such court may
judicially determined constitutes a reasonable restriction under the
circumstances. If any party of this Agreement other than Section 6 or Section 9
is held by a court of competent jurisdiction to be invalid, illegible or
incapable of being enforced in whole or in part by reason of any rule of law or
public policy, such part shall be deemed to be severed from the remainder of
this Agreement for the purpose only of the particular legal proceedings in
question and all other covenants and provisions of this Agreement shall in every
other respect continue in full force and effect and no covenant or provision
shall be deemed dependent upon any other covenant or provision.
15. WAIVER. Failure to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, not shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
16. ENTIRE AGREEMENT: MODIFICATION. This Agreement constitutes
the entire and final expression of the agreement of the parties with respect to
the subject matter hereof and, subject to Section 6 above, supersedes all prior
agreements, oral and written, between the parties hereto with respect to the
subject matter hereof. This Agreement may be modified or amended only by an
instrument in writing signed by both parties hereto.
17. COUNTERPARTS. This Agreement my 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.
18. TITLES AND HEADINGS. Titles and heading to Sections herein
are for purposes of reference only, and shall in no way limit, define or
otherwise affect the meaning or interpretation of any of the provisions of this
Employment Agreement.
19. CO-EMPLOYMENT. The parties acknowledge and agree that the
Employee may be employed by the Company through a co-employment arrangement with
Ambrose Employer Group, LLC or another professional employer organization. It is
the intent of the parties hereto that the terms of this Agreement are
enforceable notwithstanding any such professional employer arrangement.
<PAGE>
IN WITNESS WHEREOF, the Company and the Employee have duly
executed and delivered this Employment Agreement as of the day and year first
above written.
SYBARITE INTERACTIVE INC.
By: /s/ ROBERT LOCASCIO
----------------------------------------------
Name and Title: Robert LoCascio, President
Employee:
/s/ ROBERT LOCASCIO
----------------------------------------------
Robert LoCascio
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Agreement made effective as of June 23, 1999 by and between LivePerson,
Inc. (the "Company"), a Delaware corporation, and Timothy E. Bixby,
("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 I
EMPLOYMENT
The company agrees toe 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 Financial
Officer and to be responsible for the typical management responsibilities
expected of an officer holding such position.
SECTION III
TERMS AND DUTIES
A. PERIOD OF EMPLOYMENT
The period of the Executive's employment under this Agreement will commence as
of the first date and shall continue until 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. Nothing in this Agreement shall preclude the Executive from
devoting time during reasonable periods required for:
i. Serving, with prior approval of the Chief Executive
Officer of the Company ("Chief Executive") as a Director
or member of a committee or organization involving no
conflict of interest with the Company.
ii. Delivering lectures and fulfilling speaking obligations.
<PAGE>
iii. Engaging in charitable and community activities.
iv. Investing his personal assets in business that will not
violate this Agreement or require services on the part
of the Executive in the operation or affairs of the
companies in which those investments are made.
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 $140,000 per year. Base salary shall be payable according to the customary
payroll practices of the Company, but in no event less frequently than once each
month.
ii. ANNUAL INCENTIVE AWARDS
The Executive will be eligible for discretionary annual incentive compensation
awards. The initial target annual bonus shall be $35,000. Target bonus will be
paid, if earned, by January 31st of each year of the term. The initial payment
in January 2000 will be prorated for the portion of calendar 1999 during which
executive is employed by the Company.
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 Executive will receive an initial award
of 135,000 LivePerson, Inc. stock options at an exercise price of $1.00 per
share, which, to the maximum extent, will be qualified options. These options
will have a 10 year term and will vest in 25% increments, beginning on 1/1/00.
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.
SECTION V
BUSINESS EXPENSES
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. Executive will receive the same
expense reimbursement as other senior executives of the company.
<PAGE>
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 for a continuous period of 90 days or more,
the Company may terminate the employment of the Executive 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 and Incentive Compensation Awards which would be
payable in a pro-rated basis for the year in which the termination occurs. The
Company will also continue the benefits described in this Agreement 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 and Incentive
Compensation Awards which will be paid on a pro-rated basis for that year. 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.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. If 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 two months following such Termination or Constructive Discharge. Earned
but unpaid Base Salary and Incentive Compensation Awards will be paid in a
lump sum at such time. The benefits described in this Agreement will
continue for two months. In the event of any such Without Cause Termination
or Constructive Discharge, all unvested stock options held by the Executive
which would have vested during the twelve months following such termination
shall continue to vest under their original vesting schedule and shall
remain exercisable until the original expiration dates 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
<PAGE>
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 Board of Directors, by written
notice to the Executive specifying the event relied upon
for such termination, due to the Executive's serious,
willful misconduct with respect to his duties under this
Agreement (including but not limited to conviction for a
felony or perpetration of a common law fraud) which has
resulted or is likely to result in material economic
damage to the Company and which, in any case, is not
cured (if such is capable of being cured) within 30 days
after written notice thereof to the Executive.
ii. "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 Base Salary or other
material change by the Company in the functions, duties
or responsibilities of the position which would reduce
the responsibility or scope of the position.
Constructive Discharge shall also mean the removal of
Robert LoCascio as President or CEO of the Company. 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.
iii. "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.
SECTION IX
OTHER DUTIES OF THE EXECUTIVE DURING AND
AFTER THE PERIOD OF EMPLOYMENT
A. The Executive will with reasonable notice during, or after, in which case
Executive will be compensated at $100 per hour, 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.
<PAGE>
B. The Executive recognizes and acknowledges that all information pertaining to
the software, business, clients, customers or other relationships 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 the Executive knew or should have
known would 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.
E. During the Restricted Period , the Executive, without prior express written
approval by the Chief Executive, will not engage with, 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 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 solicit any clients of the
Company for any existing business 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.
<PAGE>
H. The Company's obligation to make any 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 15 days,
if capable of being cured, than 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
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 judgment 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
the Executive is either terminated under a Without Cause Termination or
Constructive Discharge, then the Company shall pay to the Executive a lump sum
amount equal to 100% of his Annual Base Salary as in effect at the time of such
termination. In addition, a) earned but unpaid Base Salary and Incentive
Compensation Awards will be paid on a pro-rated basis for the year in which the
termination occurs; b) any stock options granted to the Executive prior to
termination will be fully vested upon termination and shall remain exercisable
until the applicable expiration dates contained in the applicable stock options
agreements pursuant to which such stock options were granted; and c) the
benefits described in this Agreement will be continued for one year from the
date of termination.
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
<PAGE>
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 shareholder 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 conflicting
provisions 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
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.
<PAGE>
SECTION XVI
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.
/s/ Robert LoCascio
- -----------------------------------
Robert LoCascio, President
/s/ Timothy E. Bixby
- -----------------------------------
Timothy E. Bixby
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of March 29th, 1999, by and
among Live Person, Inc., a Delaware corporation (the "Company"), and Scott Cohen
(the "Employee").
WITNESSETH:
WHEREAS, the Company wishes to employ the Employee and the
Employee wishes to accept such employment, and each desires to enter into an
agreement to provide for the terms and conditions of such employment set forth
herein;
NOW, THEREFORE, for and in consideration of the premises
hereof and the mutual covenants contained herein, the parties hereto hereby
covenant and agree as follows:
1. EMPLOYMENT. (a) The Company hereby employs the Employee,
and the Employee hereby accepts such employment with the Company, for the period
set forth in Section 2 hereof, all upon the terms and conditions hereinafter set
forth.
(b) The Employee affirms and represents that the is under no
obligation to any former employer or other party which is in any way
inconsistent with, or which imposes any restriction upon, the Employee's
acceptance of employment hereunder with the Company, the employment of the
Employee by the Company, or the Employee's undertakings under this Agreement.
2. TERM OF EMPLOYMENT. (a) Unless earlier terminated as
hereinafter provided in this Agreement or renewed as provided in Section 2(b)
below, the Employee's employment under this Agreement shall be for a period
beginning on the date hereof (the "Start Date") and ending on March 31, 2000
(the "Renewal Date"; such period from the Start Date until the Renewal Date or,
if the Employee's employment hereunder is earlier terminated or extended as
provided herein, such shorter or longer period, as the case may be, being
hereinafter called the "Employment Term").
(b) The Employment Term shall be extended automatically on the
Renewal Date for one additional one-year period, unless the Company shall have
provided written notice to the Employee, not less than one hundred and twenty
(120) days prior to the Renewal Date, that the Employment Term will not be
extended.
(c) In the event that the Employee continues in the full-time
employ of the Company after the end of the Employment Term (it being expressly
understood and agreed that the Company does not now, no hereafter shall have,
any obligation to continue the Employee in its employ whether or not on a
full-time basis, after said Employment Term ends), then, unless otherwise
expressly agreed to by the Employee and the Company in writing, the Employee's
continued employment by the Company shall, notwithstanding anything to the
contrary expressed or implied herein, be terminable by the Company at will, but
shall in all other respects be subject to the terms and conditions of this
Agreement.
<PAGE>
3. DUTIES. The Employee shall be employed as Executive Vice
President - Sales and Strategic Alliances, of the Company, shall perform such
duties as are specified in the By-laws of each of the Company or such other
duties as the President of the Company shall from time to time determine and
shall also perform and discharge such other employment duties and
responsibilities as the President of the Company may from time to time
prescribe. The Employee shall report to the President of the Company, and shall
perform his duties at such places and times as the President of the Company may
reasonably prescribe, provided that the Employee's principal office location
during the term of the Agreement shall be in the New York City Metropolitan
area. Except as may otherwise be approved in advance by the President of the
Company, and except during vacation periods and reasonable periods of absence
due to sickness, personal injury or other disability, the Employee shall devote
substantially all of his working time throughout the Employment Term to the
services required of him hereunder. The Employee shall render his services
exclusively to the Company during the Employment Term and shall use his best
efforts, judgment and energy to improve and advance the business and interests
of the Company and its subsidiaries in a manner consistent with the duties of
his position, provided however, that the Employee may also serve as a consulting
advisor on the advisory boards or Board of Directors of certain companies if
serving in such capacity such does not interfere with the services to be
provided by the Employee hereunder during the Employment Term or the terms of
this Agreement and provided that such activities shall be subject to the
restrictions set forth in Section 10 below. The Company and the Employee
acknowledge that it is their present intention the Employee shall have the
opportunity to meet with the President of the Company, on a semi-annual basis at
a time to be mutually agreed, to ascertain and evaluate the achievement of
certain performance objectives by the Employee.
4. Compensation. (a) SALARY. As compensation for the
performance by the Employee of the services to be performed by the Employee
hereunder during the Employment Term, the Company shall pay the Employee a base
salary at the annual rate of not less than One Hundred Eighty-Five Thousand
Dollars ($185,000) (said amount, together with any increments thereto as may be
determined from time to time by the Board of Directors of the Company in its
sole discretion, being hereinafter referred to as the "Salary"). Any Salary
payable hereunder shall be paid in regular intervals in accordance with the
Company's payroll practices.
(b) BONUS. The Employee shall also be eligible for bonus
compensation (the "Bonus") in respect of each year of the Employment Term in the
aggregate amount of up to $50,000, such Bonus to be payable in cash on an annual
basis in accordance with the Company's standard payroll practices, upon the
achievement of semiannual performance objectives to be mutually agreed upon by
the Employee and the Board of Directors of the Company. The Bonus shall be
earned on a semi-annual basis and paid at the end of each 12 month period of
employment.
Nothing contained herein and no action taken in respect of any
Bonus (or otherwise in respect of this Section 49b)) shall create or be
construed to create a trust of any kind. The Employee's right to receive any
Bonus pursuant to this Section 4(b) shall be no greater than the right of an
unsecured general creditor of the Company to receive payment from the Company.
Any Bonus paid under this Section 4(b) shall be paid from the general funds of
the Company, and no special or separate fund shall be established, and no
segregation of assets shall be made, to assure payment of any Bonus hereunder.
<PAGE>
(c) COMMISSIONS. The Employee shall also be entitled to
receive commissions with respect to sales on the basis set forth on Schedule I
annexed hereto ("Commission"). Such Commissions shall be payable on a quarterly
basis in accordance with the Company's standard payroll practices.
(d) WITHHOLDING, ETC. The payment of any Salary and Bonus
hereunder shall be subject to applicable withholding and payroll taxes, and such
other deductions as may be required under the Company's employee benefit plans.
(e) STOCK OPTIONS. Pursuant to the Option Agreement, the
Executive shall be granted non-qualified options (the "Options") under the
Sybarite Interactive Inc. Stock Option and Restricted Stock Purchase Plan (the
"Plan") to purchase up to 392,640 shares of Common Stock, $0.001 par value of
the Company, which currently represents 5% of the Company's fully diluted
capital stock (assuming for purposes of such calculation the exercise of all
outstanding options and warrants and conversion of all convertible common
equity).
5. RIGHT TO PURCHASE EQUITY SECURITIES. (a) During the
Employment Term, in order to enable the Employee to maintain his fully-diluted
ownership position in the Company, if the Company proposes to issue, sell or
exchange, agree to issue, sell or exchange, or reserves or sets aside for
issuance, sale or exchange, from and after the date hereof, (A) any equity
security of the Company, (B) any debt security of the Company which by its terms
is convertible into or exchangeable for any equity security of the Company or
(C) any option, warrant or other right to subscribe for, purchase or otherwise
acquire any equity security or any debt security referred to in clause (A) or
(B) above to any person at any time, in a private capital-raising transaction or
series of contractually related private capital-raising transactions (a
"Dilutive Offering"), the Company shall deliver to the Employee an offer (the
"Purchase Offer") to issue and sell such number of securities of the type to be
issued in such Dilutive Offering to the Employee, for a purchase price not
greater than the price at which securities are to be sold in such Dilutive
Offering, to enable the Employee to maintain his fully-diluted ownership
position in the Company that he held immediately prior to the proposed Dilutive
Offering (the "Offered Securities"), upon the terms set forth in this Section 5.
The Purchase Offer shall state that the Company proposes to issue such
securities, specify their number, purchase price and the designations, powers,
rights and preferences of such securities. The Purchase Offer shall remain open
for a period of 10 days (the "Preemptive Period") from the date of its delivery
unless earlier withdrawn by the Company. For purposes of this Section 5, the
Employee's fully diluted ownership position shall mean the proportion that the
number of shares of Common Stock issued or issuable to the Employee upon
exercise of all options granted to the Employee pursuant to the Option Agreement
bears to the total number of shares of Common Stock then outstanding (assuming
full conversion and exercise of all convertible or exercisable securities then
outstanding).
(b) Employee may accept the Purchase Offer by delivering to
the Company a notice (the "Purchase Notice"), within the Purchase Period. The
Purchase Notice shall state the number of Offered Securities that Employee
Purchaser desires to purchase. Employee shall fund such purchase at the time of
the first closing of such transaction for any other parties to such transaction.
<PAGE>
(c) Nothing in this Section 5 shall require the Company to
extend a Purchase Offer to the Employee with respect to (i) the issuance or sale
of options to purchase shares of Common Stock to employees, consultants and
directors, as amended, (ii) securities issued in connection with an IPO or any
securities issued by the Company thereafter, (iii) the issuance of securities
pursuant to the conversion or exercise of currently outstanding convertible or
exercisable securities, (iv) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise, which
involves a third party which is not affiliated with the Company or its current
stockholders, (v) the issuance of securities to service providers or to
financial institutions or lessors in connection with commercial or credit
arrangements, equipment financings, or similar transactions, (vi) the issuance
of securities, with respect to which preemptive or similar rights have been
waived by the requisite percentage of financial investors necessary to waive
such rights or (vii) the issuance of up to $1.75 million in Series B Preferred
Stock and warrants presently proposed by the Company to be offered to certain
purchasers (the "Series B Offering"), provided, however, that the Employee shall
be entitled to accept a Purchase Offer upon the first Dilutive Offering
following the Series B Offering to the extent necessary to maintain an ownership
position in the Company equal to five percent (5%) of the fully diluted capital
stock of the Company, excluding for purposes of such calculation any additional
issuances of equity securities by the Company (other than the Series B Offering)
during the period beginning on the date of this Agreement and ending on the date
of the Series B Offering.
6. BENEFITS. During the Employment Term, the Employee shall:
(a) be eligible to participate in all employee fringe benefits
and any pension and/or profit sharing plans that may be provided by the
Company for its key executive employees in accordance with the
provisions of any such plans, as the same may be in effect on and after
the date hereof;
(b) be eligible to participate in any medical and health plans
or other employee welfare benefit plans that may be provided by the
Company for its key executive employees in accordance with the
provisions of any such plans, as the same may be in effect on and after
the date hereof;
(c) be entitled to three weeks' paid vacation;
(d) be entitled to sick leave, sick pay and disability
benefits in accordance wit any Company policy that may be applicable on
and after the date hereof to key executive employees; and
(e) be entitled to reimbursement for all reasonable and
necessary out-of-pocket business expenses incurred by the Employee in
the performance of his duties hereunder in accordance with the
Company's policies applicable (on and after the date hereof) thereto.
7. INVENTIONS AND CONFIDENTIAL INFORMATION. The Company and
the Employee acknowledge the provisions of the Confidentiality Agreement dated
as of March 26,
<PAGE>
1999 (the "Confidentiality Agreement"), between the Company and the Employee,
the provisions of which are incorporated herein in their entirety.
8. TERMINATION. (a) The Employee's employment hereunder shall
be terminated upon the occurrence of any of the following:
(i) death of the Employee;
(ii) termination of the Employee's employment hereunder by the
Company because of the Employee's inability to perform his duties on
account of disability or incapacity for a period of one hundred eight
(180) or more days, whether or not consecutive, occurring within any
period of twelve (12) consecutive months;
(iii) termination of the Employee's employment hereunder by
the Company at any time for "cause" (as defined below), such
termination to take effect as set forth below in this Section 8(a);
(iv) termination of Employee's employment hereunder by the
Company, other than termination by reason of disability as contemplated
by clause (ii) above and other than termination by the Company for
"cause" as contemplated by clause (iii) above;
(v) termination of Employee's employment hereunder by Employee
for Good Reason (as hereinafter defined), provided, however, that
Employee shall have provided the Company written notice of his desire
to terminate for Good Reason under this clause (v) within thirty (30)
days following the occurrence of the event constituting Good Reason,
such termination to take effect upon not less than thirty (30) days'
advance written notice by Employee to the Company; and
(vi) termination of Employee's employment hereunder by reason
of the liquidation of dissolution of the Company or other shutdown of
the business then conducted by the Company other than as a result of a
Change in Control (as hereinafter defined).
The following actions, failures or events by or affecting the
Employee shall constitute "cause" for termination within the meaning of clause
(iii) above: (1) conviction of having committed a felony, in which case
termination shall take effect immediately upon written notice from the Company
to the Employee, (2) acts of dishonesty or moral turpitude which are materially
detrimental to the Company and/or its Affiliates, in which case termination
shall take effect immediately upon written notice from the Company to the
Employee, (3) breach by the Employee of the Confidentiality Agreement or Section
10 of this Agreement, or (4) a Curable Event of Cause (as defined below) that:
(x) in the case of the first Curable Event of Cause occurring during
the Employment Term, is not remedied by the Employee within 30 business
days following receipt by the Employee of notice from the Company
specifying (A) the action, failure or event constituting such Curable
Event of Cause and (B) the action or conduct necessary to remedy such
Curable Event of Cause, or
<PAGE>
(y) occurs subsequent to a Curable Event of Cause for which the Company
has delivered a notice pursuant to clause (x) above, whether or not
such previous Curable Event of Cause had been remedied, in which case
termination shall take effect immediately upon written notice from the
Company to the Employee.
For purposes of this Agreement, a "Curable Event of Cause" shall mean
(1) failure by the Employee to obey the reasonable and lawful orders of the
President and Chief Executive Officer, or (2) gross negligence by the Employee
in the performance of, or willful disregard by the Employee of, his obligations
hereunder.
The following events affecting Employee shall constitute "Good Reason"
within the meaning of clause (v) above: (i) if Employee, at any time during the
Employment Term (except during a period of disability as contemplated by clause
(ii) above), shall no longer be serving in a senior executive capacity, (ii) if
the Company shall consummate a sale of all or substantially all of its assets to
a third party (other than in connection with a plan of liquidation, winding up
or dissolution of the Company) and such third party shall not assume the
obligations of the Company under this Agreement or (iii) if Robert LoCascio
shall no longer be employed in the capacity of President or Chief Executive
Officer of the Company.
For purposes of this Employment Agreement, a "Change of Control" shall
mean the happening of any of the following:
(A) the acquisition by any person or group deemed a person
under Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") (other than
the Company and its subsidiaries as determined
immediately prior to that date) of beneficial ownership,
directly or indirectly (with beneficial ownership
determined as provided in Rule 13d-3, or any successor
rule, under the Exchange Act), of a majority of the
total combined voting power of all classes of stock of
the Company having the right under ordinary
circumstances to vote at an election of the Board of
Directors of the Company, if such person or group deemed
a person was not a beneficial owner of at least five
percent (5%) of such total combined voting power of the
company on the date of this Agreement;
(B) the date of approval by the stockholders of the Company
of an agreement providing for the merger or
consolidation of the Company with another corporation or
other entity where stockholders of the Company
immediately prior to such merger or consolidation would
not beneficially own following such merger or
consolidation shares entitling such stockholders to 50%
or more of all votes (without consolidation of the
rights of any class of stock to elect directors by a
separate class vote) to which all stockholders of the
surviving corporation would be entitled in the election
of directors; or
<PAGE>
(C) the sale of all or substantially all of the assets of
the Company (other than in connection with a plan of
liquidation, winding up or dissolution of the Company).
(b) If Employee's employment with the Company hereunder is
terminated for any reason other than as described in clauses (a)(iv) or (a)(v)
above during the Employment Period, the Company shall promptly pay to Employee
his Salary and Commissions that remain unpaid through the effective date of such
termination, and other benefits accrued through the effective date of such
termination, and Employee shall not entitled to any other compensation or
benefits from the Company under this Employment Agreement.
(c) In the event that the Employee's employment is terminated
by the Company pursuant to clause (iv) of paragraph (a) above at any time during
the Employment Term or by the Employee pursuant to clause (v) of paragraph (a)
above, then so long as Employee shall not have breached the provisions of the
Confidentiality Agreement or Section 10 of this Agreement, the Company shall pay
to Employee, as severance pay or liquidated damages or both, the amount of
Salary and Commissions, if any, which Employee would have otherwise been
entitled to receive pursuant to Section 2(a) above for a period of four (4)
months had the Employee's employment not been so terminated, such amount to be
payable at regular intervals in accordance with the Company's payroll practices,
PROVIDED, HOWEVER, that the severance payments payable pursuant to this
paragraph (c) shall be reduced by any amounts earned by the Employee prior to
the completion of the making of such severance payments as a result of his
employment by any business (whether as a director, officer, employee, manager,
owner, consultant, independent contractor, advisor or otherwise).
(d) Notwithstanding anything to the contrary expressed or
implied herein, except as required by applicable law and except as set forth in
paragraph (c) above or for payments made to Employee by the Company upon
exercise of repurchase options pursuant to the Option Agreement, the Company
(and its Affiliates) shall not be obligated to make any payments to the Employee
or on his behalf of whatever kind or nature by reason of the Employee's
cessation of employment (including, without limitation, by reason of termination
of the Employee's employment by the Company for "cause"), other than (i) such
amounts, if any, of his Salary as shall have accrued and remained unpaid as of
the date of said cessation and (ii) such other amounts which may be then
otherwise payable to the Employee from the Company's benefits plans or
reimbursement policies, if any.
(e) No interest shall accrue on or be paid with respect to any
portion of any payments hereunder.
9. NON-ASSIGNABILITY. (a) Neither this Agreement nor any right
or interest hereunder shall be assignable by the Employee, his beneficiaries, or
legal representatives without the Company's prior written consent, provided,
however, that nothing in this Section 9(a) shall preclude the Employee from
designating a beneficiary to receive any benefit payable hereunder upon his
death or incapacity.
(b) Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment,
<PAGE>
encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy
or similar process or assignment by operation of law, and any attempt, voluntary
or involuntary, to effect any such action shall be null, void and of no effect.
10. COMPETITION, ETC. During the Employee's employment by the
Company and during the one (1) year period following the termination of the
Employee's employment hereunder for any reason whatsoever:
(a) the Employee will not make any statement or perform any
act intended to advance an interest of any existing or prospective
competitor of the Company or any of its Affiliates in any way that will
or may injure an interest of the Company or any of its Affiliates in
its relationship and dealings with existing or potential customers or
clients, or solicit or encourage any other employee of the Company or
any of its Affiliates to do any act that is disloyal to the Company or
any of its Affiliates or inconsistent with the interest of the Company
or any of its Affiliate's interests or in violation of any provision of
this Agreement;
(b) the Employee will not discuss with any existing or
potential customers or clients of the company or any of its Affiliates
the present or future availability of services or products of a
business, if the Employee has or expects to acquire a proprietary
interest in such business or is or expects to be an employee, officer
or director of such business, where such services or products are
competitive with services or products which the Company or any of its
Affiliates provides;
(c) the Employee agrees that, when the Employee has or expects
to acquire a proprietary interest in, or is or expects to be made an
employee, officer or director of, any existing or future business that
provides or is expected to provide services or products in competition
with the Company or any of its Affiliates, the Employee will
immediately furnish to the Board of Directors of the Company all
information that may reasonably be of assistance to the Company in
acting promptly to protect its relationships with any existing or
potential customers or clients with whom the Employee has had any
dealings as a result of his employment by the Company or any of its
Affiliates;
(d) the Employee will not make any statements ors do any act
intended to cause any existing or potential customers or clients of the
Company or any of its affiliates to make use of the services or
purchase the products of any competitive business in which the Employee
has or expects to acquire a proprietary interest or in which the
Employee is or expects to be made an employee, officer or director, if
such services or products in any way compete with the service or
products sold or provided or expected to be sold or provided by the
Company or any of its Affiliates to any existing or potential customer
or client;
(e) the Employee will not directly or indirectly (as a
director, officer, employee, manager, consultant, independent
contractor, advisor or otherwise) engage in competition with, or own
any interest in, perform any services for, participate in or be
connected with (i) any business or organization which engages in
competition with the Company or any of its Affiliates in any
geographical area where any business is presently
<PAGE>
carried on by the Company or any of its Affiliates, or (ii) any
business or organization which engages in competition with the Company
or any of its Affiliates in any geographical area where any business
shall be hereafter, during the period of the Employee's employment by
the Company, carried on by the Company or any of its Affiliates, if
such business is then being carried on by the Company or any of its
Affiliates in such geographical area; PROVIDED, HOWEVER, that the
provisions of this Section 10(e) shall not be deemed to prohibit the
Employee's ownership of not more than 1% of the total shares of all
classes of stock outstanding of any publicly held company, and
(f) except in furtherance of legitimate business interests of
the Company or its Affiliates or in response to requests for personal
references, the Employee will not, directly or indirectly, solicit for
employment, or advise or recommend to any other person that they employ
or solicit for employment, any employee or former employee of the
Company or any of its Affiliates, unless at least six months have
passed since such employee or former employee had been employed by the
Company or any of its Affiliates.
For purposes of this Section 10, a person or entity (including without
limitation, the Employee) shall be deemed to be a competitor of the Company or
any of its Affiliates, or a person or entity (including, without limitation, the
Employee) shall be deemed to be engaging in competition with the Company or any
of its Affiliates, only if such person or entity in any way conducts, operates,
carries out or engages in the business of providing on-line customer support, or
such other business or businesses as the Company or any of its Affiliates may in
the future conduct.
In connection with the foregoing provisions of this Section
10, the Employee represents that his experience, capabilities and circumstances
are such that such provisions will not prevent him from earning a livelihood.
The Employee further agrees that the limitations set forth in this Section 10
(including, without limitation, any time or territorial limitations) are
reasonable and properly required for the adequate protection of the businesses
of the Company and its Affiliates. It is understood and agreed that the
covenants made by the Employee in this Section 10 (and in the Confidentiality
Agreement) shall survive the expiration or termination of the Employment Term.
For purposes of this Agreement, the term "Affiliate" or
"Affiliates" shall mean any corporation or other entity (i) which owns the
Company in whole or in plurality, or which controls the Company directly or
indirectly, whether through common control or otherwise, (ii) which is owned by
the Company in whole or in majority, or which is controlled, directly or
indirectly, by the Company or (iii) which is under the common control, directly
or indirectly, of the Company and any person or entity.
The Employee acknowledges and agrees that a remedy at law for
any breach or threatened breach of the provisions of this Section 10 would be
inadequate and, therefore, agrees that the Company and any of its Affiliates
shall be entitled to injunctive relief in addition to any other available rights
and remedies in cases of such breach or threatened breach; PROVIDED, HOWEVER,
that nothing contained herein shall be construed as prohibiting the Company or
any of
<PAGE>
its Affiliates from pursuing any other rights and remedies available for any
such breach or threatened breach.
11. BINDING EFFECT. Without limiting or diminishing the effect
of Section 8 hereof, (a) this Agreement shall not be assignable by Employee, (b)
shall be binding upon and shall inure to the Employee and his respective heirs
and (c) shall be binding upon and inure to the benefit of the Company and any
successor organization which shall succeed to the Company by merger or
consolidation or operation of law, or by acquisition of all or substantially all
of the assets of the Company (provided that a successor by way of acquisition of
assets shall have undertaken in writing to assume the obligations of the Company
hereunder).
12. NOTICES. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and either delivered in
person or sent by first class certified or registered mail or a recognized
overnight courier service, postage prepaid, if to the Company, at the Company's
principal place of business, and if to the Employee, at his home address most
recently filed with the Company, or to such other address or addresses as either
party shall have designated in writing to the other party hereto.
13. LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. SEVERABILITY. The Employee agrees that in the event that
any court of competent jurisdiction shall finally hold that any provision of the
Confidentiality Agreement or Section 10 hereof (collectively, the "Protective
Provisions") is void or constitutes an unreasonable restriction against the
Employee, then such provisions shall not be rendered void but shall apply with
respect to such extent as such court may judicially determine constitutes a
reasonable restriction under the circumstances. If any part of this Agreement
other than the Protective Provisions is held by a court of competent
jurisdiction to be invalid, illegible or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be deemed
to be severed from the remainder of this Agreement for the purpose only of the
particular legal proceedings in question and all other covenants and provisions
of this Agreement shall in every other respect continue in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant
or provision.
15. WAIVER; CONSENT. No consent or waiver, express or implied,
by any party hereto or of any breach or default by any other party in the
performance by the other party of its obligations hereunder shall be valid
unless in writing, and no such consent or waiver shall be deemed or construed to
be a consent or waiver to or of any other breach or default in the performance
by such other party of the same or any other obligations of such party
hereunder. Failure on the part of any party thereto to complain of any act or
failure to act of any other party hereto or to declare the other party hereto in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such party of its rights hereunder. The granting of any consent or
approval in any one instance by or on behalf of any party hereto shall not be
construed to waive or limit the need for such consent in any other or subsequent
instance.
16. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement together
with the Confidentiality Agreement and the Option Agreement constitutes the
entire and final expression
<PAGE>
of the agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, oral and written, between the parties hereto
with respect to the subject matter hereof. This Agreement may be modified or
amended only by an instrument in writing signed by both parties hereto.
17. DAMAGES. Nothing contained herein shall be construed to
prevent the Company or the Employee from seeking and recovering from the other
damages sustained by either or both of them as a result of his or its, as the
case may be, breach of this Agreement. In the event that either party hereto
brings suit for the collection of any damages resulting from, or the injunction
of any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party to be found at fault shall pay all reasonable court
costs and attorneys' fees of the other.
18. THIRD PARTY BENEFICIARIES. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
person (other than the parties hereto and, in the case of the Employee, his
heirs, personal representative(s) and/or legal representative) any rights or
remedies under or by reason of this Agreement.
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this Agreement as of
the date just above written.
LivePerson, Inc.
/s/ Robert LoCascio
- -----------------------------
Robert LoCascio, President
/s/ Scott Cohen
- -----------------------------
Scott Cohen
<PAGE>
SCHEDULE I
SALES AND COMMISSIONS
Employee shall be entitled to receive a commission equal to (a) in the
first year of the Employment Term, ten percent (10%) of all Gross Sales during
the first year of the Employment Term in excess of $1,000,000 and (b) in the
second year of the Employment Term (if any), (i) ten percent (10%) of the first
$1,000,000 of Gross Sales in excess of the amount of Gross Sales during the
first year of the Employment Term (the "Clause (i) Amount") and (ii) seven and
one-half percent (7.50%) of all Gross Sales in excess of the Clause (i) Amount.
For purposes hereof, "Gross Sales" means all sales invoiced by the Company as a
direct result of sales of the LivePerson service and any other online customer
support products developed OR ACQUIRED by the Company to customers of the
Company, less (x) any amounts rebated or refunded by the Company to such
customers and (y) any taxes or similar surcharges payable by the Company, and
provided that such Commissions shall be paid after invoices are paid by
customers and collected by the Company and in accordance with the Company's
standard quarterly commission policy.
<PAGE>
EXHIBIT A
OPTION AGREEMENT
<PAGE>
LIVE PERSON, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
March 29, 1999
Employee/Optionee: Scott Cohen
Number of shares of
Common Stock subject
to this Agreement: 392,640 shares
Pursuant to the Sybarite Interactive Inc. Stock Option and Restricted
Stock Purchase Plan (the "Plan"), the Board of Directors of Sybarite Interactive
Inc. (the "Company") has granted to you effective as of the date set forth in
Section 1 below an option (referred to herein as the "Option" and sometimes
referred to as the "Options") to purchase the number of shares of the Company's
Common Stock, $.001 par value ("Common Stock"), set forth above. Such shares (as
the same may be adjusted as described in Section 13 below) are herein referred
to as the "Option Shares". You are also on the date hereof entering into an
Employment Agreement with the Company (the "Employment Agreement"), which
incorporates by reference the provisions of this Agreement.
The Option shall constitute and be treated at all times by you and the
Company as a "non-qualified stock option" for Federal income tax purposes and
shall not be treated as an "incentive stock option" as defined under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The terms
and conditions of the Option are set out below.
1. DATE OF GRANT. The Option is granted to you as of March 29, 1999
(the "Grant Date"). -------------
2. TERMINATION OF OPTION. Your right to exercise the Option (and to
purchase the Option Shares) shall expire and terminate in all events on the
earlier of (i) March 31, 2004 or (ii) the date provided in Section 8 below in
the event you cease to be employed by the Company or any subsidiary or parent
thereof.
3. OPTION PRICE. The purchase price to be paid upon the exercise of the
Option is $1.20 per share, the fair market value of a share of Common Stock (as
determined by the Board of Directors of the Company) on the Grant Date (subject
to adjustment as provided in Section 13 hereof).
4. VESTING PROVISIONS. (a) ORDINARY VESTING. You will not be entitled
to exercise the Option (and purchase any Option Shares) prior to March 31, 2000.
Commencing on March 31, 2000 (the "First Vesting Date"), provided that you shall
continue to be employed by the Company at such date, you shall become entitled
to exercise the Option as to 196,320 of the Option Shares and, commencing on
March 31, 2001 (the "Second Vesting Date"; each of the First Vesting Date and
the Second Vesting Date being hereinafter at times referred to as a
<PAGE>
"Vesting Date"), provided that you shall continue to be employed by the Company
at such date, you shall become entitled to exercise the Option as to the
remaining 196,320 Option Shares. The Option Shares subject to each such exercise
will be rounded to the nearest whole share. Notwithstanding the foregoing, the
provisions of this Section 4 shall b subject to your continued employment on a
full-time basis by the Company or any subsidiary or parent thereof on the First
Vesting Date and the Second Vesting Date, respectively, and the provisions of
Section 9 herein.
(b) ACCELERATED VESTING. (i) Notwithstanding paragraph 4(a),
until the expiration or termination of your Option pursuant to Section 2 above
or Section 8 below, you shall become entitled to exercise your Option with
respect to all of the Option Shares to which you would have become entitled at
the next Vesting Date (to the extent that your Option had not already become
exercisable) upon the consummation of a Change of Control (as defined in the
Employment Agreement), if, within ninety (90) days following the consummation of
such Change of Control either (x) your employment shall have been terminated by
the Company or its successor other than for "cause" in the manner described in
Section 7(a)(iv) of the Employment Agreement or (y) your employment shall have
been terminated by you for "Good Reason" pursuant to Section 7(a)(v) of the
Employment Agreement, and in either such case such vesting shall be effective
immediately upon such termination.
(ii) Notwithstanding paragraph 4(a), until the expiration or
termination of your Option pursuant to Section 2 above or Section 8 below, you
shall become entitled to exercise your Option with respect to 98,160 Option
Shares (to the extent that your Option with respect to the First Vesting Date
had not already become exercisable) if, at or prior to the First Vesting Date,
there has not occurred a Change of Control and either (x) your employment shall
have been terminated by the Company other than for "cause" in the manner
described in Section 7(a)(iv) of the Employment Agreement or (y) your employment
shall have been terminated by you for "Good Reason" pursuant to Section 7(a)(v)
of the Employment Agreement, and in either such case such vesting shall be
effective immediately upon such termination.
5. ADDITIONAL PROVISIONS RELATING TO EXERCISE. (a) Once you become
entitled to exercise the Option (and purchase Option Shares) as provided in
Section 4 hereof, such right will continue until the date on which the Option
expires and terminates pursuant to Section 2 hereof.
(b) The Board of Directors of the Company, in its sole
discretion, may at any time accelerate the time set forth in Section 4 at which
the Option may be exercised by you with respect to any Option Shares.
6. EXERCISE OF OPTION. To exercise the Option, you must deliver a
completed copy of the attached Option Exercise Form to the address indicated on
the form, specifying the number of Option Shares being purchased as a result of
such exercise, together with payment of the full option price for the Option
Shares being purchased. Payment of the option price must be made (i) in cash or
by certified or official bank check or (ii) by tendering such other
consideration as may be acceptable to the Board of Directors of the Company.
7. TRANSFERABILITY OF OPTION. The Option may not be transferred by you
(other than by will or the laws of descent and distribution) and may be
exercised during your lifetime only by you.
<PAGE>
8. TERMINATION OF EMPLOYMENT. Subject to the provisions of Section 9
herein: (a) In the event that you cease to be employed on a full-time basis by
the Company or any subsidiary or parent thereof (A) as a result of the
termination or your employment by the Company or any subsidiary of parent hereof
at any time for "cause" (pursuant to Section 8(a)(iii) of the Employment
Agreement) or (B) as a result of your employment not being automatically renewed
as of the Renewal Date (as defined in the Employment Agreement), then the Option
may only be exercised within one month after such termination, and only to the
same extent that you were entitled to exercise the Option on the date your
employment was so terminated and had not previously done so.
(b) In the event that you cease to be employed on a full-time
basis by the Company or any subsidiary or parent thereof as a result of the
termination of your employment by the Company or any subsidiary or parent
thereof at any time other than for "cause" (pursuant to Section 8(a)(iv) of the
Employment Agreement) or by you for "Good Reason" (pursuant to Section 8(a)(v)
of the Employment Agreement) the Option may only be exercised within three
months after the date you cease to be so employed, and only to the same extent
that you were entitled to exercise the Option on the date you ceased to be so
employed by reason of such termination and had not previously done so.
(c) In the event that you cease to be employed on a full-time
basis by the Company or any subsidiary or parent thereof by reason of a
"disability" (within the meaning of Section 22(e)(3) of the Code and pursuant to
Section 8(a)(ii) of the Employment Agreement), the Option may only be exercised
within three months after the date you cease to be so employed, and only to the
same extent that you were entitled to exercise the Option on the date you ceased
to be so employed by reason of such disability and had not previously done so.
(d) In the event that you die while employed by the Company or
any subsidiary or parent thereof (or (i) within a period of one month after
ceasing to be employed by the Company or any subsidiary or parent thereof for
any reason described in Section 8(a) above, (ii) within a period of three months
after ceasing to be employed by the Company or any subsidiary or parent thereof
for any reason described in Section 8(b) above or (iii) within a period of one
year after ceasing to be employed by the Company for any reason described in
Section 8(c) hereof), the Option may only be exercised within one year after
your death. In such event, the Option may be exercised during such one-year
period by the executors or administrator of your estate or by any person who
shall have acquired the Option through bequest or inheritance, but only to the
same extent that you were entitled to exercise the Option immediately prior to
the time of your death and you had not previously done so.
(e) Notwithstanding any provision contained in this Section 8
to the contrary, in no event may the Option be exercised to any extent by anyone
after March 31, 2004.
9. COMPANY'S RIGHTS AND OPTION TO REPURCHASE OPTION SHARES UPON
TERMINATION OF EMPLOYMENT. (a) (i) In the event that you cease to be employed by
the Company or any subsidiary or parent thereof on a full-time basis (x) at any
time, upon your death or on account of a disability pursuant to Section 8(a)(ii)
of the Employment Agreement, at any time prior to the date on which an
underwritten public offering of the Company's Common Stock, registered under the
Securities Act of 1933, as amended (the "Securities Act") (a "Public Offering'),
has
<PAGE>
been consummated, or (y) on or before the earlier to occur of August 31, 1999
and the consummation of a Public Offering, as a result of termination by the
Company as described in Section 8(a)(iv) of the Employment Agreement or
termination for Good Reason pursuant to Section 8(a)(v) of the Employment
Agreement, then, with respect to all Options which have vested, the Company
shall have the right and option, but not the obligation, to purchase from you
(or in the case of your death, your legal representative) any or all of the
Option Shares (i) held by you on the date you cease to be so employed by the
Company or (ii) purchased by you after such date as permitted by Section 8 above
(the "Clause (i) Repurchase Right"). In the event that the Company exercises the
Clause (i) Repurchase Right, the Company shall pay to you as the purchase price
for such Option Shares an amount per share equal to the fair market value
thereof as of the date you ceased to be employed by the Company or any
subsidiary of parent thereof, such fair market value to be determined by the
Board of Directors of the Company.
(ii) In the event that you cease to be employed by the Company or any
subsidiary or parent thereof on a full-time basis as a result of the termination
of your employment by the Company for "cause" pursuant to Section 8(a)(iii) of
the Employment Agreement or by you other than for a reason described in clause
(a)(i) above, at any time prior to the date on which a Public Offering has been
consummated, then, with respect to all Options which have vested, the Company
shall have the right and option, but not the obligation, to purchase from you
(or in the case of your death, your legal representative) any or all of such
Option Shares (i) held by you on the date you cease to be so employed by the
Company or (ii) purchased by you after such date as permitted by Section 8 (the
"Clause (ii) Repurchase Right"; the Clause (i) Repurchase Right and the Clause
(ii) Repurchase Right are each hereinafter referred to as the "Repurchase
Right"). In the event that the Company exercises its Clause (ii) Repurchase
Right, the Company shall pay to you as the purchase price for such Option Shares
an amount per share equal to $1.20 per share.
(b) The Company may exercise its Repurchase right above by
giving you (or, in the case of your death, your legal representative) a written
notice of election to purchase at any time within 60 days after the date your
employment ceases, which notice of election shall specify the number of Option
Shares to be purchased and the purchase price for such Option Shares. The
closing for the purchase by the Company of such Option Shares pursuant to the
provisions of this Section 9 (the "Purchase Date") will take place at the
offices of the Company on the date specified in such written notice, which date
shall be a business day not later than 60 days after the date such notice is
given. At such closing, you will deliver such Option Shares, duly endorsed for
transfer, against payment in cash of the purchase price thereof. To the extent
the Company chooses not to exercise Repurchase Right under this Section 9 to
purchase any of such Option Shares, such Shares shall thereafter cease to be
subject to the provisions of this Agreement.
10. RIGHT OF FIRST REFUSAL ON DISPOSITIONS. (a) If at any time you
desire to sell for cash any or all of the Option Shares pursuant to a bona fide
offer from a third party other than the Company (the "Proposed Transferee"), you
shall submit a written offer (the "Offer") to sell such Option Shares (the
"Offered Shares") to the Company on terms and conditions, including price, not
less favorable than those on which you propose to sell such Offered Shares to
the Proposed Transferee. The Offer shall disclose the identity of the Proposed
Transferee, the Offered Shares proposed to be sold, the terms and conditions,
including price, of the proposed sale, and any other material facts relating to
the proposed sale. The Offer shall further state that the Company
<PAGE>
may acquire, in accordance with the provisions of this Agreement, all or any
portion of the Offered Shares for the price and upon the other terms and
conditions, including deferred payment (if applicable), set forth therein.
(b) If the Company desires to purchase all or any part of the
Offered Shares, the Company shall communicate to you in writing its election to
purchase, which communication shall state the number of Offered Shares the
Company desires to purchase and shall be delivered in person or mailed to you
within ten days of the date of the Offer. Such communication shall, when taken
in conjunction with the Offer, be deemed to constitute a valid, binding and
enforceable agreement for the sale and purchase of the Offered Shares. The
closing for the purchase by the Company of such Offered Shares pursuant to the
provisions of this Section 10 shall take place at the offices of the Company on
the date specified in the Company's written notice to you which date shall be a
business day not later than 60 days after the date the Offer is received by the
Company. At such closing, you will deliver to the Company a certificate or
certificates evidencing the Offered Shares (or any portion thereof) to be
purchased by it, duly endorsed for transfer to the Company, against payment to
you of the purchase price therefor by the Company.
(c) If the company does not purchase all of the Offered
Shares, the Offered Shares not so purchased may be sold by you at any time
within six (6) months after the date the Offer was made. Any such sale shall be
to the Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. Any Offered Shares not sold within such six-month period
shall continue to be subject to the requirements of this Section 10. If Offered
Shares are sold pursuant to this Section 10, the Offered Shares so sold shall no
longer be subject to this Agreement.
11. REPRESENTATIONS. (a) You represent and warrant to the Company that,
upon exercise of the Option, you will be acquiring the Option Shares for your
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, and you understand that (i) neither
the Option nor the Option Shares have been registered with the Securities and
Exchange Commission by reason of their issuance in a transaction exempt from the
registration requirements and (ii) the Option Shares must be held indefinitely
by you unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration. The stock certificates for
any Option Shares issued to you will bear the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE
BEEN REGISTERED UNDER THAT ACT OR ANY EXEMPTION FROM
REGISTRATION IS AVAILABLE.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND MAY NOT BE SOLD, EXCHANGED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT
<PAGE>
IN ACCORDANCE WITH AND SUBJECT TO ALL THE TERMS AND CONDITIONS
OF A CERTAIN OPTION AGREEMENT DATED AS OF MARCH , 1999, A COPY
OF WHICH THE COMPANY WILL FURNISH TO THE HOLDER OF THIS
CERTIFICATE UPON REQUEST AND WITHOUT CHARGE.
(b) You further represent and warrant that you understand the
Federal, state and local income tax consequences of the granting of the Option
to you, the acquisition of rights to exercise the Option with respect to any
Option Shares, the exercise of the Option and purchase of Option Shares, and the
subsequent sale or other disposition of any Option Shares. In addition, you
understand that the Company will be required to withhold Federal, state or local
taxes in respect of any compensation income realized by you as a result of any
"disqualifying disposition" of any Option Shares acquired upon exercise of the
Option granted thereunder. To the extent that the Company is required to
withhold any such taxes as a result of any such "disqualifying disposition", you
hereby agree that the Company may deduct from any payments of any kind otherwise
due to you an amount equal to the total Federal, state and local taxes required
to be so withheld, or if such payments are inadequate to satisfy such Federal,
state and local taxes, or if no such payments are due or to become due to you,
then you agree to provide the Company with cash funds or make other arrangements
satisfactory to the Company regarding such payment. It is understood that all
matters with respect to the total amount of taxes to be withheld in respect of
any such compensation income shall be determined by the Board of Directors of
the Company in its sole discretion.
12. NOTICE OF SALE. You agree to give the Company prompt notice of any
sale or other disposition of any Option Shares that occurs (i) within two years
from the date of the granting of the Option to you, or (ii) within one year
after the transfer of such Option Shares to you upon the exercise of the Option
13. ADJUSTMENTS; REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. (a) In the event that, after the date hereof, the outstanding
shares of the Company's Common Stock shall be increased or decreased or changed
into or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation through reorganization,
merger or consolidation, recapitalization, reclassification, stock split,
split-up, combination or exchange of shares or declaration of any dividends
payable in Common Stock, the Board of Directors of the Company shall
appropriately adjust the number of shares of Common Stock (and the option price
per share) subject to the unexercised portion of the Option (to the nearest
possible full share), and such adjustment shall be effective and binding for all
purposes of this Agreement and the Plan, subject in all cases to the limitations
of Section 424 of the Code.
(b) If any capital reorganization or reclassification of the
capital stock of the Company or any consolidation or merger of the Company with
another entity, or the sale of all or substantially all its assets to another
entity, shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then you shall thereafter have the
right to purchase, upon the exercise of the Option in accordance with the terms
and conditions specified in this
<PAGE>
Agreement and in lieu of the shares of Common Stock immediately theretofore
receivable upon the exercise of the Option, such shares of stock, securities or
asses (including, without limitation, cash) as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore so
receivable and such reorganization, reclassification, consolidation, merger or
sale not taken place.
14. CONTINUATION OF EMPLOYMENT. Neither the plan nor the Option shall
confer upon you any right to continued in the employ of the Company or any
subsidiary or parent thereof, or limit in any respect the right of the Company
or any subsidiary or parent thereof to terminate your employment or other
relationship with the Company or any subsidiary or parent thereof, as the case
may be, at any time.
15. PLAN DOCUMENTS. This Agreement is qualified in its entirety by
reference to the provisions of the Plan applicable to "Non-Qualified Options" as
described in Treasury Regulation 1.83-7 or any successor regulation thereto,
which are hereby incorporated herein by reference.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. If any one or more provisions
of this Agreement shall be found to be illegal or unenforceable in any respect,
the validity and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby.
<PAGE>
Please acknowledge receipt of this Agreement by signing the enclosed
copy of this Agreement in the space provided below and returning it promptly to
the Secretary of the Company.
LIVE PERSON, INC.
By /s/ Robert LoCascio
-------------------------------------------
Robert LoCascio
President and Chief Executive Officer
Accepted and Agreed:
/s/ Scott Cohen
- --------------------------------
Scott Cohen
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Agreement made effective as of January 3, 2000 by and between LivePerson,
Inc. (the "Company"), a Delaware corporation, and James Reagan, ("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 I
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
Technology Officer and to be responsible for the typical management
responsibilities expected of an officer holding such position.
SECTION III
TERMS AND DUTIES
A. PERIOD OF EMPLOYMENT
The period of the Executive's employment under this Agreement will commence as
of the first date 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.
<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 $165,000 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. The initial target annual bonus shall be $40,000, half of which will be
paid in advance with Executive's first pay check.
iii. LONG TERM INCENTIVE AWARDS
The Executive will be eligible for discretionary stock option awards as may be
awarded by the Board of Directors.
iv. UP-FRONT PAYMENT
The Company shall pay the Executive an upfront payment of $20,000.
v. REIMBURSEMENT FOR MOVING
The Company will reimburse the Executive for up to $30,000 for documented moving
expenses incurred in his move to the New York area.
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.
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.
<PAGE>
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 for a continuous period of 90 days or more,
the Company may terminate the employment of the Executive 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 and Incentive Compensation Awards which would be
payable in a pro-rated basis for the year in which the termination occurs. The
Company will also continue the benefits described in this Agreement 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. 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.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. If the Executive's employment terminates due to a Without Cause Termination
as defined later in this Agreement, Company will continue to pay the
Executive his Base Salary for a period of four months following such
Termination. The benefits described in this Agreement will continue for four
months. In the event of any such Without Cause Termination, all unvested
stock options held by the Executive which would have vested during the
twelve months following such termination shall continue to vest under their
original vesting schedule and shall remain exercisable until the original
expiration dates contained in the applicable stock option agreements
pursuant to which such options were granted.
B. If the Executive's employment Terminates 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.
<PAGE>
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 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 perpetration of a common
law fraud) which has resulted or is likely to result in
economic damage to the Company and which, in any case,
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.
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.
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.
<PAGE>
C. During the Period of Employing 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.
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 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 solicit any clients of the
Company for any existing business 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 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 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 15 days,
if capable of being cured, than 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.
<PAGE>
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 judgment 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 is terminated under a
Without Cause Termination, then the Company shall pay to the Executive a lump
sum amount equal to 66.6% of his Annual Base Salary as in effect at the time of
such termination. In addition, a) any stock options granted to the Executive
prior to termination that would vest in the 24 months following such termination
will be fully vested upon termination and shall remain exercisable until the
applicable expiration dates 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 eight months from the date of
termination.
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 shareholder 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.
<PAGE>
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 conflicting
provisions 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.
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.
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the date
just above written.
LivePerson, Inc.
/s/ Robert LoCascio
- --------------------------------
Robert LoCascio, President
/s/ James Reagan
- --------------------------------
James Reagan
<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.
/s/ KPMG
New York, New York
January 28, 2000
