LIVEPERSON, INC.
|
(Exact Name of Registrant as Specified in Its Charter)
|
DELAWARE
|
13-3861628
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(IRS Employer Identification No.)
|
462 SEVENTH AVENUE, 3
RD
FLOOR
NEW YORK, NEW YORK
|
10018
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
(212) 609-4200
|
(Registrant’s Telephone Number, Including Area Code)
|
Large accelerated filer
¨
|
Accelerated filer
x
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
(Do not check if a smaller reporting company)
|
March 31, 2011
|
December 31, 2010
|
|||||||
(Unaudited)
|
(Note 1(B))
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 67,119 | $ | 61,336 | ||||
Accounts receivable, net of allowance for doubtful accounts of $621 and $561 as of March 31, 2011 and December 31, 2010, respectively
|
19,606 | 16,491 | ||||||
Prepaid expenses and other current assets
|
5,046 | 6,341 | ||||||
Deferred tax assets, net
|
1,540 | 1,529 | ||||||
Total current assets
|
93,311 | 85,697 | ||||||
Property and equipment, net
|
12,491 | 12,762 | ||||||
Intangibles, net
|
1,806 | 2,124 | ||||||
Goodwill
|
24,090 | 24,015 | ||||||
Deferred tax assets, net
|
3,645 | 3,876 | ||||||
Deferred implementation costs, net of current
|
172 | 164 | ||||||
Security deposits
|
500 | 499 | ||||||
Other assets
|
1,980 | 2,006 | ||||||
Total assets
|
$ | 137,995 | $ | 131,143 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 6,736 | $ | 6,416 | ||||
Accrued expenses
|
9,099 | 12,111 | ||||||
Deferred revenue
|
6,720 | 5,570 | ||||||
Total current liabilities
|
22,555 | 24,097 | ||||||
Deferred revenue, net of current
|
421 | 513 | ||||||
Other liabilities
|
1,980 | 1,890 | ||||||
Total liabilities
|
24,956 | 26,500 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $.001 par value per share; 5,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2011 and December 31, 2010
|
— | — | ||||||
Common stock, $.001 par value per share; 100,000,000 shares authorized, 52,516,835 shares issued and outstanding at March 31, 2011 and 51,753,842 shares issued and outstanding at December 31, 2010
|
53 | 52 | ||||||
Additional paid-in capital
|
210,233 | 205,063 | ||||||
Accumulated deficit
|
(96,942 | ) | (100,173 | ) | ||||
Accumulated other comprehensive loss
|
(305 | ) | (299 | ) | ||||
Total stockholders’ equity
|
113,039 | 104,643 | ||||||
Total liabilities and stockholders’ equity
|
$ | 137,995 | $ | 131,143 |
Three Months
Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Revenue
|
$ | 30,382 | $ | 25,308 | ||||
Operating expenses:
|
||||||||
Cost of revenue
|
8,095 | 6,632 | ||||||
Product development
|
4,377 | 3,606 | ||||||
Sales and marketing
|
8,860 | 7,690 | ||||||
General and administrative
|
3,960 | 3,792 | ||||||
Amortization of intangibles
|
11 | 83 | ||||||
Total operating expenses
|
25,303 | 21,803 | ||||||
Income from operations
|
5,079 | 3,505 | ||||||
Other income (expense):
|
||||||||
Financial income (expense)
|
156 | (49 | ) | |||||
Interest income
|
14 | 23 | ||||||
Total other income (expense), net
|
170 | (26 | ) | |||||
Income before provision for income taxes
|
5,249 | 3,479 | ||||||
Provision for income taxes
|
2,018 | 1,343 | ||||||
Net income
|
$ | 3,231 | $ | 2,136 | ||||
Basic net income per common share
|
$ | 0.06 | $ | 0.04 | ||||
Diluted net income per common share
|
$ | 0.06 | $ | 0.04 | ||||
Weighted average shares outstanding used in basic net income per common share calculation
|
52,080,363 | 49,838,491 | ||||||
Weighted average shares outstanding used in diluted net income per common share calculation
|
54,805,222 | 52,193,862 |
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 3,231 | $ | 2,136 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Stock-based compensation expense
|
1,535 | 1,087 | ||||||
Depreciation
|
1,634 | 1,053 | ||||||
Amortization of intangibles
|
318 | 389 | ||||||
Provision for doubtful accounts, net
|
60 | — | ||||||
Deferred income taxes
|
220 | (6 | ) | |||||
CHANGES IN OPERATING ASSETS AND LIABILITIES:
|
||||||||
Accounts receivable
|
(3,175 | ) | (2,350 | ) | ||||
Prepaid expenses and other current assets
|
1,323 | 466 | ||||||
Deferred implementation costs
|
(8 | ) | — | |||||
Security deposits
|
— | (166 | ) | |||||
Other Assets
|
116 | — | ||||||
Accounts payable
|
1,231 | (740 | ) | |||||
Accrued expenses
|
(3,024 | ) | (2,969 | ) | ||||
Deferred revenue
|
1,058 | 695 | ||||||
Net cash provided by (used in) operating activities
|
4,519 | (405 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of property and equipment, including capitalized software
|
(2,293 | ) | (578 | ) | ||||
Acquisition of Proficient
|
(75 | ) | — | |||||
Net cash used in investing activities
|
(2,368 | ) | (578 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Excess tax benefit from the exercise of employee stock options
|
220 | 3 | ||||||
Proceeds from issuance of common stock in connection with the exercise of options
|
3,416 | 6,275 | ||||||
Net cash provided by financing activities
|
3,636 | 6,278 | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents
|
(4 | ) | (32 | ) | ||||
Net increase in cash and cash equivalents
|
5,783 | 5,263 | ||||||
Cash and cash equivalents at the beginning of the period
|
61,336 | 45,572 | ||||||
Cash and cash equivalents at the end of the period
|
$ | 67,119 | $ | 50,835 |
(1)
|
SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
|
|
Three Months Ended
March 31,
|
|||||||
|
2011
|
2010
|
||||||
Cost of revenue
|
$ | 298 | $ | 214 | ||||
Product development expense
|
440 | 335 | ||||||
Sales and marketing expense
|
336 | 280 | ||||||
General and administrative expense
|
461 | 258 | ||||||
Total stock based compensation included in operating expenses
|
$ | 1,535 | $ | 1,087 |
|
Three Months Ended
March 31,
|
|||||||
|
2011
|
2010
|
||||||
Dividend yield
|
0.0 | % | 0.0 | % | ||||
Risk-free interest rate
|
3.46% - 3.68 | % | 3.61% - 3.80 | % | ||||
Expected life (in years)
|
5.0 | 5.0 | ||||||
Historical volatility
|
61.2% - 61.3 | % | 60.3% - 60.5 | % |
Options
|
Weighted
Average Exercise
Price
|
|||||||
Options outstanding at December 31, 2010
|
8,816,760
|
$
|
5.04
|
|||||
Options granted
|
194,000
|
11.36
|
||||||
Options exercised
|
(803,275
|
)
|
4.59
|
|||||
Options cancelled
|
(263,965
|
)
|
6.75
|
|||||
Options outstanding at March 31, 2011
|
7,943,520
|
5.19
|
||||||
Options exercisable at March 31, 2011
|
3,088,845
|
$
|
3.89
|
Shares
|
Weighted
Average
Grant-Date
Fair Value
|
|||||||
Nonvested Shares at December 31, 2010
|
5,719,012
|
$
|
3.13
|
|||||
Granted
|
194,000
|
6.26
|
||||||
Vested
|
(794,372
|
)
|
2.58
|
|||||
Cancelled
|
(263,965
|
)
|
3.72
|
|||||
Nonvested Shares at March 31, 2011
|
4,854,675
|
$
|
3.33
|
Three Months Ended March 31,
|
||||||||
2011
|
2010
|
|||||||
Basic
|
52,080,363
|
49,838,491
|
||||||
Effect of assumed exercised options
|
2,724,859
|
2,355,371
|
||||||
Diluted
|
54,805,222
|
52,193,862
|
Consolidated
|
Corporate
|
Business
|
Consumer
|
|||||||||||||
Revenue:
|
||||||||||||||||
Hosted services — Business
|
$
|
25,585
|
$
|
—
|
$
|
25,585
|
$
|
—
|
||||||||
Hosted services — Consumer
|
3,658
|
—
|
—
|
3,658
|
||||||||||||
Professional services
|
1,139
|
—
|
1,139
|
—
|
||||||||||||
Total revenue
|
30,382
|
—
|
26,724
|
3,658
|
||||||||||||
Cost of revenue
|
8,095
|
—
|
7,188
|
907
|
||||||||||||
Sales and marketing
|
8,860
|
—
|
7,315
|
1,545
|
||||||||||||
Amortization of intangibles
|
11
|
—
|
11
|
—
|
||||||||||||
Unallocated corporate expenses
|
8,337
|
8,337
|
—
|
—
|
||||||||||||
Operating income (loss)
|
$
|
5,079
|
$
|
(8,337
|
)
|
$
|
12,210
|
$
|
1,206
|
Consolidated
|
Corporate
|
Business
|
Consumer
|
|||||||||||||
Revenue:
|
||||||||||||||||
Hosted services — Business
|
$
|
20,913
|
$
|
—
|
$
|
20,913
|
$
|
—
|
||||||||
Hosted services — Consumer
|
3,458
|
—
|
—
|
3,458
|
||||||||||||
Professional services
|
937
|
—
|
937
|
—
|
||||||||||||
Total revenue
|
25,308
|
—
|
21,850
|
3,458
|
||||||||||||
Cost of revenue
|
6,632
|
—
|
5,684
|
948
|
||||||||||||
Sales and marketing
|
7,690
|
—
|
6,028
|
1,662
|
||||||||||||
Amortization of intangibles
|
83
|
—
|
11
|
72
|
||||||||||||
Unallocated corporate expenses
|
7,398
|
7,398
|
—
|
—
|
||||||||||||
Operating income (loss)
|
$
|
3,505
|
$
|
(7,398
|
)
|
$
|
10,127
|
$
|
776
|
March 31,
|
||||||||
2011
|
2010
|
|||||||
United States
|
$
|
23,602
|
$
|
19,305
|
||||
United Kingdom
|
3,703
|
3,318
|
||||||
Other countries
|
3,077
|
2,685
|
||||||
Total revenue
|
$
|
30,382
|
$
|
25,308
|
|
March 31, 2011
|
December 31, 2010
|
||||||
United States
|
$
|
28,670
|
$
|
29,352
|
||||
Israel
|
13,871
|
13,736
|
||||||
United Kingdom
|
2,143
|
2,358
|
||||||
Total long-lived assets
|
$
|
44,684
|
$
|
45,446
|
Total
|
Business
|
Consumer
|
||||||||||
Balance as of December 31, 2010
|
$
|
24,015
|
$
|
15,991
|
$
|
8,024
|
||||||
Adjustments to goodwill:
|
||||||||||||
Contingent earnout payments (see Note 3)
|
75
|
75
|
—
|
|||||||||
Balance as of March 31, 2011
|
$
|
24,090
|
$
|
16,066
|
$
|
8,024
|
Total
|
Business
|
Consumer
|
||||||||||
Balance as of December 31, 2009
|
$
|
23,920
|
$
|
15,896
|
$
|
8,024
|
||||||
Adjustments to goodwill:
|
||||||||||||
Contingent earnout payments (see Note 3)
|
95
|
95
|
—
|
|||||||||
Balance as of December 31, 2010
|
$
|
24,015
|
$
|
15,991
|
$
|
8,024
|
As of March 31, 2011
|
||||||||||||
Gross
Carrying
Amount
|
Weighted
Average
Amortization
Period
|
Accumulated
Amortization
|
||||||||||
Amortizing intangible assets:
|
||||||||||||
Technology
|
$ | 6,199 |
3.8 years
|
$ | 4,796 | |||||||
Customer contracts
|
2,400 |
3.0 years
|
2,400 | |||||||||
Trade names
|
630 |
3.0 years
|
630 | |||||||||
Non-compete agreements
|
410 |
1.2 years
|
410 | |||||||||
Patents
|
475 |
11.0 years
|
72 | |||||||||
Other
|
235 |
3.0 years
|
235 | |||||||||
Total
|
$ | 10,349 | $ | 8,543 |
As of December 31, 2010
|
||||||||||||
Gross
Carrying
Amount
|
Weighted
Average
Amortization
Period
|
Accumulated
Amortization
|
||||||||||
Amortizing intangible assets:
|
||||||||||||
Technology
|
$ | 6,199 |
3.8 years
|
$ | 4,489 | |||||||
Customer contracts
|
2,400 |
3.0 years
|
2,400 | |||||||||
Trade names
|
630 |
3.0 years
|
630 | |||||||||
Non-compete agreements
|
410 |
1.2 years
|
410 | |||||||||
Patents
|
475 |
11.0 years
|
61 | |||||||||
Other
|
235 |
3.0 years
|
235 | |||||||||
Total
|
$ | 10,349 | $ | 8,225 |
March 31, 2011
|
December 31, 2010
|
|||||||
Computer equipment and software
|
$
|
25,521
|
$
|
25,002
|
||||
Furniture, equipment and building improvements
|
2,700
|
1,856
|
||||||
28,221
|
26,858
|
|||||||
Less accumulated depreciation
|
15,730
|
14,096
|
||||||
Total
|
$
|
12,491
|
$
|
12,762
|
March 31, 2011
|
December 31, 2010
|
|||||||
Payroll and other employee related costs
|
$
|
4,103
|
$
|
6,973
|
||||
Professional services, consulting and other vendor fees
|
4,289
|
4,211
|
||||||
Sales commissions
|
271
|
565
|
||||||
Other
|
436
|
362
|
||||||
Total
|
$
|
9,099
|
$
|
12,111
|
|
·
|
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
|
|
·
|
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
|
|
·
|
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
|
|
·
|
Expanding Business with Existing Customers and Adding New Customers.
We are expanding our sales capacity by adding enterprise sales agents, and we have recently established a midmarket sales group focused on adding new customers that are larger than our typical SMB customers, but smaller than our typical enterprise customers. We have also expanded our efforts to retain existing SMB customers through increased interaction with them during the early stages of their usage of our services.
|
|
·
|
Introducing New Products and Capabilities.
We are investing in product marketing, R&D and executive personnel to support our expanding efforts to build and launch new products and capabilities to support existing customer deployments, and to further expand our total addressable market. These investments are initially focused in the areas of online marketing engagement and chat transcript text analysis. Over time, we expect to develop and launch additional capabilities that leverage our existing market position as a leader in proactive, intelligence-driven online engagement.
|
|
·
|
Creating and Supporting an Open Development Platform.
We have recently introduced an open development platform capability, supported by a community and developer tools that enable third-party developers to create and deliver new applications that leverage our existing customer base and proactive engagement technology. By creating and supporting this platform, we expect to enable both independent developers and R&D personnel within our customer base to accelerate their product development and innovation, and to expand the value and usage of our current and future products and capabilities.
|
|
·
|
Expanding our international presence.
We continue to increase our investment in sales and support personnel in the United Kingdom and Western Europe, particularly France and Germany. We are also working with sales and support partners as we expand our investment in the Asia-Pacific region. We continue to improve the multi-language and translation capabilities within our hosted solutions to further support international expansion.
|
|
·
|
Revenue increased 20.0% to $30.4 million from $25.3 million.
|
|
·
|
Gross profit margin decreased to 73.4% from 73.8%.
|
|
·
|
Operating expenses increased to $25.3 million from $21.8 million.
|
|
·
|
Net income increased 51% to $3.2 million from $2.1 million.
|
|
·
|
compensation costs relating to employees who provide customer support and implementation services to our clients;
|
|
·
|
compensation costs relating to our network support staff;
|
|
·
|
depreciation of certain hardware and software;
|
|
·
|
allocated occupancy costs and related overhead;
|
|
·
|
the cost of supporting our infrastructure, including expenses related to server leases, infrastructure support costs and Internet connectivity;
|
|
·
|
the credit card fees and related payment processing costs associated with the consumer and SMB services; and
|
|
·
|
amortization of certain intangibles.
|
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Stock-based compensation expense related to ASC 718-10
|
$
|
1,535
|
$
|
1,087
|
||||
Total
|
$
|
1,535
|
$
|
1,087
|
Payments due by period
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less than 1
year
|
1-3 years
|
3-5 years
|
More than 5
years
|
|||||||||||||||
Operating leases
|
$
|
21,678
|
$
|
5,323
|
$
|
11,728
|
$
|
2,625
|
$
|
2,002
|
||||||||||
Total
|
$
|
21,678
|
$
|
5,323
|
$
|
11,728
|
$
|
2,625
|
$
|
2,002
|
Period
|
Total Number of
Shares Purchased
|
Average Price Paid per
Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs
|
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Plans or
Programs
(1)
|
||||||||||||
1/1/2011 – 1/31/2011
|
—
|
$
|
—
|
—
|
$
|
6,365,000
|
||||||||||
2/1/2011 – 2/28/2011
|
—
|
—
|
—
|
6,365,000
|
||||||||||||
3/1/2011 – 3/31/2011
|
—
|
—
|
—
|
6,365,000
|
||||||||||||
Total
|
—
|
$
|
—
|
—
|
$
|
6,365,000
|
|
(1)
|
Under the stock repurchase program, we are authorized to repurchase shares of our common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by our Board of Directors depending upon prevailing market conditions and other corporate considerations, up to an aggregate purchase price of $10.0 million. As of March 31, 2011, approximately $6.4 million remained available for purchases under the program.
|
|
10.1
|
Forms of Grant Agreements under the 2009 Stock Incentive Plan
|
|
31.1
|
Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification by President (the principal financial officer) pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
Certification by the principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
LIVEPERSON, INC.
|
||
(Registrant)
|
||
Date: May 6, 2011
|
By:
|
/s/ ROBERT P. LOCASCIO
|
Name:
|
Robert P. LoCascio
|
|
Title:
|
Chief Executive Officer (duly authorized officer)
|
|
Date: May 6, 2011
|
By:
|
/s/ TIMOTHY E. BIXBY
|
Name:
|
Timothy E. Bixby
|
|
Title:
|
President (principal
financial and accounting officer)
|
EXHIBIT
|
||
10.1
|
Forms of Grant Agreements under the 2009 Stock Incentive Plan
|
|
31.1
|
Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
Certification by President (the principal financial officer) pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1
|
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
Certification by the principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
1.
|
Grant of Option
.
|
2.
|
Definitions
.
|
3.
|
Exercise Schedule
.
|
Vesting Date | Percentage of Shares | |
First Anniversary of the Grant Date | 25% | |
Second Anniversary of the Grant Date | 25% | |
Third Anniversary of the Grant Date | 25% | |
Fourth Anniversary of the Grant Date | 25% |
4.
|
Exercise of Option
.
|
a)
|
Form of Exercise
. Each election to exercise the Option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of the Option may be for any fractional share.
|
b)
|
Continuous Relationship with the Company Required
. Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an “Eligible Participant”).
|
5.
|
Termination of Option
. Any unexercised portion of the Option shall automatically and without notice terminate at the time of the earliest to occur of the following:
|
a)
|
Expiration
. No later than 10 years from the Grant Date (the “Final Exercise Date”).
|
b)
|
Termination of Relationship with the Company
. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (c) and (d) below, the right to exercise the Option shall terminate three months after such cessation (but in no event after the Final Exercise Date),
provided
that
the Option shall be exercisable only to the extent that the Participant was entitled to exercise the Option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise the Option shall terminate immediately upon such violation.
|
c)
|
Exercise Period Upon Death or Disability
. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, the Option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),
provided
that
the Option shall be exercisable only to the extent that the Option was exercisable by the Participant on the date of his or her death or disability, and further provided that the Option shall not be exercisable after the Final Exercise Date.
|
d)
|
Termination for Cause
. If, prior to the Final Exercise Date, the Participant’s employment with the Company is terminated by the Company for Cause (as defined below), the right to exercise the Option shall terminate immediately upon the effective date of such termination of employment. If the Participant is party to an employment, consulting or severance agreement with the Company that contains a definition of “cause” for termination of employment, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’s employment shall be considered to have been terminated for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that termination for “Cause” was warranted.
|
6.
|
Tax Matters
.
|
a)
|
Withholding
. No Shares will be issued pursuant to the exercise of the Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of the Option.
|
b)
|
Disqualifying Disposition
. If the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition.
|
7.
|
Transfer Restrictions
.
|
8.
|
No Employment or Service Contract
.
|
9.
|
Provisions of the Plan
.
|
1.
|
Grant of Option
.
|
2.
|
Definitions
.
|
3.
|
Exercise Schedule
.
|
Vesting Date | Percentage of Shares | |
First Anniversary of the Grant Date | 25% | |
Second Anniversary of the Grant Date | 25% | |
Third Anniversary of the Grant Date | 25% | |
Fourth Anniversary of the Grant Date | 25% |
4.
|
Exercise of Option
.
|
a)
|
Form of Exercise
. Each election to exercise the Option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of the Option may be for any fractional share.
|
b)
|
Continuous Relationship with the Company Required
. Except as otherwise provided in this Section 4, the Option may not be exercised unless the Participant, at the time he or she exercises the Option, is, and has been at all times since the Grant Date, an employee, officer, director, consultant or advisor to the Company or any other entity the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).
|
5.
|
Termination of Option
. Any unexercised portion of the Option shall automatically and without notice terminate at the time of the earliest to occur of the following:
|
a)
|
Expiration
. No later than 10 years from the Grant Date (the “Final Exercise Date”).
|
b)
|
Termination of Relationship with the Company
. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (c) and (d) below, the right to exercise the Option shall terminate three months after such cessation (but in no event after the Final Exercise Date),
provided
that
the Option shall be exercisable only to the extent that the Participant was entitled to exercise the Option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise the Option shall terminate immediately upon such violation.
|
c)
|
Exercise Period Upon Death or Disability
. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, the Option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),
provided
that
the Option shall be exercisable only to the extent that the Option was exercisable by the Participant on the date of his or her death or disability, and further provided that the Option shall not be exercisable after the Final Exercise Date.
|
d)
|
Termination for Cause
. If, prior to the Final Exercise Date, the Participant’s employment or other relationship with the Company is terminated by the Company for Cause (as defined below), the right to exercise the Option shall terminate immediately upon the effective date of such termination of employment or other relationship. If the Participant is party to an employment, consulting or severance agreement with the Company that contains a definition of “cause” for termination of employment or other relationship, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’s employment or other relationship shall be considered to have been terminated for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that termination for “Cause” was warranted.
|
6.
|
Withholding
.
|
7.
|
Transfer Restrictions.
|
8.
|
No Employment or Service Contract
.
|
9.
|
Provisions of the Plan
.
|
(a)
|
The Option is subject to Section 102 and the terms that apply to a Non-Statutory Stock Option in the Plan.
|
(b)
|
The Option may only be granted to an Israeli person employed by the Company or by an Israeli subsidiary of the Company or any person who is engaged as an officer of the Company or of an Israeli subsidiary of the Company, and that is not a "controlling party", as defined in section 32 (9) of the Ordinance, prior to and after the issuance of the Option.
|
(c)
|
The Option and the Option Shares issued upon the exercise of the Option will be held by the Trustee for a period of at least 24 months from the date on which such Option is allocated to the Trustee or a shorter period as approved by the tax authorities (the “Lock-up Period”), under the terms set in Section 102. In accordance with Section 102, the Optionee is prohibited from selling the Option or the Option Shares issued upon the exercise of the Option, until the end of the Lock-up Period, unless otherwise determined by the Tax Authorities. The meaning of the above restriction for purposes of the Tax Authorities is that if the Employee voluntarily sells the Option or the Option Shares before the end of the Lock-up Period, the Option or the Option Shares shall be subject to tax as ordinary income as per sections 2(1) and 2(2) of the Ordinance, and other provisions of Section 102.
|
(d)
|
All rights related to the Option Shares will be held by the Trustee until the end of the Lock-up Period, including bonus shares, and will be subject to the provisions of Section 102 regarding the 102 Capital Gain Track.
|
(e)
|
The Optionee declares that s/he is aware and accepts the following terms and conditions:
|
i.
|
that Section 102 provisions will apply to the Option.
|
ii.
|
that the Option is granted under the 102 Capital Gain Track.
|
iii.
|
that s/he is obligated not to make any disposition of the Option Shares until the end of the Lock-up Period.
|
(f)
|
Any and all taxes, fees and other liabilities (as may apply from time to time) in connection with the grant and/or exercise of the Option and the sale of Option Shares issued upon the exercise of the Option, will be borne by the Optionee and s/he will be solely liable for all such taxes, fees and other liabilities. Furthermore, the Optionee shall agree to indemnify the Corporation and the Company and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon.
|
(g)
|
The Optionee acknowledges that the receipt of the Option and the acquisition of the Option Shares to be issued upon the exercise of the Option may result in tax consequences. The description set forth in the Plan relating to the payment of tax does not purport to be a full and complete description of the Optionee’s tax obligations under the law.
|
(h)
|
Anything to the contrary notwithstanding, the Trustee shall not release any part of the Option which was not already exercised into Option Shares by the Optionee nor release any Option Shares issued upon an exercise of the Option, prior to the full payment of the Exercise Price and Optionee’s tax liability arising from the Option that was granted to him and/or Option Shares issued upon exercise of such Option.
|
Vesting Date | Percentage of Shares | |
First Anniversary of the Grant Date | 25% | |
Second Anniversary of the Grant Date | 25% | |
Third Anniversary of the Grant Date | 25% | |
Fourth Anniversary of the Grant Date | 25% |
Date: May 6, 2011
|
By:
|
/s/ ROBERT P. LOCASCIO
|
Name:
|
Robert P. LoCascio
|
|
Title:
|
Chief Executive Officer
(principal executive officer)
|
Date: May 6, 2011
|
By:
|
/s/ TIMOTHY E. BIXBY
|
Name:
|
Timothy E. Bixby
|
|
Title:
|
President
(principal financial officer)
|
Date: May 6, 2011
|
By:
|
/s/ ROBERT P. LOCASCIO
|
Name:
|
Robert P. LoCascio
|
|
Title:
|
Chief Executive Officer
|
Date: May 6, 2011
|
By:
|
/s/ TIMOTHY E. BIXBY
|
Name:
|
Timothy E. Bixby
|
|
Title:
|
Principal financial officer
|