<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1997.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 7372 94-3120525
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1155 MARKET STREET
SAN FRANCISCO, CALIFORNIA 94103
(415) 437-1100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
<TABLE>
<S> <C>
GREGORY SHENKMAN ALEC MILOSLAVSKY
PRESIDENT AND CHIEF EXECUTIVE OFFICER VICE CHAIRMAN OF THE BOARD AND CHIEF TECHNICAL
OFFICER
</TABLE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
1155 MARKET STREET
SAN FRANCISCO, CALIFORNIA 94103
(415) 437-1100
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
<TABLE>
<S> <C>
EDWARD M. LEONARD, ESQ. ROBERT V. GUNDERSON, JR., ESQ.
SCOTT D. LESTER, ESQ. DANIEL E. O'CONNOR, ESQ.
JACQUELINE E. COWDEN, ESQ. GUNDERSON DETTMER STOUGH VILLENEUVE
BROBECK, PHLEGER & HARRISON LLP FRANKLIN & HACHIGIAN, LLP
TWO EMBARCADERO PLACE 155 CONSTITUTION DRIVE
2200 GENG ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94303 (415) 321-2400
(415) 424-0160
</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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value.................. 2,300,000 shares $16.00 $36,800,000 $11,152
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 3, 1997
2,000,000 SHARES
[LOGO]
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
COMMON STOCK
(NO PAR VALUE)
-----------
All of the 2,000,000 shares of Common Stock offered hereby are being sold by
the Company. Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $14.00 and $16.00 per share. For factors to be
considered in determining the initial public offering price, see
"Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.
The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "GCTI".
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total(3)............................... $ $ $
</TABLE>
- -----
(1) The Company and, if the underwriters' over-allotment option is exercised,
the Selling Shareholders, have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(2) Before deducting estimated expenses of $1,100,000 payable by the Company.
(3) The Company and the Selling Shareholders have granted the Underwriters an
option for 30 days to purchase up to an additional 300,000 shares at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. If such option is exercised in full, the
total initial public offering price, underwriting discount, proceeds to
Company and proceeds to Sellling Shareholders will be $ ,
$ , $ and $ , respectively. See "Underwriting".
-----------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
ROBERTSON, STEPHENS & COMPANY
-----------
The date of this Prospectus is , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial data appearing elsewhere in this
Prospectus, including information under "Risk Factors". Except as set forth in
the Consolidated Financial Statements and the Notes thereto, and unless
otherwise indicated, all information contained in this Prospectus (i) reflects
the conversion of all outstanding shares of Preferred Stock of the Company into
shares of Common Stock of the Company on a one-to-one basis and (ii) assumes no
exercise of the Underwriters' over-allotment option. See "Description of
Capital Stock" and "Underwriting". Unless otherwise referenced herein,
references to Consolidated Financial Statements shall mean references to the
Consolidated Financial Statements of Genesys Telecommunications Laboratories,
Inc. and its subsidiaries.
THE COMPANY
Genesys is a leading provider of enterprise-wide platform and applications
software that enables organizations to integrate critical business information
and computing resources with telephony and other telecommunications media. The
Company's products allow an organization to optimally manage its customer
interactions and employee communications to increase productivity, lower costs
and achieve greater customer satisfaction and loyalty. In addition, the
Company's products enable organizations to develop and offer new or enhanced
revenue-generating products and services. Genesys believes that it is the first
company to offer a suite of open, scaleable, enterprise-wide platform and
applications software solutions to address the evolving needs of organizations
for intelligent communications, a new market paradigm known as Enterprise
Computer Telephony Integration ("ECTI").
The Company's platform and applications software products allow organizations
to integrate disparate telecommunications media with heterogeneous computing
environments. These products integrate with most major telephone systems and
interoperate across most major computing platforms, operating systems and
databases, enabling organizations to manage their desktop and media resources
throughout the enterprise. Together with the Company's platform software,
Genesys offers a range of applications that provide advanced ECTI solutions,
such as intelligent call routing, outbound/blended dialing and campaign
management, real-time and historical management reporting and Web-based
telephony fulfillment. The open, standards-based nature of the Company's
products allows an organization to leverage its investments in existing
telecommunications and computing infrastructure, software applications and
employee training. The Company's products also support the integration of
internally developed or commercially available business applications, such as
help desk or sales force automation. In order to assist customers in realizing
the maximum benefit from its solutions, the Company augments its products with
a range of implementation, training and support services. The Company has
targeted formal call centers within key industries as important entry points
for its products. To date, the Company has licensed its products to more than
125 end-users worldwide, including: Ameritech, Bank of America, BT, Charles
Schwab, FedEx, Gateway 2000, MCI, NationsBanc, NB Tel, The SABRE Group and
Sprint/United Management.
An organization's ability to manage the increasingly complex information
requirements of customers and employees in a cost-effective manner is an
important competitive advantage. Modern organizations communicate, both
internally and externally, through a variety of different communications media,
including telephony, voice mail, e-mail, the Internet/intranets and video.
Traditionally, each of these media and its associated databases and information
retrieval systems have been treated as a unique and separate environment within
which specialized applications have been developed, resulting in the creation
of "silos" of information that are not intelligently utilized across the
enterprise. This lack of
3
<PAGE>
interoperability has prevented organizations from optimally managing customer
interactions and employee communications and has, in turn, limited
productivity, increased costs and restricted the ability of organizations to
generate greater customer satisfaction and loyalty. To be most effective,
organizations now need to make information available at any time it is needed,
anywhere it may be located and in any way that it may be requested. The
shortcomings in the traditional means by which organizations have managed
customer interactions and employee communications, in combination with general
business trends such as the increasingly global nature of business operations,
the proliferation of distributed computing environments, the deregulation of
major industries and the increase in merger and acquisition and partnering
activity, have created what the Company believes to be a significant market
opportunity for open, scaleable, standards-based ECTI solutions.
The Company's objective is to be the leading provider worldwide of open,
scaleable ECTI platform and applications software. In order to meet this goal,
the Company's strategy is to establish the Genesys framework as a de facto ECTI
standard, provide industry-leading, technologically advanced products, target
strategic markets, develop and leverage strategic business relationships and
penetrate the network services market. The Company's sales and marketing
strategy is to target large organizations through its worldwide direct sales
force and through a broad range of indirect channels, including
telecommunications equipment vendors, systems integrators, VARs, ISVs and NSPs.
THE OFFERING
<TABLE>
<C> <S>
Common Stock to be offered by the Company........... 2,000,000 shares
Common Stock to be outstanding after this offering.. 16,799,812 shares(1)
Proposed Nasdaq National Market symbol.............. GCTI
Use of Proceeds..................................... Working capital and general
corporate purposes
</TABLE>
- --------
(1) Based on the number of shares outstanding as of December 31, 1996. Excludes
5,059,191 shares of Common Stock issuable upon exercise of stock options
and 420,282 shares of Common Stock underlying warrants to purchase Common
Stock, which options and warrants were outstanding as of December 31, 1996.
Also excludes 1,612,000 shares of Common Stock issuable upon exercise of
stock options granted during the period commencing on January 1, 1997 and
ending on March 31, 1997. Also excludes 854,363 shares of Common Stock
issuable upon conversion of Series C Preferred Stock, 675,000 shares of
Common Stock and 494,629 shares of Common Stock underlying warrants to
purchase Series C Preferred Stock, which Series C Preferred Stock, Common
Stock and warrants were issued on February 26, 1997. Assumes no exercise of
stock options or warrants after December 31, 1996. See "Management--Stock
Plans", "Description of Capital Stock--Warrants" and Notes 9 and 10 of
Notes to Consolidated Financial Statements.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------ ------------------
1993 1994 1995 1996 1995 1996
----- ------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
License.................. $ -- $ 460 $3,077 $ 7,369 $ 2,839 $ 10,233
Service.................. 956 1,272 1,403 1,950 600 1,571
----- ------ ------ ------- -------- --------
Total revenues........... 956 1,732 4,480 9,319 3,439 11,804
Cost of revenues:
License.................. -- 23 123 308 122 465
Service.................. 352 595 1,190 2,568 819 1,572
----- ------ ------ ------- -------- --------
Total cost of revenues... 352 618 1,313 2,876 941 2,037
----- ------ ------ ------- -------- --------
Gross margin.............. 604 1,114 3,167 6,443 2,498 9,767
Operating expenses:
Research and development. 357 578 959 3,673 1,562 3,527
Sales and marketing...... -- 162 705 3,030 911 5,038
General and
administrative.......... 503 534 1,343 2,979 1,500 1,440
----- ------ ------ ------- -------- --------
Total operating expenses. 860 1,274 3,007 9,682 3,973 10,005
----- ------ ------ ------- -------- --------
Income (loss) from
operations............... (256) (160) 160 (3,239) (1,475) (238)
Interest and other income
(expense), net........... (8) 23 (6) (88) (50) 215
----- ------ ------ ------- -------- --------
Net income (loss) (1)..... $(264) $ (137) $ 154 $(3,327) $ (1,525) $ (23)
===== ====== ====== ======= ======== ========
Pro forma net income $
(loss) per share (1)..... $ (.18) $ (.09) --
======= ======== ========
Pro forma weighted average
common shares and
equivalents.............. 18,644 17,760 20,154
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------
PRO PRO FORMA AS
ACTUAL FORMA(2) ADJUSTED(3)
------- -------- ------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 1,816 $ 4,316 $31,116
Working capital................................... 3,133 5,633 32,433
Total assets...................................... 16,201 18,701 45,501
Long-term obligations............................. 747 747 747
Total shareholders' equity........................ 5,542 8,042 34,842
</TABLE>
- --------
(1) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method of calculation.
(2) Pro forma as of December 31, 1996, to give effect to the exercise of
outstanding warrants to purchase 420,282 shares of Common Stock on a cash
basis prior to the closing of this offering and the conversion of the
Company's Preferred Stock into Common Stock. See Note 2 of Notes to
Consolidated Financial Statements.
(3) Pro forma as provided in footnote (2), and as adjusted to reflect the sale
of 2,000,000 shares of Common Stock by the Company at an assumed initial
public offering price of $15.00 per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization".
----------------
Design (COIL), NetVector, NetVectoring and VIDEOACD are registered trademarks
of the Company, and Call Center Pulse, Campaign Manager, DART, ICD, ICIS,
InterActive-T, T-Server and VIDEOICD are trademarks of the Company. This
Prospectus also includes trade names and trademarks of other companies.
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered hereby. Certain statements contained in
this Prospectus constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act, Section 21E of the Securities Exchange Act,
and the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. See "Special Note
Regarding Forward-Looking Statements".
LIMITED OPERATING HISTORY
The Company was founded in October 1990 and began shipment of its principal
product, T-Server, in 1991. As of December 31, 1996, the Company had an
accumulated deficit of approximately $3.6 million. The Company achieved
profitability in the quarter ended December 31, 1996, but there can be no
assurance that the Company will remain profitable on a quarterly basis or
achieve profitability on an annual basis. The Company's limited operating
history makes the prediction of future operating results unreliable. Although
the Company has experienced significant growth in revenues in recent periods,
the Company does not believe prior growth rates are sustainable or indicative
of future revenue growth rates or operating results. The Company's prospects
must be considered in light of the risks encountered by companies in an early
stage of development, particularly companies in new and rapidly evolving
markets. Future operating results will depend on many factors, including
demand for and market acceptance of the Company's products, the level of
product and price competition, the ability of the Company to develop, market
and deploy new, high-quality products and to control costs, the ability of the
Company to expand its direct sales force and indirect distribution channels,
the Company's success in attracting and retaining key personnel, the
uncertainty, recent emergence and acceptance of the ECTI market, and
technological changes in the ECTI market. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have in the past fluctuated and
may in the future fluctuate significantly, depending on a number of factors,
many of which are beyond the Company's control, including: market acceptance
of the Company products; the Company's ability to develop and market new
products and product enhancements; the size, timing and recognition of revenue
from significant orders; the length of sales and implementation cycles;
competition; the Company's success in establishing indirect sales channels and
expanding its direct sales force; the Company's success in retaining and
training third-party support personnel; the timing of new product releases by
the Company and its competitors; the delay or deferral of significant revenues
until acceptance of software required by an individual license transaction;
technological changes in the ECTI market; the deferral of customer orders in
anticipation of new products and product enhancements; purchasing patterns of
indirect channel partners and customers; changes in pricing policies by the
Company and its competitors; the mix of revenues derived from the Company's
direct sales force and various indirect distribution and marketing channels;
the mix of revenues derived from domestic and international customers;
seasonality; changes in operating expenses; changes in relationships with
strategic partners; changes in Company strategy; personnel changes; foreign
currency exchange rate fluctuations; the ability of the Company to control its
costs and general economic factors.
The Company currently operates with limited backlog. The Company derives
substantially all of its revenues from licenses of the Company's platform and
related applications software and services.
6
<PAGE>
The Company believes that the purchase of its products is relatively
discretionary and generally involves a significant commitment of capital and
other resources by a customer. The Company's typical order size per site
ranges from $150,000 to $300,000. The timing of the receipt and shipment of a
single order can have a significant impact on the Company's revenues and
results of operations for a particular quarter. In situations requiring
customer acceptance of implementation, the Company does not recognize license
revenues until installations are complete and does not recognize the
consulting component of service revenues until the services are rendered. As a
result, revenue recognition may be delayed in many instances. Historically,
the Company has often recognized a substantial portion of its revenues in the
last month of a quarter, with these revenues frequently concentrated in the
last two weeks of a quarter. As a result, product revenues in any quarter are
substantially dependent on orders booked and shipped in that quarter, and
revenues for any future quarter are not predictable with any significant
degree of certainty. Product revenues are also difficult to forecast because
the market for ECTI software products is rapidly evolving, and the Company's
sales cycle, which may last from three to nine months or more, varies
substantially from customer to customer. The Company's quarterly revenues are
also subject to seasonal fluctuations, particularly in the quarter ending in
September when reduced activity outside North America during the summer months
can adversely affect the Company's revenues. The Company's expenses are
relatively fixed and are based, in part, on its expectations as to future
revenues. Consequently, if revenue levels are below expectations, net income
would be disproportionately affected because a proportionately smaller amount
of the Company's expenses varies with its revenues. In addition, the Company
expects that sales derived through indirect channels, which are more difficult
to forecast and may have lower gross margins than direct sales, will increase
as a percentage of total revenues. Due to all of the foregoing factors, the
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. It is likely that in some future quarter
the Company's operating results will be below the expectations of public
market analysts and investors. In such event, the price of the Company's
Common Stock would likely be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
LENGTHY SALES CYCLE
Because of the mission-critical nature of the Company's products, the
purchase of such products is typically a strategic decision that requires
approval at senior levels of customers' organizations. In addition, the
purchase of the Company's products involves a significant commitment of
customers' personnel and financial and other resources. Furthermore, the cost
of the Company's products is typically only a small portion of the related
hardware, software, development, training and integration costs of
implementing an ECTI solution. For these and other reasons, the sales cycle
associated with the purchase of the Company's products is typically complex,
lengthy and subject to a number of significant risks, including changes in
customers' budgetary constraints and approval at senior levels of customers'
organizations, over which the Company has no control. The Company's sales
cycle can range from three to nine months or more and varies substantially
from customer to customer. Because of the lengthy sales cycle and the
dependence of the Company's quarterly revenues upon a small number of orders
that represent large dollar amounts, the loss or delay of a single order could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Sales, Marketing
and Support".
LENGTHY IMPLEMENTATION CYCLE; DEPENDENCE ON THIRD PARTY CONSULTANTS
The time required to deploy the Company's products can vary significantly
with the needs of its customers and the complexity of a customer's
telecommunications and computing infrastructure. Accordingly, deployment of
the Company's products is generally a process that extends for several months
and may involve a pilot implementation, successful completion of which is
typically a prerequisite for full-scale deployment. Because of their
complexity, larger implementations, especially
7
<PAGE>
multi-site or enterprise-wide implementations, can take several quarters. The
Company generally relies upon internal resources or third-party consultants to
implement its products. The Company has experienced difficulty implementing
customer orders on a timely basis in the past due to the limited resources
available to the Company. There can be no assurance that the Company will not
experience delays in the implementation of orders in the future, that third-
party consultants will be available as needed by the Company to implement
orders on a timely basis or that consultants will be able to successfully
install the Company's products. Any delays in the implementation of orders
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, any significant delay in the
implementation of a customer order could cause a customer to reject the
Company's software, which could impair the Company's reputation. The rejection
of the Company's software by customers could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Sales, Marketing and Support".
DEPENDENCE ON NEW PRODUCTS; RAPID TECHNOLOGICAL CHANGE
The market for the Company's products is characterized by rapid
technological change, frequent new product introductions, changes in customer
requirements and emerging industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards could
render the Company's existing products obsolete and unmarketable. The life
cycles of the Company's products are difficult to estimate. The Company's
future success will depend upon its ability to develop and introduce new
products and product enhancements on a timely basis that keep pace with
technological developments and emerging industry standards and address
increasingly sophisticated requirements of its customers. There can be no
assurance that the Company will be successful in developing and marketing new
products or product enhancements that respond to technological changes or
evolving industry standards, that the Company will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of these new products or product enhancements, or that its new
products or product enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. If the Company is unable, for
technological or other reasons to develop and market new products or product
enhancements on a timely and cost-effective basis, the Company's business,
financial condition and results of operations would be materially adversely
affected. As part of the Company's ongoing development process, in March 1997,
the Company announced the availability of version 5.0 of its T-Server platform
software and the potential future release of several new application products
and certain enhancements to existing application products, which the Company
currently plans to make available at various times during 1997. Certain of the
Company's competitors currently offer products with features and functionality
similar to these planned products and product enhancements. Due to the
complexity of ECTI software and the difficulty in gauging the engineering
effort required to produce these planned products and product enhancements,
such planned products and product enhancements are subject to significant
technological risks. There can be no assurance that such planned products and
product enhancements will be introduced and deployed on a timely basis or at
all. In the past, the Company has experienced significant delays in the
commencement of commercial shipments of its new and enhanced products. If any
new products or product enhancements are delayed or do not achieve market
acceptance, this may result in the cancellation or delay of customer orders
which could materially adversely affect the Company's business, financial
condition and results of operations. The Company has also, in the past,
experienced delays in purchases of its products by customers anticipating the
launch of new products by the Company. There can be no assurance there will
not be significant cancellations of orders received in anticipation of new
product introductions in the future.
The Company's products may contain undetected errors or failures when first
introduced or as new versions are released. The Company has in the past
discovered software errors in its new products and product enhancements after
their introduction and has experienced delays or lost revenues during those
periods required to correct these errors. There can be no assurance that,
8
<PAGE>
despite testing by the Company and by current and potential customers, errors
will not be found in new products and product enhancements after commencement
of commercial shipments, resulting in loss of or delay in market acceptance,
which could have a material adverse effect upon the Company's business,
results of operations and financial condition. See "Business--Products" and
"--Research and Development".
COMPETITION
The market for the Company's software products is highly competitive and
subject to rapid technological change. The Company expects competition to
increase significantly in the future. The Company's principal competition
currently comes from different market segments including computer telephony
platform developers, computer telephony applications software developers and
telecommunications equipment vendors. These competitors include Aspect
Telecommunications, Dialogic Corporation, GeoTel Communications Corporation,
Hewlett-Packard, IBM Corporation, IEX Corporation, Lucent Technologies,
Northern Telecom and Tandem Computers Incorporated. The Company also competes
to a lesser extent with new or recent entrants to the marketplace. The
Company's competitors vary in size and in the scope and breadth of the
products and services offered. Many of the Company's current and potential
competitors have longer operating histories, significantly greater financial,
technical, marketing, customer service and other resources, greater name
recognition and a larger installed base of customers than the Company. As a
result, such competitors may be able to respond to new or emerging
technologies and changes in customer requirements more expediently than the
Company, or to devote greater resources to the development, promotion and sale
of products than can the Company. Current and potential competitors have
established and may in the future establish cooperative relationships among
themselves or with third parties to increase the ability of their products to
address the needs of the Company's current or prospective customers. In
addition, as the ECTI market develops, a number of companies with
significantly greater resources than the Company could attempt to increase
their presence in the ECTI market by acquiring or forming strategic alliances
with competitors of the Company. Accordingly, it is likely that new
competitors or alliances among competitors will emerge and may rapidly acquire
significant market share, which would have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, because there are relatively low barriers to entry in the software
market, the Company expects additional competition from other established and
emerging companies if the ECTI market continues to develop and expand.
Increased competition is likely to result in price reductions, reduced margins
and loss of market share, any of which could materially adversely affect the
Company's business, financial condition and results of operations. In order to
be successful in the future, the Company must respond promptly and effectively
to the challenges of technological change, changing customer requirements and
competitors' innovations. There can be no assurance that the Company will be
able to compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially adversely
affect its business, and financial condition and results of operations.
PRODUCT CONCENTRATION
Substantially all of the Company's revenues to date have been attributable
to the license of the Company's platform and related applications software and
services. These products and services are currently expected to account for
substantially all of the Company's revenues for the foreseeable future.
Consequently, a decline in demand for, or failure to achieve broad market
acceptance of, the Company's platform and related applications software
products, as a result of competition, technological change or otherwise, would
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's application products can only be used
in conjunction with the Company's platform products. As a result, a decline in
demand for the Company's platform products would adversely affect sales of the
Company's application products. Furthermore, if customers experience problems
with the Company's platform products, it may limit their ability to utilize
the
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Company's application products. The Company's future financial performance will
depend in part on the successful development, introduction and customer
acceptance of new and enhanced versions of its platform and related
applications software products. There can be no assurance that the Company will
continue to be successful in marketing its platform products, related
applications software or any new or enhanced products. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Products".
MANAGEMENT OF GROWTH
The Company has recently experienced a period of significant expansion of its
operations, including substantial growth in its number of employees, that has
placed a strain upon its management, information systems and operations. As of
February 28, 1997, the Company had a total of 293 employees, as compared to 159
on June 30, 1996. The failure of the Company to manage its internal expansion
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's ability to compete
effectively and to manage future growth, if any, will require the Company to
continue to improve its financial and management controls, reporting systems
and procedures on a timely basis and expand, train and manage its employee
workforce. Six of the Company's nine executive officers joined the Company
within the past year, including its Chief Financial Officer, Vice President of
Sales, Vice President of Channels, Vice President of Business Development, Vice
President of Product Development and Vice President of Network Services. In
addition, the Company is currently attempting to recruit a Vice President of
Marketing. The Company's ability to compete effectively and to successfully
implement its strategies will depend in part upon its ability to integrate
these and future new managers into its operations. Competition for such
personnel is intense, and the failure to attract, train and retain such
personnel in the future on a timely basis could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company's future operating results will also depend on its ability to expand
its sales and marketing organizations, further develop its channels to
penetrate different and broader markets and expand its support organization to
accommodate the rapid growth in its installed base. There can be no assurance
that the Company will be able to do so successfully. The Company's failure to
do so could have a material adverse effect upon the Company's business,
financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Sales, Marketing and Support".
DEPENDENCE ON THIRD-PARTY RESELLERS
An integral part of the Company's strategy is to develop multiple
distribution channels, to increase the proportion of its revenue obtained from
third-party resellers and to enhance the Company's installation and deployment
capabilities. The Company intends to continue to expend significant resources
to develop third-party reseller channels, such as value-added resellers
("VARs"), original equipment manufacturers ("OEMs"), systems integrators and
independent software vendors ("ISVs"). Many of these third-party resellers do
not have minimum purchase or resale requirements and can cease marketing the
Company's products at any time. Certain of these third-party resellers also
offer competing products that they produce or that are produced by third
parties. There can be no assurance that the Company's existing third-party
resellers will continue to provide the level of services and technical support
required by the Company's customers or that they will not emphasize their own
or third-party products to the detriment of the Company's products. The loss of
a significant number of the Company's third-party resellers, the failure of
such parties to sell the Company's products, or the inability of the Company to
attract and retain new third-party resellers with the technical, industry and
application expertise required to market and deploy the Company's products
successfully in the future could have a material adverse effect on the
Company's business, financial condition and results of operations. To the
extent that the Company is successful in increasing its sales through third-
party resellers, those sales may be at more discounted rates, and revenue to
the Company for each such sale may be less than if the Company had licensed the
same products to the customer directly. See "Business--Sales, Marketing and
Support".
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The Company is also seeking to establish strategic relationships with
telecommunications switch vendors. Certain of these vendors' products offer
functionality provided by the Company's products. In addition, certain of these
vendors offer competing products that are produced by third parties. The
Company has entered into reseller agreements with certain of the
telecommunications switch vendors, including those that compete with the
Company. Such switch vendors often attempt to sell their products or third
party products, rather than the Company's products, to prospective customers.
Many of these switch vendors do not have minimum purchase or resale
requirements and can cease marketing the Company's products at any time. There
can be no assurance that the telecommunications switch vendors that currently
resell the Company's products or partner with the Company will continue to do
so in the future. There can also be no assurance that the Company will be able
to develop relationships with other switch vendors in the future. The loss of a
significant number of the switch vendors or failure of such parties to sell the
Company's products or the inability of the Company to attract and retain new
switch vendor resellers in the future could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Sales, Marketing and Support" and "--Competition".
A key element of the Company's strategy is to incorporate its products into
local and long distance network carriers' product offerings. In the near term,
the Company is focused on enabling Network Service Providers ("NSPs") to offer
ECTI services to their corporate customers. There can be no assurance that the
Company will be able to establish relationships with NSPs, that NSPs will
successfully incorporate the Company's products into their product offerings,
or that corporate or other customers will be interested in purchasing the
Company's products through the NSPs. Failure of the Company to develop this
channel for any of the foregoing or other reasons could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Sales, Marketing and Support".
GEOTEL LITIGATION
On December 17, 1996, GeoTel Communications Corporation ("GeoTel") filed a
lawsuit in the United States District Court for the District of Massachusetts
naming the Company as defendant, and alleging infringement of a patent issued
to GeoTel entitled "Communications System Using a Central Controller to Control
at Least One Network and Agent System". On February 10, 1997, the Company filed
an answer in response to the complaint filed by GeoTel, asserting that the
GeoTel patent is invalid, denying the alleged patent infringement and seeking
dismissal of the complaint with prejudice. The Company believes that it has
meritorious defenses to the asserted claims and intends to defend the
litigation vigorously. However, the outcome of litigation is inherently
unpredictable, and there can be no assurance that the results of these
proceedings will be favorable to the Company or that they will not have a
material adverse effect on the Company's business, financial condition or
results of operations. Regardless of the ultimate outcome, the GeoTel
litigation could result in substantial expense to the Company and significant
diversion of effort by the Company's technical and managerial personnel. If the
Court determines that the Company infringes GeoTel's patent and that the GeoTel
patent is valid and enforceable, it could issue an injunction against the use
or sale of certain of the Company's products and it could assess significant
damages against the Company. Accordingly, an adverse determination in the
proceeding could subject the Company to significant liabilities and require the
Company to seek a license from GeoTel. Although patent and intellectual
property disputes in the software area have sometimes been settled through
licensing or similar arrangements, costs associated with such arrangements may
be substantial, and there can be no assurance that a license from GeoTel, if
required, would be available to the Company on acceptable terms or at all.
Accordingly, an adverse determination in the GeoTel litigation could prevent
the Company from licensing certain of its software products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
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CUSTOMER CONCENTRATION
A relatively small number of customers have accounted for a significant
percentage of the Company's revenues. In fiscal 1994, one customer accounted
for 26.5% of total revenues; in fiscal 1995, three other customers accounted
for 11.1%, 11.2% and 12.8% of total revenues, respectively; and in fiscal
1996, one of these customers and two other customers accounted for
approximately 10.2%, 10.0% and 10.8% of total revenues, respectively. No
individual customer accounted for 10.0% or more of total revenues in the six
months ended December 31, 1996. The Company expects that it will continue to
be dependent upon a limited number of customers for a significant portion of
its revenues in future periods, and such customers are expected to vary from
period-to-period. In general, the Company's customers are not contractually
obligated to license or purchase additional products or services from the
Company, and these customers generally have acquired fully-paid licenses to
the installed product. As a result, the failure by the Company to successfully
sell its products to one or more targeted customers in any particular period,
or the deferral or cancellation of orders by one or more customers, could have
a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that any customer will
continue to purchase the Company's products. The loss of a major customer or
any reduction in orders by such customer, including reductions due to market
or competitive conditions, would have a material adverse effect on the
Company's business, financial condition and results of operations. The
Company's operating results may in the future be subject to substantial
period-to-period fluctuations as a consequence of such customer concentration.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--Sales, Marketing and Support".
DEPENDENCE ON EMERGING ECTI MARKET
The market for ECTI software is an emerging market that is extremely
competitive, rapidly evolving and subject to rapid technological change. The
Company's future financial performance will depend in large part on continued
growth in the number of organizations adopting ECTI solutions. The market for
the Company's products is relatively new and undeveloped, and if the demand
for ECTI software fails to develop, or develops more slowly than the Company
currently anticipates, it could have a material adverse effect on the demand
for the Company's products and on its business, financial condition and
results of operations.
RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS
For the fiscal years ended June 30 1994, 1995 and 1996, and the six months
ended December 31, 1996, the Company derived 40.6%, 30.9%, 36.2% and 46.7% of
its total revenues, respectively, from sales outside the United States. The
Company anticipates that a significant portion of its revenues for the
foreseeable future will be derived from sources outside the United States. The
Company intends to continue to expand its sales and support operations outside
the United States and to enter additional international markets. This will
require significant management attention and resources, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. To successfully expand international sales, the Company
must establish additional foreign operations, hire additional personnel,
establish a foreign direct sales force and recruit additional international
resellers. To the extent that the Company is unable to do so in a timely
manner, the Company's growth in international sales, if any, will be limited,
and the Company's business, financial condition and results of operations
could be materially adversely affected. The Company's ability to expand its
ECTI platform and applications software internationally is limited to those
countries where there is regulatory approval of the third-party telephony
hardware supported by the Company's products. The Company expects to commit
additional development resources to customizing its products for selected
international markets and to developing international sales and support
channels. There can be no assurance that the Company will be successful in
expanding its operations outside the United States, entering additional
international markets or expanding its international sales. See "Business--
Customers" and "--Sales, Marketing and Support".
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International operations are generally subject to a number of risks,
including costs of customizing products for foreign countries, protectionist
laws and business practices that support local competition to the Company's
detriment, dependence on local resellers, multiple, conflicting and changing
government regulations regarding communications, use of data and control of
Internet access, longer payment cycles, unexpected changes in regulatory
requirements, import and export restrictions and tariffs, difficulties in
staffing and managing foreign operations, greater difficulty or delay in
accounts receivable collection, potentially adverse tax consequences, the
burdens of complying with a variety of foreign laws, the impact of possible
recessionary environments in economies outside the United States and political
and economic instability. The Company's international sales are currently
denominated in both U.S. dollars and foreign currencies. The Company believes
that an increasing portion of the Company's revenues, cost of revenues and
operating expenses will be denominated in foreign currencies. Although it is
impossible to predict future exchange rate movements between the U.S. dollar
and other currencies, it can be anticipated that to the extent the U.S. dollar
strengthens or weakens against other currencies, a substantial portion of the
Company's revenues and operating expenses will be proportionally lower or
higher than would be the case in a more stable foreign currency environment.
Although the Company may from time to time undertake foreign exchange hedging
transactions to cover a portion of its foreign currency transaction exposure,
the Company does not currently attempt to cover potential foreign currency
exposure. In the event the Company increases its international sales, its
total revenue may also fluctuate to a greater extent due to the seasonality of
European sales during the summer months. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation" and "Business--
Sales, Marketing and Support".
DEPENDENCE ON KEY PERSONNEL
The Company's future performance will depend significantly upon the
continued contributions of its executive officers and of its technical, sales,
marketing, customer service and finance personnel. The Company does not have
an employment agreement with any of its employees or maintain key person life
insurance with respect to any employee. The loss of any of the Company's
executive officers, in particular, Gregory Shenkman, President and Chief
Executive Officer, Alec Miloslavsky, Vice Chairman of the Board and Chief
Technical Officer or Michael J. McCloskey, Vice President of Finance and
International and Chief Financial Officer, or other key personnel could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company's future performance also depends on its
continuing ability to attract, train and retain highly qualified technical,
sales, marketing, customer service and finance personnel. The Company
continues to require additional personnel due to its recent growth and
occasional delays in filling key positions have placed additional burdens on
existing personnel. See "Business--Employees" and "Management".
GOVERNMENT REGULATION OF IMMIGRATION
Over 35% of the Company's employees, including approximately 75% of the
Company's technical staff, are foreign citizens. Accordingly, the Company must
comply with the immigration laws of the United States. Most of the Company's
foreign employees are working in the United States under H-1 temporary work
visas ("H-1 Visas"). An H-1 Visa allows the holder to work in the United
States for three years and, thereafter, to apply for a three-year extension.
Upon the expiration of such period, unless the holder thereof has become a
Lawful Permanent U.S. Resident or has obtained some other legal status
permitting continued employment, that holder must spend at least one year
abroad before reapplying for an H-1 Visa. Furthermore, Congress and
administrative agencies with jurisdiction over immigration matters have
periodically expressed concerns over the level of immigration into the United
States. The inability of the Company to utilize the continued services of such
employees would have a material adverse effect on the Company's business,
financial condition and results of operations.
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DEPENDENCE ON ABILITY TO INTEGRATE WITH THIRD-PARTY TECHNOLOGY
A key element of the Company's strategy is to establish the Genesys
framework as an industry standard for the development of ECTI applications and
solutions. The Company's products currently integrate with most major
telephone systems and interoperate across most major computing platforms,
operating systems and databases. In the event that the Company's platform is
no longer able to readily integrate with major telephone systems and computing
platforms, operating systems or databases, the Company could be required to
redesign its platform product to ensure compatibility with such systems. There
can be no assurance that the Company would be able to redesign its products or
that any redesign would achieve market acceptance. The inability of the
Company's platform product to integrate with third-party technology would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Architecture" and "--Products".
PRODUCT LIABILITY
The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential liability
claims. However, it is possible that the limitation of liability provisions
contained in the Company's license agreements may not be effective under the
laws of certain jurisdictions, and that liability limitations may be
negotiated in certain contractual agreements on a less favorable basis.
Although the Company has not experienced any product liability claims to date,
the sale and support of products by the Company and the incorporation of
products from other companies may entail the risk of such claims. The Company
does not currently have insurance against product liability risks, and, if the
Company were to elect to obtain such insurance, there can be no assurance that
such insurance will be available to the Company on commercially reasonable
terms or at all. A successful product liability claim brought against the
Company could have a material adverse effect upon the Company's business,
financial condition and results of operations. See "Business--Architecture"
and "--Products".
PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon proprietary technology. The
Company relies primarily on a combination of copyright, trademark and trade
secret laws, as well as nondisclosure agreements and other contractual
provisions to protect its proprietary rights. The Company presently holds no
patents, and as of March 31, 1997, had filed sixteen United States patent
applications and one corresponding foreign patent application. There can be no
assurance that any of the Company's patent applications will be approved, that
the Company will develop additional proprietary products or technologies that
are patentable, that any issued patent will provide the Company with any
competitive advantages or will not be challenged by third parties or that the
patents of others will not have an adverse effect on the Company's ability to
do business. Furthermore, there can be no assurance that others will not
independently develop similar products, duplicate the Company's products or,
if patents are issued to the Company, design around the patents issued to the
Company. As part of its confidentiality procedures, the Company generally
enters into nondisclosure agreements with its employees, consultants and other
third-party providers who serve the Company in any technical capacity or who
have access to confidential information of the Company. In addition, the
Company limits access to and distribution of its software, documentation and
other proprietary information. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy may become a problem.
In addition, effective protection of intellectual property rights may be
unavailable or limited in certain countries in which the Company currently
sells products and countries the Company may target to expand its sales
efforts. Accordingly, there can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.
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There has also been a substantial amount of litigation in the software
industry regarding intellectual property rights. The Company has from time to
time received claims that it is infringing third parties' intellectual
property rights, and there can be no assurance that third parties will not in
the future claim infringement by the Company with respect to current or future
products, trademarks or other proprietary rights. The Company expects that
software product developers will increasingly be subject to infringement
claims as the number of products and competitors in the Company's industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of this offering, the present directors, executive officers
and principal shareholders of the Company and their affiliates will
beneficially own approximately 65.0% of the outstanding Common Stock. Upon the
anticipated elimination of cumulative voting rights currently held by the
Company's shareholders, the foregoing shareholders will be able to control all
matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. Under the General
Corporations Law of California, the Company's shareholders are currently
entitled to cumulate their votes for the election of directors so long as at
least one shareholder has given notice at the shareholder meeting prior to the
voting of that shareholder's desire to cumulate his or her votes. The Bylaws,
in accordance with the General Corporations Law of California, however,
provide that cumulative voting will no longer be permitted at such time as (i)
the Company's shares of Common Stock are listed on the Nasdaq National Market
and the Company has at least 800 holders of its equity securities as of the
record date of the Company's most recent annual meeting of shareholders or
(ii) the Company's shares of Common Stock are listed on the New York Stock
Exchange or the American Stock Exchange. The Company expects to have its
shares listed on the Nasdaq National Market and to have at least 800 holders
of its equity securities by the record date for its next annual meeting of
shareholders. This provision of the Bylaws, along with certain other
provisions of the Bylaws pertaining to the elimination of shareholder action
by written consent and the requirement that shareholders may only call a
special meeting of shareholders upon a request of shareholders owning at least
50% of the Company's Common Stock, could delay or make more difficult a proxy
contest involving the Company, which could adversely affect the market price
of the Company's Common Stock. See "Principal and Selling Shareholders" and
"Description of Capital Stock--Anti-takeover Effects of Provisions of the
Bylaws".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common Stock
of the Company, and there can be no assurance that an active public market
will develop or will be sustained after this offering or that investors will
be able to sell the Common Stock should they desire to do so. The initial
public offering price will be determined by negotiations among the Company,
the Selling Shareholders and the representatives of the Underwriters based
upon several factors. The trading price of the Company's Common Stock could be
subject to wide fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new products by the
Company or its competitors, as well as other events or factors. In addition,
the stock market has from time to time experienced extreme price and volume
fluctuations, which have particularly affected the market price of many
technology companies and which often have been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the Company's Common Stock. See "Underwriting" for
a discussion of factors to be considered in determining the initial public
offering price.
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SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for
sale in the public market is limited by restrictions under the Securities Act
of 1933, as amended (the "Securities Act"), and lock-up agreements under which
the holders of such shares have agreed not to sell or otherwise dispose of any
of their shares for a period of 180 days after the date of this Prospectus
without the prior written consent of the Representatives of the Underwriters.
However, such Representatives may, in their sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-
up agreements. As a result of these restrictions, based on shares outstanding
and options granted as of December 31, 1996, the following shares of Common
Stock will be eligible for future sale. On the date of this Prospectus, no
shares other than the 2,000,000 shares offered hereby will be eligible for
sale. Upon the expiration of the lock-up period 180 days after the date of
this Prospectus, an additional 14,739,812 shares will become available for
sale. In addition, 1,529,363 shares which were issued in February 1997 will
become eligible for sale in February 1998. Furthermore, the Company intends to
register on a registration statement on Form S-8, approximately 30 days after
the effective date of this offering, a total of approximately
10,315,957 shares of Common Stock subject to outstanding options or reserved
for issuance under the Company's 1997 Stock Incentive Plan, and a total of
500,000 shares of Common Stock reserved for issuance under the Company's
Employee Stock Purchase Plan. Upon expiration of the lock-up agreements
referred to above, holders of approximately 2,797,878 shares of Common Stock
(excluding the following shares issued on February 26, 1997, the holders of
which are entitled to such registration rights, (i) 854,363 shares of Common
Stock issuable upon conversion of Series C Preferred Stock, (ii) 675,000
shares of Common Stock and (iii) 494,629 shares of Common Stock underlying
warrants to purchase Series C Preferred Stock) will be entitled to certain
rights with respect to the registration of such shares under the Securities
Act . If such holders, by exercising their registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price for the Company's
Common Stock. See "Description of Capital Stock--Registration Rights" and
"Shares Eligible for Future Sale".
EFFECT OF CERTAIN CHARTER PROVISIONS; ANTI-TAKEOVER EFFECTS OF PROVISIONS OF
THE BYLAWS
Immediately after the closing of this offering, the Company's Board of
Directors will have the authority to issue up to 5,000,000 shares of Preferred
Stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further
vote or action by the shareholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. Further, certain provisions of the Company's Bylaws pertaining to the
future elimination of cumulative voting and shareholder action by written
consent, and the requirement that shareholders may call a special meeting of
shareholders only upon a request of shareholders owning at least 50% of the
Company's Common Stock, could delay or make more difficult a proxy contest
involving the Company, which could adversely affect the market price of the
Company's Common Stock. See "Description of Capital Stock--Preferred Stock"
and "--Anti-takeover Effects of Provisions of the Bylaws".
DILUTION
The initial public offering price is substantially higher than the net
tangible book value per share of Common Stock. Investors participating in this
offering will incur immediate, substantial dilution. To the extent outstanding
options and warrants to purchase the Company's Common Stock are exercised,
there will be further dilution. See "Dilution".
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THE COMPANY
Genesys is a leading provider of enterprise-wide platform and applications
software that enables organizations to integrate critical business information
and computing resources with telephony and other telecommunications media. The
Company's products allow an organization to optimally manage its customer
interactions and employee communications to increase productivity, lower costs
and achieve greater customer satisfaction and loyalty. In addition, the
Company's products enable organizations to develop and offer new or enhanced
revenue-generating products and services. Genesys believes that it is the
first company to offer a suite of open, scaleable, enterprise-wide platform
and applications software solutions to address the evolving needs of
organizations for intelligent communications, a new market paradigm known as
Enterprise Computer Telephony Integration ("ECTI").
Genesys Telecommunications Laboratories, Inc. was incorporated in California
in October 1990. As used in this Prospectus, unless the context otherwise
indicates, references to "Genesys" or the "Company" refer to Genesys
Telecommunications Laboratories, Inc. and its subsidiaries. The Company's
principal executive offices are at 1155 Market Street, San Francisco,
California 94103 and its telephone number is (415) 437-1100.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $26.8 million
($ if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $15.00 per share and after
deducting estimated underwriting discounts and estimated offering expenses.
The primary purposes of this offering are to create a public market for the
Common Stock, to facilitate future access to public markets and to obtain
additional equity capital. The Company expects to use the net proceeds for
general corporate purposes, including working capital. A portion of the net
proceeds may also be used for the acquisition of businesses, products and
technologies that are complementary to those of the Company. Although the
Company has no present plans, agreements or commitments and is not currently
engaged in any negotiations with respect to any such transaction, the Company
may from time-to-time evaluate such opportunities. Pending such uses, the net
proceeds of this offering will be invested in investment grade, interest-
bearing securities.
DIVIDEND POLICY
The Company has not paid any cash dividends on its capital stock since its
inception and does not intend to pay any cash dividends on its Common Stock in
the foreseeable future. Pursuant to the Company's bank line of credit
agreement, the Company may not pay cash dividends on its capital stock without
the bank's prior approval. See Note 7 to Notes to Consolidated Financial
Statements.
17
<PAGE>
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
December 31, 1996 was $8,042,000, or approximately $0.53 per share. Net
tangible book value per share represents the amount of the Company's
shareholders' equity, less intangible assets, divided by 15,220,094 shares of
Common Stock outstanding after giving effect to the conversion of all
outstanding shares of Preferred Stock into 2,797,878 shares of Common Stock
and the exercise of an outstanding warrant to purchase 420,282 shares of
Common Stock at a price of $5.9483 per share upon completion of this offering
and excluding 854,363 shares of Common Stock issuable upon conversion of
Series C Preferred Stock, 675,000 shares of Common Stock and 494,629 shares of
Common Stock underlying warrants to purchase Series C Preferred Stock, all of
which were issued on February 26, 1997.
Net tangible book value dilution per share represents the difference between
the amount per share paid by purchasers of shares of Common Stock in this
offering made hereby and the pro forma net tangible book value per share of
Common Stock immediately after completion of this offering. After giving
effect to the sale by the Company of 2,000,000 shares of Common Stock in this
offering at an assumed initial public offering price of $15.00 per share and
the application of the estimated net proceeds therefrom, the pro forma net
tangible book value of the Company as of December 31, 1996 would have been
$34,842,000 or $2.02 per share. This represents an immediate increase in net
tangible book value of $1.49 per share to existing shareholders and an
immediate dilution in net tangible book value of $12.98 per share to
purchasers of Common Stock in this offering, as illustrated in the following
table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $15.00
Net tangible book value per share as of December 31, 1996.... $0.53
Increase in net tangible book value per share attributable to
new investors............................................... 1.49
-----
Pro forma net tangible book value per share after this
offering...................................................... 2.02
------
Dilution per share to new investors............................ $12.98
======
</TABLE>
The following table sets forth as of December 31, 1996, after giving effect
to the conversion of all outstanding shares of Preferred Stock into Common
Stock upon completion of this offering and excluding all issuances subsequent
to December 31, 1996, of Common Stock and securities convertible, exchangeable
or exercisable for Common Stock, the difference between the existing
shareholders and the purchasers of shares in this offering (at an assumed
initial public offering price of $15.00 per share) with respect to the number
of shares purchased from the Company, the total consideration paid and the
average price per share paid:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... 15,220,094 88% $11,847,000 28% $ 0.78
New shareholders.............. 2,000,000 12 30,000,000 72 15.00
---------- --- ----------- --- ------
Totals.................... 17,220,094 100% $41,847,000 100%
========== === =========== ===
</TABLE>
As of December 31, 1996, there were options outstanding to purchase a total
of 5,059,191 shares of Common Stock at a weighted average exercise price of
$0.25 per share under the Company's 1995 Stock Option Plan. To the extent
outstanding options are exercised, there will be further dilution to new
investors. See "Management--Stock Plans" and Note 10 of Notes to Consolidated
Financial Statements.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, (i) on an actual basis, (ii) on a pro forma basis after
giving effect to the conversion of all outstanding shares of Preferred Stock
into Common Stock upon the closing of this offering, the filing of Amended and
Restated Articles of Incorporation upon the closing of this offering and the
assumed exercise of warrants to purchase 420,282 shares of Common Stock on a
cash basis for an aggregate of $2.5 million prior to the closing of this
offering, and (iii) on an as adjusted basis to reflect the receipt of the
estimated net proceeds from the sale by the Company of 2,000,000 shares of
Common Stock pursuant to this offering at an assumed initial public offering
price of $15.00 per share:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
PRO
PRO FORMA AS
ACTUAL FORMA ADJUSTED
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion(1)............. $ 747 $ 747 $ 747
Shareholders' equity:
Preferred Stock, 3,300,000 shares authorized,
2,797,878 shares outstanding at actual, 5,000,000
shares authorized pro forma and as adjusted; no
shares outstanding pro forma and as adjusted..... 8,995 -- --
Common Stock, 120,000,000 shares authorized;
12,001,934 shares outstanding at actual,
15,220,094 shares outstanding pro forma and
17,220,094 shares outstanding as adjusted(2)..... 352 11,847 38,647
Notes receivable.................................. (297) (297) (297)
Accumulated deficit............................... (3,508) (3,508) (3,508)
------- ------- -------
Total shareholders' equity...................... 5,542 8,042 34,842
------- ------- -------
Total capitalization............................ $ 6,289 $ 8,789 $35,589
======= ======= =======
</TABLE>
- --------
(1) See Notes 5 and 8 of Notes to Consolidated Financial Statements.
(2) Excludes 854,363 shares of Series C Preferred Stock, 675,000 shares of
Common Stock and 494,629 shares of Common Stock underlying warrants to
purchase Series C Preferred Stock, all of which were issued on February
26, 1997. Also excludes 5,059,191 shares of Common Stock issuable upon
exercise of stock options, at a weighted average exercise price of $0.25
per share, which were outstanding as of December 31, 1996, and 42,709
shares of Common Stock reserved for grant of future options or direct
issuances under the Company's 1995 Stock Option Plan. Further excludes
1,612,000 shares of Common Stock issuable upon exercise of stock options
granted during the period commencing on January 1, 1997 and ending on
March 31, 1997. Subsequent to December 31, 1996, the Company adopted,
subject to shareholder approval, (i) on January 30, 1997, a 1,000,000-
share increase in the number of shares issuable under the 1995 Stock
Option Plan, (ii) on February 28, 1997, a 2,000,000-share increase in the
number of shares issuable under the 1995 Stock Option Plan, (iii) on March
27, 1997, the 1997 Stock Incentive Plan to replace the 1995 Stock Option
Plan, with an increase in the number of shares available for issuance
thereunder of 2,400,000 shares and (iv) on March 27, 1997, the Employee
Stock Purchase Plan and reserved 500,000 shares of Common Stock for
issuance thereunder. See "Management--Stock Plans", and Note 13 of Notes
to Consolidated Financial Statements.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
notes thereto included elsewhere in this Prospectus. The consolidated
statement of operations data for the years ended June 30, 1994, 1995 and 1996,
and the consolidated balance sheet data at June 30, 1995 and 1996, are derived
from, and are qualified by reference to, the consolidated financial statements
included elsewhere in this Prospectus that have been audited by and reported
on by Arthur Andersen, LLP, independent public accountants, and should be read
in conjunction with those consolidated financial statements and notes thereto.
The consolidated balance sheet data at June 30, 1994, is derived from audited
consolidated financial statements not included herein. The consolidated
statement of operations data for the year-ended June 30, 1993 and the six-
month periods ended December 31, 1995 and 1996, and the consolidated balance
sheet data at June 30, 1993 and December 31, 1996, are derived from unaudited
consolidated financial statements that include, in the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the information set forth therein. The operating
results of the Company for the six month period ended December 31, 1996 are
not necessarily indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------ ------------------
1993 1994 1995 1996 1995 1996
----- ------ ------ ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
License.................. $ -- $ 460 $3,077 $ 7,369 $ 2,839 $ 10,233
Service.................. 956 1,272 1,403 1,950 600 1,571
----- ------ ------ ------- -------- --------
Total revenues........... 956 1,732 4,480 9,319 3,439 11,804
Cost of revenues:
License.................. -- 23 123 308 122 465
Service.................. 352 595 1,190 2,568 819 1,572
----- ------ ------ ------- -------- --------
Total cost of revenues... 352 618 1,313 2,876 941 2,037
----- ------ ------ ------- -------- --------
Gross margin.............. 604 1,114 3,167 6,443 2,498 9,767
Operating expenses:
Research and development. 357 578 959 3,673 1,562 3,527
Sales and marketing...... -- 162 705 3,030 911 5,038
General and
administrative.......... 503 534 1,343 2,979 1,500 1,440
----- ------ ------ ------- -------- --------
Total operating expenses. 860 1,274 3,007 9,682 3,973 10,005
----- ------ ------ ------- -------- --------
Income (loss) from
operations............... (256) (160) 160 (3,239) (1,475) (238)
Interest and other income
(expense), net........... (8) 23 (6) (88) (50) 215
----- ------ ------ ------- -------- --------
Net income (loss)......... $(264) $ (137) $ 154 $(3,327) $ (1,525) $ (23)
===== ====== ====== ======= ======== ========
Pro forma net income $
(loss) per share(1)...... $ (.18) $ (.09) --
======= ======== ========
Pro forma weighted average
common shares and
equivalents(1)........... 18,644 17,760 20,154
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------------------- DECEMBER 31,
1993 1994 1995 1996 1996
----- ----- ------ ------- ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA (IN
THOUSANDS):
Cash and cash equivalents.......... $ 37 $ 253 $ 203 $ 5,926 $ 1,816
Working capital (deficiency)....... (131) (476) (188) 4,609 3,133
Total assets....................... 151 689 2,256 11,961 16,201
Long-term obligations.............. 2 -- 57 404 747
Shareholders' equity (deficit)..... (265) (404) (245) 5,460 5,542
</TABLE>
- --------
(1) See Note 2 of Notes to Consolidated Financial Statements for an
explanation of the method of calculation.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other parts of this Prospectus contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act, Section
21E of the Securities Exchange Act and the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. See "Special Note Regarding Forward-
Looking Statements".
OVERVIEW
The Company was incorporated in October 1990 and was principally engaged in
product development. Prior to shipping its first product, the Company
generated revenues primarily from one-time consulting projects. In fiscal
1991, the Company shipped its first software product, T-Server. From 1991 to
1994, the Company transitioned from a consulting services company to a product
company. During this transition, the Company has added several applications to
its platform product.
Most of the Company's revenues to date have been derived from one-time
license fees from customers who have received a perpetual license to the
Company's products. License fees are generally based on the specific products
licensed and are determined on either a per site or per user basis. The
Company's license revenues have increased as a percentage of total revenues,
representing 26.5%, 68.7% and 79.1% of total revenues in fiscal 1994, 1995 and
1996, respectively, and 69.5% and 86.7% in the six months ended December 31,
1995 and 1996, respectively. The Company currently expects that license
revenues will continue to account for a substantial majority of the Company's
revenues for the remainder of fiscal 1997 and for the foreseeable future. The
remainder of revenues are expected to be primarily attributable to maintenance
and other revenues, including consulting and training revenues. As a result,
factors adversely affecting the pricing of or demand for the Company's
licensed software products would have a material adverse effect on the
Company's business, financial condition and results of operations.
Substantially all of the Company's revenues to date have been attributable
to the license of the Company's platform and related applications software and
services. These products and services are currently expected to account for
substantially all of the Company's revenues for the foreseeable future.
Consequently, a decline in demand for, or failure to achieve broad market
acceptance of, the Company's platform and related applications software
products, as a result of competition, technological change or otherwise, would
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's application products can only be used
in conjunction with the Company's platform products. As a result, a decline in
demand for the Company's platform products would adversely affect sales of the
Company's application products. Furthermore, if customers experience problems
with the Company's platform products, it may limit their ability to utilize
the Company's application products. The Company's future financial performance
will depend in part on the successful development, introduction and customer
acceptance of new and enhanced versions of its platform and related
applications software products. There can be no assurance that the Company
will continue to be successful in marketing its platform products, related
applications software or any new or enhanced products.
21
<PAGE>
License revenues are recognized upon execution of a license agreement by the
parties and shipment of the product if no significant obligations remain and
collection of the resulting receivable is probable. Revenues from consulting
and training services are generally charged separately from the Company's
software products and are recognized as the services are performed. Maintenance
revenues primarily consist of fees for ongoing support and product updates, are
generally determined as a percentage of list price, and are recognized ratably
over the terms of the contracts, which to date have typically ranged from 12 to
24 months. For all periods presented, the Company has recognized revenues in
accordance with Statement of Position 91-1, "Software Revenue Recognition". See
Note 2 of Notes to Consolidated Financial Statements.
A relatively small number of customers have accounted for a significant
percentage of the Company's revenues in any fiscal year. In fiscal 1994, one
customer accounted for 26.5% of total revenues; in fiscal 1995, three other
customers accounted for 11.1%, 11.2% and 12.8% of total revenues, respectively;
and in fiscal 1996, one of these customers and two other customers accounted
for approximately 10.2%, 10.0% and 10.8% of total revenues, respectively. No
individual customer accounted for 10.0% or more of total revenues in the six
months ended December 31, 1996. The Company expects that licenses of its
products to a limited number of customers will continue to account for a large
percentage of revenues for the foreseeable future. The license of the Company's
software products is typically an enterprise-wide decision by prospective
customers and generally requires the Company to provide a significant level of
education to prospective customers regarding the use and benefits of the
Company's products. In addition, the implementation of the Company's products
involves a significant commitment of resources by prospective customers and
typically involves substantial integration efforts, which may be performed by
the Company, the customer or third-party vendors. The cost of the Company's
product is typically only a small portion of the related hardware, software,
development, training and integration costs of implementing an ECTI solution.
For these and other reasons, the sales and implementation cycles associated
with the license of the Company's products is often lengthy and is subject to a
number of significant delays over which the Company has little or no control.
Given these factors and the expected customer concentration, the loss of a
major customer or any reduction or delay in sales to or implementations by such
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company markets its products in North America primarily through its
direct sales force and internationally through its direct sales force and VARs.
International revenues accounted for 40.6%, 30.9%, and 36.2% of total revenues
in fiscal 1994, 1995 and 1996, respectively, and 30.5% and 46.7% in the six
months ended December 31, 1995 and 1996, respectively. The Company is
increasing its international sales force, primarily in Europe and the Asia
Pacific region, and is seeking to establish distribution relationships with
appropriate strategic partners. As a result, failure to increase international
sales could have a material adverse effect on the Company's business, operating
results and financial condition. The Company expects international revenues to
account for an increasing portion of total revenues in the future.
The Company's revenues have increased in each of the last six quarters, and
the Company achieved profitability in the quarter ended December 31, 1996. The
Company's limited operating history, however, makes the prediction of future
operating results unreliable. Prior growth rates in the Company's revenues
should not be considered indicative of future revenue growth rates or operating
results. Future operating results will depend upon many factors, including the
demand for and market acceptance of the Company's products, the level of
product and price competition, the ability of the Company to develop, market
and deploy new, high-quality products and control costs, the ability of the
Company to expand its direct sales force and indirect distribution channels,
the Company's success in attracting and retaining key personnel, the
uncertainty, recent emergence and acceptance of the ECTI market and
technological changes in the ECTI market. There can be no assurance that any of
the Company's business or strategies will be successful or that the Company
will be able to achieve or sustain profitability on a quarterly or annual
basis.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth statement of operations data of the Company
expressed as a percentage of total revenues for the years and periods
indicated.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JUNE ENDED
30, DECEMBER 31,
--------------------- ---------------
1994 1995 1996 1995 1996
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
License............................. 26.6 % 68.7 % 79.1 % 82.6 % 86.7 %
Service............................. 73.4 31.3 20.9 17.4 13.3
----- ----- ----- ------ ------
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
License............................. 1.3 2.7 3.3 3.5 3.9
Service............................. 34.4 26.6 27.6 23.8 13.3
----- ----- ----- ------ ------
Total cost of revenues............. 35.7 29.3 30.9 27.4 17.2
----- ----- ----- ------ ------
Gross margin......................... 64.3 70.7 69.1 72.6 82.8
Operating expenses:
Research and development............ 33.4 21.4 39.4 45.4 29.9
Sales and marketing................. 9.4 15.7 30.4 26.5 42.7
General and administrative.......... 30.8 30.0 34.1 43.6 12.2
----- ----- ----- ------ ------
Total operating expenses........... 73.6 67.1 103.9 115.5 84.8
----- ----- ----- ------ ------
Income (loss) from operations........ (9.3) 3.6 (34.8) (42.9) (2.0)
Interest and other income (expense),
net................................. 1.3 (0.1) (0.9) (1.5) 1.8
----- ----- ----- ------ ------
Net income (loss).................... (8.0)% 3.5 % (35.7)% (44.4)% (0.2)%
===== ===== ===== ====== ======
</TABLE>
REVENUES
LICENSE. License revenues were $460,000, $3.1 million and $7.4 million in
fiscal 1994, 1995 and 1996, respectively, representing increases of 569% from
fiscal 1994 to fiscal 1995, and 140% from fiscal 1995 to fiscal 1996. License
revenues were $2.8 million and $10.2 million in the six months ended December
31, 1995 and 1996, respectively, an increase of 260%. These increases were due
to the market's growing acceptance of the Company's products and underlying
technology, an expansion of the Company's product offerings, and a significant
increase in the Company's sales, marketing and customer service organizations.
License fees as a percentage of total annual revenues have increased
consistently since fiscal 1994 as the Company has expanded its software
product suite and has engaged in fewer consulting service engagements, which
were a more significant part of its business from inception through fiscal
1994. The Company does not believe that the historical growth rates of license
revenues will be sustainable or are indicative of future results.
SERVICE. Service revenues primarily comprise fees from consulting, post-
contract support and, to a lesser extent, training services. Service revenues
were $1.3 million, $1.4 million and $2.0 million, in fiscal 1994, 1995 and
1996, respectively, representing increases of 10% from fiscal 1994 to fiscal
1995 and 39% from fiscal 1995 to fiscal 1996. Service revenues were $600,000
and $1.6 million in the six months ended December 31, 1995 and 1996,
respectively, an increase of 162%. The Company's software license agreements
often provide for maintenance and for consulting and training. Accordingly,
increases in licensing activity have resulted in increases in revenues from
services related to maintenance, consulting and training.
Service revenues have decreased as a percentage of total revenues from
fiscal 1994 through the six months ended December 31, 1996 due principally to
a significant increase in licensing of the
23
<PAGE>
Company's products. If the Company is successful in implementing its strategy
of encouraging third party organizations such as systems integrators to
undertake a greater percentage of implementation of the Company's products,
service revenues may decrease as a percentage of total revenues, while
maintenance as a percentage of sales will increase. The Company does not
believe that the historical growth rates of service revenues will be
sustainable or are indicative of future results.
COST OF REVENUES
LICENSE. Cost of license revenues includes the costs of product media,
product duplication and manuals, as well as allocated labor and overhead costs
associated with the preparation and shipment of products. Cost of license
revenues were $23,000, $123,000 and $308,000 in fiscal 1994, 1995 and 1996,
respectively. Cost of license revenues were $122,000 and $465,000 in the six
months ended December 31, 1995 and 1996, respectively. These increases in
absolute dollar amounts relate primarily to increases in the volume of
products shipped by the Company, and the resulting increases in documentation
material costs and personnel necessary to assemble and ship the products.
SERVICE. Cost of service revenues primarily comprise employee-related costs
incurred in providing consulting, post-contract support and training services.
Cost of service revenues were $595,000, $1.2 million and $2.6 million in
fiscal 1994, 1995 and 1996, respectively. Cost of service revenues were
$819,000 and $1.6 million in the six months ended December 31, 1995 and 1996,
respectively. These increases in absolute dollars were due primarily to
increases in consulting, support and training personnel, and increases in
overhead costs associated with travel, computer equipment and facilities. The
Company increased the number of consulting, maintenance, training and shipping
personnel significantly during fiscal 1996 from 7 employees to 33 employees in
anticipation of higher sales activity, and, as a result, in fiscal 1996 the
Company incurred a negative gross margin from service revenues. The cost of
service revenues as a percentage of service revenues may vary between periods
due to the mix of services provided by the Company and the resources used to
provide these services.
OPERATING EXPENSES
The Company's operating expenses were $1.3 million, $3.0 million and $9.7
million, or 73.6%, 67.1% and 103.9% of total revenues in fiscal 1994, 1995 and
1996, respectively. For the six months ended December 31, 1995 and 1996, the
Company's operating expenses were $4.0 million and $10.0 million, or 115.5%
and 84.8% of total revenues, respectively.
RESEARCH AND DEVELOPMENT. Research and development expenses were $578,000,
$959,000 and $3.7 million, or 33.4%, 21.4% and 39.4% of total revenues in
fiscal 1994, 1995 and 1996, respectively. Research and development expenses
were $1.6 million and $3.5 million, or 45.4% and 29.9% of total revenues, in
the six months ended December 31, 1995 and 1996, respectively. These expenses
increased in absolute dollars primarily as a result of an increase in
personnel to support the Company's product development activities. The Company
expects that research and development expenditures will continue to increase
in absolute dollars.
Research and development expenses are generally charged to operations as
incurred. In accordance with Statement of Financial Accounting Standards No.
86, costs that were eligible for capitalization for these periods were
insignificant, and the Company charged all software development costs to
research and development expense.
SALES AND MARKETING. Sales and marketing expenses were $162,000, $705,000
and $3.0 million, representing 9.4%, 15.7% and 30.4% of total revenues in
fiscal 1994, 1995 and 1996, respectively. Sales and marketing expenses were
$911,000 and $5.0 million, representing 26.5% and 42.7% of total revenues, in
the six months ended December 31, 1995 and 1996, respectively. These expenses
24
<PAGE>
increased in absolute dollars primarily due to the Company's investment in
building a direct sales force in North America and, to a lesser extent, in
Europe. From July 1, 1995 to December 31, 1996, the Company increased the
number of its sales and marketing personnel from 7 to 71 worldwide, and
incurred higher commission expenses related to higher sales levels. In
addition, the Company incurred increased marketing expenses associated with
the Company's expanding product line, including trade shows and promotional
expenses. The Company expects to continue to expand its direct sales and
marketing efforts and, therefore, anticipates sales and marketing expenditures
will continue to increase in absolute dollars.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$534,000, $1.3 million and $3.0 million, or 30.8%, 30.0% and 34.1% of total
revenues in fiscal 1994, 1995 and 1996, respectively. These expenses increased
in absolute dollars during these periods principally due to the addition of
staff and information system investments to support the growth of the
Company's business during these periods. In addition, during fiscal 1996 the
Company recorded a provision for bad debts totaling approximately $300,000
related to the increased sales activity and related receivables, and incurred
higher legal costs associated primarily with general corporate matters,
trademark matters and patent filings. General and administrative expenses were
$1.5 million and $1.4 million, representing 43.6% and 12.2% of total revenues,
in the six months ended December 31, 1995 and 1996, respectively. During
fiscal 1996, the Company incurred higher consulting expenses related primarily
to the engagement of temporary financial personnel, which expenses were
reduced in fiscal 1997 upon the hiring of the Company's Chief Financial
Officer and other finance personnel. The Company expects to continue to
increase its general and administrative staff and to incur other costs
necessary to manage a growing organization, and, accordingly, it expects
general and administrative expenses to continue to increase in absolute
dollars.
PROVISION FOR INCOME TAXES
The Company did not incur state or federal income taxes in fiscal 1994, 1995
or 1996 due to operating losses incurred during those periods. As of June 30,
1996, the Company had net operating loss carryforwards for federal and state
tax reporting purposes of approximately $685,000 million and $464,000 million,
respectively, available to offset future taxable income, which expire at
various dates through 2010 if not utilized. In addition, the Tax Reform Act of
1986 contains certain provisions that may limit the net operating loss
carryforwards available for use in any given period upon the occurrence of
certain events, including a significant change in ownership interests. The
Company has net deferred tax assets, including its net operating loss
carryforwards, totaling $1.1 million as of June 30,1996. The Company has
recorded a valuation allowance to the full extent of its net deferred tax
assets as a result of significant uncertainties regarding the realization of
the assets, including the limited operating history of the Company, a recent
history of losses and the variability of operating results. See Note 11 of
Notes to Consolidated Financial Statements.
25
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain consolidated statement of operations
data for each of the six quarters in the period ended December 31, 1996, as
well as the percentage of the Company's total revenues represented by each
item. This information has been derived from the Company's unaudited
consolidated financial statements. The unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements contained herein and include all adjustments, consisting
only of normal recurring adjustments, that the Company considers necessary for
a fair presentation of such information when read in conjunction with the
Company's annual audited consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus. The results of operations for any
quarter are not necessarily indicative of the results to be expected for any
future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1996 1996 1996 1996
--------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
License................ $ 613 $2,226 $1,849 $2,681 $3,525 $6,708
Service................ 393 207 587 763 711 860
------- ------ ------ ------ ------ ------
Total revenues......... 1,006 2,433 2,436 3,444 4,236 7,568
Cost of revenues:
License................ 53 69 61 125 153 312
Service................ 300 519 668 1,081 682 890
------- ------ ------ ------ ------ ------
Total cost of revenues. 353 588 729 1,206 835 1,202
------- ------ ------ ------ ------ ------
Gross margin............ 653 1,845 1,707 2,238 3,401 6,366
Operating expenses:
Research and
development........... 710 852 913 1,198 1,571 1,956
Sales and marketing.... 303 608 820 1,299 1,909 3,129
General and
administrative........ 675 825 796 683 684 756
------- ------ ------ ------ ------ ------
Total operating
expenses.............. 1,688 2,285 2,529 3,180 4,164 5,841
------- ------ ------ ------ ------ ------
Income (loss) from
operations............. (1,035) (440) (822) (942) (763) 525
Interest and other
income (expense), net. (25) (25) (38) -- 143 72
------- ------ ------ ------ ------ ------
Net income (loss)....... $(1,060) $ (465) $ (860) $ (942) $ (620) $ 597
======= ====== ====== ====== ====== ======
Pro forma net income
(loss) per share....... $ (0.06) $(0.03) $(0.05) $(0.05) $(0.03) $ 0.03
======= ====== ====== ====== ====== ======
Pro forma weighted
average common and
common equivalent
shares................. 17,300 18,400 18,900 20,500 20,200 22,400
======= ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1996 1996 1996 1996
--------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
PERCENT OF TOTAL
REVENUES:
Revenues:
License................ 60.9 % 91.5 % 75.9 % 77.8 % 83.2 % 88.6%
Service................ 39.1 8.5 24.1 22.2 16.8 11.4
------ ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
License................ 5.3 2.8 2.5 3.6 3.6 4.1
Service................ 29.8 21.3 27.4 31.4 16.1 11.8
------ ----- ----- ----- ----- -----
Total cost of revenues. 35.1 24.1 29.9 35.0 19.7 15.9
------ ----- ----- ----- ----- -----
Gross margin............ 64.9 75.9 70.1 65.0 80.3 84.1
Operating expenses:
Research and
development........... 70.6 35.0 37.5 34.8 37.1 25.8
Sales and marketing.... 30.1 25.0 33.7 37.7 45.1 41.3
General and
administrative........ 67.1 33.9 32.7 19.8 16.1 10.0
------ ----- ----- ----- ----- -----
Total operating
expenses.............. 167.8 93.9 103.9 92.3 98.3 77.1
------ ----- ----- ----- ----- -----
Income (loss) from
operations............. (102.9) (18.0) (33.8) (27.3) (18.0) 7.0
Interest and other
income (expense), net. (2.5) (1.0) (1.6) 0.0 3.4 1.0
------ ----- ----- ----- ----- -----
Net income (loss)....... (105.4)% (19.0)% (35.4)% (27.3)% (14.6)% 8.0%
====== ===== ===== ===== ===== =====
</TABLE>
26
<PAGE>
The Company's quarterly operating results have in the past fluctuated and
may in the future fluctuate significantly, depending on a number of factors,
many of which are beyond the Company's control, including: market acceptance
of the Company products; the Company's ability to develop and market new
products and product enhancements; the size, timing and recognition of revenue
from significant orders; the length of sales and implementation cycles;
competition; the Company's success in establishing indirect sales channels and
expanding its direct sales force; the Company's success in retaining and
training third-party support personnel; the timing of new product releases by
the Company and its competitors; the delay or deferral of significant revenues
until acceptance of software required by an individual license transaction;
technological changes in the ECTI market; the deferral of customer orders in
anticipation of new products and product enhancements; purchasing patterns of
indirect channel partners and customers; changes in pricing policies by the
Company and its competitors; the mix of revenues derived from the Company's
direct sales force and various indirect distribution and marketing channels;
the mix of revenues derived from domestic and international customers;
seasonality; changes in operating expenses; changes in relationships with
strategic partners; changes in Company strategy; personnel changes; foreign
currency exchange rate fluctuations; the ability of the Company to control its
costs and general economic factors.
The Company currently operates with limited backlog. The Company derives
substantially all of its revenues from licenses of the Company's platform and
related applications software and services. The Company believes that the
purchase of its products is relatively discretionary and generally involves a
significant commitment of capital resources by a customer. The timing of the
receipt and shipment of a single order can have a significant impact on the
Company's revenues and results of operations for a particular quarter. In
situations requiring customer acceptance of implementation, the Company does
not recognize license revenues until installations are complete and does not
recognize the consulting component of service revenues until the services are
rendered. As a result, revenue recognition may be delayed in many instances.
Historically, the Company has often recognized a substantial portion of its
revenues in the last month of a quarter, with these revenues frequently
concentrated in the last two weeks of a quarter. As a result, product revenues
in any quarter are substantially dependent on orders booked and shipped in
that quarter, and revenues for any future quarter are not predictable with any
significant degree of certainty. Product revenues are also difficult to
forecast because the market for ECTI software products is rapidly evolving,
and the Company's sales cycle, which may last from three to nine months or
more, varies substantially from customer to customer. The Company's quarterly
revenues are also subject to seasonal fluctuations, particularly in the
quarter ending in September when reduced activity outside North America during
the summer months can adversely affect the Company's revenues. The Company's
expenses are relatively fixed and are based, in part, on its expectations as
to future revenues. Consequently, if revenue levels are below expectations,
net income would be disproportionately affected because a proportionately
smaller amount of the Company's expenses varies with its revenues. In
addition, the Company expects that sales derived through indirect channels,
which are more difficult to forecast and may have lower gross margins than
direct sales, will increase as a percentage of total revenues. Due to all of
the foregoing factors, the Company believes that period-to-period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. It is likely that in some
future quarter the Company's operating results will be below the expectations
of public market analysts and investors. In such event, the price of the
Company's Common Stock would likely be materially adversely affected.
Because of these factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
that such comparisons should not be relied upon as indications of future
performance.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations and met its capital
expenditure requirements primarily from proceeds from related party advances,
a $1.5 million term note (of which $900,000 was converted into Series A
Preferred Stock) and the private sale of Preferred Stock. Through December 31,
1996, the Company had raised $9.0 million from the sale of Preferred Stock,
and in February 1997, the Company raised an additional $9.5 million of
financing through the sale of Series C Preferred Stock. At December 31, 1996,
the Company's principal sources of liquidity included cash and cash
equivalents of $1.8 million and a $3.0 million line of credit agreement. Under
the terms of the agreement, the Company may borrow up to $3.0 million under a
revolving line of credit, which includes sublimits of $500,000 for equipment
purchases and $500,000 for letters of credit. As of December 31, 1996, the
Company had borrowed $500,000 under the line of credit. The line of credit is
secured by substantially all of the Company's assets. Advances under the line
of credit are limited to 80% of eligible accounts receivable. Borrowings
accrue interest at the bank's prime rate plus 0.5% for line of credit
borrowings and 1.0% for borrowings under the equipment sublimit. The line of
credit contains provisions that prohibit the payment of cash dividends and
require the maintenance of certain financial covenants, with which the Company
is in compliance. See Note 7 of Notes to Consolidated Financial Statements.
The Company generated cash from operating activities of $242,000 and
$295,000 in fiscal 1994 and 1995, respectively, and used cash for operating
activities of $2.4 million, in fiscal 1996. The Company also used cash of
$293,000 and $2.8 million in the six months ended December 31, 1995 and 1996,
respectively. The increased use of cash for operating activities in the six
months ended December 31, 1996 is attributable primarily to an increase in
accounts receivable of approximately $6.1 million, offset in part by an
increase in deferred revenues of approximately $2.5 million.
The Company used cash for the purchase of property and equipment totaling
$83,000, $227,000 and $1.2 million in fiscal 1994, 1995 and 1996,
respectively. The Company used cash for the purchase of property and equipment
totaling $311,000 and $1.9 million in the six months ended December 31, 1995
and 1996, respectively.
The Company generated $57,000 of cash from financing activities in fiscal
1994, used cash of $118,000 for financing activities in fiscal 1995 related to
the repayment of related party loans, and generated cash of $9.3 million from
financing activities in fiscal 1996, primarily related to the sales of Series
A and Series B Preferred Stock.
The Company currently has no significant capital commitments other than
commitments under capital leases. The Company believes that the proceeds from
the sale of the Common Stock offered hereby, together with its existing
sources of liquidity, will satisfy the Company's projected working capital and
capital requirements for at least the next twelve months.
28
<PAGE>
BUSINESS
Genesys is a leading provider of enterprise-wide platform and applications
software that enables organizations to integrate critical business information
and computing resources with telephony and other telecommunications media. The
Company's products allow an organization to optimally manage its customer
interactions and employee communications to increase productivity, lower costs
and achieve greater customer satisfaction and loyalty. In addition, the
Company's products enable organizations to develop and offer new or enhanced
revenue-generating products and services. Genesys believes that it is the
first company to offer a suite of open, scaleable, enterprise-wide platform
and applications software solutions to address the evolving needs of
organizations for intelligent communications, a new market paradigm known as
Enterprise Computer Telephony Integration ("ECTI").
The Company's platform and applications software products allow
organizations to integrate disparate telecommunications media with
heterogeneous computing environments. These products integrate with most major
telephone systems and interoperate across most major computing platforms,
operating systems and databases, enabling organizations to manage their
desktop and media resources throughout the enterprise. Together with the
Company's platform software, Genesys offers a range of applications that
provide advanced ECTI solutions, such as intelligent call routing,
outbound/blended dialing and campaign management, real-time and historical
management reporting and Web-based telephony fulfillment. The open, standards-
based nature of the Company's products allows an organization to leverage its
investments in existing telecommunications and computing infrastructure,
software applications and employee training. The Company's products also
support the integration of internally developed or commercially available
business applications, such as help desk or sales force automation. In order
to assist customers in realizing the maximum benefit from its solutions, the
Company augments its products with a range of implementation, training and
support services.
The Company has targeted formal call centers within key industries as
important entry points for its products. To date, Genesys has licensed its
products to more than 125 end-users worldwide, including: Ameritech, Bank of
America, BT, Charles Schwab, FedEx, Gateway 2000, MCI, NationsBanc, NB Tel,
The SABRE Group and Sprint/United Management Company. As of February 28, 1997,
the Company had 293 employees.
BACKGROUND
In the increasingly complex global business environment, an organization's
ability to manage the increased information demands of customers and employees
in a cost-effective manner is an important competitive advantage. In response
to these competitive pressures, the delivery of high-quality, cost-effective
services has become critical in differentiating an organization's product or
service offerings and expanding its market share. In order to provide these
services and optimally manage interactions with customers and communications
with employees, organizations need to integrate critical business information
and computing resources with telephony and other telecommunications media.
Modern organizations communicate, both internally and externally, through a
variety of different communications media, including telephony, voice mail, e-
mail, the Internet/intranets and video. Traditionally, each of these media and
its associated databases and information retrieval systems have been treated
as a unique and separate environment within which specialized applications
have been developed. The point solution nature of these systems has created
"silos" of information that are not intelligently utilized across the
enterprise. This lack of interoperability has prevented organizations from
optimally managing customer interactions and employee communications. This has
limited productivity, increased costs and restricted the ability of
organizations to generate greater customer satisfaction and loyalty. To be
most effective, organizations now need to make information available at any
time it is needed, anywhere it may be located and in any way that it may be
requested.
29
<PAGE>
A number of general business trends are also contributing to the increasing
importance of flexible and sophisticated means of integrating
telecommunications media and computing platforms:
THE INCREASINGLY GLOBAL NATURE OF BUSINESS OPERATIONS has significantly
complicated the task of managing information and providing expertise in a
real-time cost-effective manner.
THE PROLIFERATION OF DISTRIBUTED COMPUTING ENVIRONMENTS has resulted in
the broader dissemination of information, particularly through enterprise
software applications that address key business functions such as finance,
human resources, sales and marketing and supply chain management.
Consequently, the task of efficiently accessing this information has become
increasingly complex and difficult.
THE DEREGULATION OF MAJOR INDUSTRIES, specifically telecommunications,
banking and health care, has resulted in increased competition and new
business opportunities. Many companies within these industries are turning
to new and enhanced services as a means of competitive differentiation.
THE INCREASE IN MERGER AND ACQUISITION AND PARTNERING ACTIVITY has forced
organizations to integrate complex, disparate telecommunications and
computer systems. This integration must be accomplished while maintaining
high-quality customer service and without disrupting or delaying employees'
access to critical business information.
Organizations have confronted a variety of complex business and
technological issues associated with intelligently accessing customer
information in a real-time, automated and cost-effective manner. The initial
response to these issues has been the establishment of formal call centers,
where hundreds of customer service representatives may occupy a dedicated
facility with systems designed specifically to address high levels of customer
inquiry. Typically, these call centers have been automated at the hardware
level (i.e., the telephone switch) through automated call distribution ("ACD")
or interactive voice response ("IVR") systems. In the face of competitive
pressures, the stand-alone nature of these systems is becoming increasingly
burdensome to organizations, as the appropriate person to handle many customer
interactions is no longer just a call center representative with limited,
generic training, but is instead a more experienced or specialized employee
located elsewhere within the organization. Providing intelligent access to
these employees and furnishing them with pertinent information requires a
level of sophistication and flexibility beyond the reach of traditional
solutions.
The shortcomings in the traditional means by which organizations have
managed customer interactions and employee communications, in combination with
the general business trends noted above, have created what the Company
believes to be a significant market opportunity for ECTI solutions with the
following characteristics:
. open, standards-based frameworks within which ECTI and other enterprise
business applications, whether developed by Genesys, ISVs or in-house IT
departments, may be incorporated;
. a suite of comprehensive business applications that address a wide
variety of customer needs;
. intelligent, real-time integration of and access to information matched
to customer and employee needs across different media and throughout
the organization;
. a high-performance, scaleable and flexible platform that can readily
integrate with existing computer architectures and business
applications, thereby preserving an organization's investment in its
infrastructure and applications; and
. a consistent level of functionality regardless of the underlying
infrastructure.
30
<PAGE>
The Company believes that ECTI solutions with these characteristics will
allow organizations of all sizes to increase productivity, lower costs and
achieve greater customer satisfaction and loyalty, as well as enable
organizations to develop and offer new or enhanced revenue-generating
services.
THE GENESYS SOLUTION
Genesys is a leading provider of enterprise-wide platform and applications
software that enables organizations to integrate critical business information
and computing resources with telephony and other telecommunications media.
Genesys believes that its products represent a fundamentally new approach to
CTI that addresses many of the limitations inherent in traditional call center
approaches. The Company's products provide the following benefits:
OPEN, SCALEABLE AND MEDIA-INDEPENDENT PLATFORM
The Company's open platform intelligently manages the convergence of
disparate telecommunications media and heterogeneous computing environments.
The Company's platform is designed to scale with increases in the volume of
customer inquiries and growth in the number of customer service
representatives and geographic locations. The Company's platform readily
integrates with a broad range of proprietary telephone switching platforms,
IVRs and major computing platforms, operating systems and databases. In
addition, the Genesys platform is designed to integrate with products
developed by third parties and customers' internal development teams. The
Genesys platform also supports many software development and network
communication standards. This open systems approach enables an organization to
leverage its investments in existing infrastructure, software applications and
employee training.
BROAD SUITE OF INTEGRATED BUSINESS APPLICATIONS
Genesys offers a broad array of integrated business applications that
provide a wide range of ECTI solutions. These applications include intelligent
call routing, outbound/blended dialing, real-time and historical reporting and
Web-based telephony fulfillment. These applications are designed to integrate
with an organization's existing telecommunications and computing
infrastructure. Genesys also offers a sophisticated ECTI development
environment to enable an organization to develop its own applications and
integrate applications from other vendors into the Genesys framework.
ENHANCED CUSTOMER INTERACTIONS
The Company's products enable organizations to enhance interactions with
customers, resulting in increased customer satisfaction and loyalty. For
example, the Genesys Call Router product may be utilized for the real-time
analysis of critical information, including a customer's account profile,
financial position and the nature of past interactions, in order to direct
incoming calls to the representative with the skills, attributes and
experience necessary to best address the customer's needs. In addition, the
Company's products extend the boundaries of the call center to enable a
customer inquiry to be routed to more specialized personnel located throughout
the organization, regardless of their location.
INCREASED EFFICIENCY AND PRODUCTIVITY
The Company's products enable organizations to improve the efficiency of
customer interactions, as well as optimize the distribution of information
across the enterprise. The Company's products automate the call routing and
placement function to minimize agents' idle time. The real-time availability
of relevant customer information enables agents to more quickly process calls,
resulting in significant cost savings through the more efficient use of
valuable customer service personnel and decreased toll charges. An extensive
suite of reporting tools enables managers to monitor and analyze
31
<PAGE>
the nature of inbound calls and the effectiveness of outbound campaigns in
real-time and on a historical basis. In addition, by providing agents with
increased access to pertinent information and improving the overall efficiency
of customer interactions, the Company's products create opportunities for
cross-selling and other revenue-generating activities.
IMPROVED TIME TO BENEFIT
The Company's platform and applications software are designed to provide
customers with comprehensive ECTI solutions that can be readily deployed.
Additionally, customers retain the flexibility to add new applications,
whether developed internally, by Genesys or by third parties, as market
requirements change. The deployability and flexibility of the Company's
software allow its customers to more quickly begin to benefit from the
efficiency and productivity gains that the software delivers.
THE GENESYS STRATEGY
Genesys seeks to be the leading provider worldwide of open, scaleable ECTI
platform and applications software. The Company's strategy includes the
following key elements:
ESTABLISH THE GENESYS FRAMEWORK AS A DE FACTO ECTI STANDARD
The Company's objective is to establish the Genesys framework as a de facto
ECTI standard. To achieve this goal, the Company's products are designed to
interoperate across major telecommunications and computing platforms. In
addition, Genesys focuses on licensing its products to industry leaders in
targeted strategic markets. The Company has developed, and will continue to
develop, strategic relationships with major telecommunications equipment and
computer hardware vendors, systems integrators, VARs, ISVs and NSPs.
PROVIDE INDUSTRY-LEADING, TECHNOLOGICALLY ADVANCED PRODUCTS
The Company offers a broad array of products that provide comprehensive ECTI
solutions. Genesys has developed an industry-leading platform and suite of
applications and continues to invest significant resources to enhance the
Company's products and to incorporate new technologies and standards as they
evolve. In addition, Genesys offers a sophisticated ECTI development
environment to enable an organization to develop its own applications and
integrate third-party applications into the Genesys framework.
TARGET STRATEGIC MARKETS
The Company targets organizations in industries with a strong need for
external or internal communications, a heavy transaction orientation or
significant requirements for managing customer information and providing
customer service. The Company also focuses on specific industries undergoing
structural changes, such as deregulation or significant mergers and
acquisitions activity, that create the need for ECTI solutions. Examples
include the telecommunications, financial services and health care industries,
where deregulation has substantially increased the competitive pressures to
provide new or enhanced products and services and mergers and acquisitions
have created the need to integrate heterogeneous communications and computing
environments without any disruption in customer service or employee
communications.
The Company has initially targeted formal call centers within these key
industries as important entry points for its products. The Company's framework
and applications software are well-suited to meeting the needs of formal call
centers. As the ECTI market evolves and moves beyond the boundaries of the
formal call center, the Company believes it will be able to leverage its
market presence to offer a range of solutions for the informal call center,
small office/home office ("SOHO") and, eventually, consumer markets.
32
<PAGE>
DEVELOP AND LEVERAGE STRATEGIC BUSINESS RELATIONSHIPS
The sale, installation and implementation of advanced ECTI solutions require
significant expenditures of time and resources. In order to supplement the
Company's direct sales organization and more rapidly take advantage of the
significant ECTI market opportunity, Genesys has focused on developing
strategic third-party relationships with telecommunications equipment and
computer hardware vendors, systems integrators, VARs, ISVs and NSPs. These
relationships enable Genesys to leverage the technical expertise of its
partners and to access additional sales and marketing channels, while further
enhancing its efforts to establish the Genesys platform as a de facto ECTI
standard.
PENETRATE NETWORK SERVICES MARKET
By incorporating the Company's products into local and long distance network
carriers' offerings, Genesys believes that it can make its products available
to a broader customer base than would otherwise be possible. The Company is
focused on enabling NSPs to offer ECTI services to their corporate customers.
These services would also provide the functionality of formal call centers
without the need to assemble personnel in a single location or purchase
specialized equipment or software. These so-called "virtual" call centers
could subsequently be extended to the SOHO market, where cost considerations
have generally precluded the utilization of ECTI services.
ARCHITECTURE
The Genesys architecture consists of an ECTI framework and a suite of
integrated applications that are open, scaleable and standards-based. Whereas
traditional telecommunications applications are often embedded within hardware
such as ACDs and IVRs, the Genesys architecture supports a complete software-
based ECTI solution that interoperates across major telecommunications and
computing platforms, independent of the underlying infrastructure. As a
result, this architecture provides robust scaleability from small premise call
centers to multi-site global enterprises and can be readily adapted to an
organization's existing infrastructure. Thus, the Company's solutions can
scale with the increase in the size of the organization as well as be quickly
and easily adapted to accommodate changes in the level or nature of customer
interactions and employee communications. The Company believes that its
emphasis on, and investment in, this architecture is the key to Genesys' ECTI
technological leadership. The following diagram illustrates the Genesys
architecture:
[DIAGRAM DEPICTING THE COMPANY'S THREE LAYER ARCHITECTURE AND FRAMEWORK
AS THEY INTERFACE WITH VARIOUS HARDWARE EQUIPMENT AND THIRD PARTY
APPLICATIONS.]
The Genesys architecture consists of four layers: The top layer--Real-Time
Business Applications--includes inbound, outbound, reporting and multimedia
applications and will incorporate future network services applications when
they become available. The remaining three layers--Media Control Services,
Common Applications Services and Management Applications--comprise the Genesys
framework.
MEDIA CONTROL SERVICES
The Media Control Services layer contains the interfaces to various
telecommunications equipment and computing hardware, such as PBXs, ACDs, IVRs,
outbound dialers, SS7 gateways and Internet and video servers. This layer
incorporates a unified call control and event model that insulates the rest of
the software from the complexities of interfacing with particular types of
hardware. Media Control Services include a variety of device drivers for major
ACD/PBX and central office switch manufacturers. The capabilities and behavior
of different switches can vary widely and the unified call control and event
model creates a superset of these capabilities to handle the interface. With
the introduction of Genesys T-Server 5.0, applications are able to query the
capabilities of the underlying
33
<PAGE>
equipment and appropriately adjust their behavior in real time, which enables
applications to interoperate across different ACD/PBX environments. The
Company's outbound solutions can utilize the capabilities of the ACD/PBX
equipment, where available, or a stand-alone server equipped with voice-
processing hardware. Currently, the outbound capabilities of Lucent
Technologies, Inc., Rockwell and Aspect Telecommunications switches are
supported. Genesys also supports a variety of IVR equipment from vendors such
as Lucent Technologies, Inc., Northern Telecom, Inc., Periphonics Corporation,
Syntellect, Inc., Voicetek, Inc., Edify Corporation, Brite Voice Systems,
Intervoice, Inc. and IBM Corporation.
In order to enable network services, the Media Control Services layer
contains drivers for the Public Switched Telephone Network. The Company's
software is fully certified on MCI's network as a Customer Access Point
solution provider, interfacing to MCI's Gateway 800, as well as the AT&T
network as the solution provider for AT&T's Intelligent Call Processing
Service (SS7). Genesys has completed the development of the Sprint interface
and is currently awaiting certification.
COMMON APPLICATION SERVICES
The Common Application services layer contains a rich set of services that
are used to create powerful ECTI client/server applications, whether by the
Company, third parties or internal IT departments. The following services are
available:
STAT SERVER. Stat Server keeps track of vital call center statistics that
describe call traffic and agent activities. This service is used for making
real-time call routing decisions, as well as for real-time reporting.
DB SERVER. DB Server serves as the gateway to different databases. This
service is essential for integration with the enterprise computing environment
and is used by various applications for call routing, historical reporting and
outbound campaign management.
LIST MANAGER. List Manager provides the interface to customer contact
information used in outbound campaign management.
CLIENT SERVICES. Client Services consists of a broad array of services for
creating desktop applications and integrating with enterprise business
applications such as help desk or sales force automation. Genesys provides the
means for integrating different platforms such as Windows 95, Windows NT, Mac
O/S, OS/2 and UNIX. Client Services conforms with many standards, including
ActiveX, Java, TAPI and CORBA, as well as the Genesys API, T-Lib.
MANAGEMENT APPLICATIONS
The Management Applications layer contains all the facilities required to
install, configure, maintain and secure the Company's solutions. As more
mission-critical applications depend upon ECTI, this layer facilitates the
management of the Genesys solution. A Service Creation Environment is provided
to enable customers to configure the Genesys ECTI framework.
Genesys T-Server 5.0 includes significant new capabilities, such as the
Configuration Server, that are responsible for informing the software of any
changes in customer configurations. This capability allows services to be
reconfigured without service interruption. Another new capability is provided
through the addition of Simple Network Management Protocol ("SNMP") support to
all Genesys servers. Through SNMP, the Company's platform can integrate with
all industry standard network management solutions. Genesys T-Server 5.0
incorporates the Secure Socket Layer ("SSL") security protocol, which enables
the Company to deploy applications over the Internet while meeting the
industry standard for secure electronic commerce transactions.
34
<PAGE>
PRODUCTS
The Company's products allow an organization to optimally manage its
customer interactions and employee communications to increase productivity,
lower costs and achieve greater customer satisfaction and loyalty. The average
selling price for the Genesys platform products ranges from $15,000 to $70,000
per site, plus additional fees based on the number of seats. The average
selling price for an application product ranges from $25,000 to $75,000 per
site. The Company's typical order size per site ranges from $150,000 to
$300,000. In March 1997, the Company announced an enhanced version of its
entire product line and renamed certain of these products as described below.
[DIAGRAM DEPICTING THE COMPANY'S PLATFORM PRODUCT AND ITS VARIOUS
SOFTWARE APPLICATIONS AS THEY INTERFACE WITH MULTIPLE COMPUTER
LANGUAGES, TELECOMMUNICATIONS HARDWARE EQUIPMENT, DATABASES AND CALL
CENTERS.]
PLATFORM
GENESYS T-SERVER. Genesys T-Server, the Company's platform product, is the
basis of the Company's software framework. T-Server consists of the Company's
ECTI software implemented on industry standard hardware, integrates with most
major PBXs, IVRs and ACDs and interoperates with most major computing
platforms, operating systems and databases. The Company's platform is designed
to scale with increases in the volume of customer inquiries and growth in the
number of customer service representatives and geographic locations. T-Server
creates a bridge between client/server applications and telephony devices.
Features include the ability to transfer voice and data across sites
regardless of the switch type, providing the immediate appearance of customer
data on the agent's screen (known as a "screen pop"). In March 1997, the
Company announced the availability of version 5.0 of T-Server, with unified
call model and SNMP support.
GENESYS INTERACTIVE-T SOFTWARE TOOLKIT. Genesys InterActive-T Software
Toolkit is a set of standards-based tools for integration and development of
client/server applications on top of the Genesys platform. The Toolkit is
compliant with TAPI, CORBA, DCOM, JAVA and ActiveX. In addition, it enables
integration with applications from leading enterprise software vendors, such
as Clarify, Scopus, Siebel and Vantive.
APPLICATIONS--INBOUND
GENESYS CALL ROUTER. Genesys Call Router is an intelligent, skills-based
call routing application. Using the ECTI capabilities embodied within T-
Server, calls are routed to the most appropriate agent based on a variety of
criteria including Caller ID, ANI (automatic number identification), DNIS
(dialed number identification service), customer account information, customer
importance, customer preferences, service desired and other business rules and
relevant database information. Call Router's client/server architecture allows
agent-level routing of call distribution over a multi-site environment.
Features include an easy-to-use graphical strategy builder to customize the
routing strategy, ability to track each agent in the system based on ECTI
events to enable performance monitoring, screen pops and routing capability
between multiple sites with different kinds of switches.
APPLICATIONS--OUTBOUND
GENESYS CAMPAIGN MANAGER. Genesys Campaign Manager is an advanced and robust
predictive dialing application for outbound call management. Campaign Manager
is a scaleable software application that is fully integrated with Genesys
inbound and reporting call center applications,
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providing a truly blended and integrated environment that enables multiple
campaigns to be run simultaneously. The call result detection feature of
Campaign Manager enables customers to undertake large-scale, high-volume
outbound call campaigns while minimizing agent downtime between calls.
APPLICATIONS--REPORTING
GENESYS CALL CENTER MANAGER. Genesys Call Center Manager monitors real-time
activities across the call center and provides a graphical display of these
activities. The product collects data in real time and enables supervisors
from their desktops to monitor call activities for the enterprise across a
distributed network and observe statistics such as total calls handled by each
agent and average call duration. Call Center Manager is the current real-time
reporting product offered by Genesys and is expected to be replaced by Call
Center Pulse 5.0, which is expected to be generally available by mid-1997.
Call Center Pulse 5.0 is described below in "Products Under Development".
GENESYS CALL CONCENTRATOR. Genesys Call Concentrator is a historical
reporting package that tracks and stores data related to call center activity.
The product enables a call to be followed throughout the enterprise from
initiation through termination, even if the call is transferred or
conferenced. Call Concentrator operates with major databases such as Oracle,
Sybase, Informix, DB2 and SQL Server. Reports can be developed by the customer
using standard, off-the-shelf reporting packages. Call Concentrator is
expected to be replaced by Genesys DART, which is described below in "Products
Under Development" and expected to be generally available by mid-1997.
PRODUCTS UNDER DEVELOPMENT
The Company has various products that are currently in development and plans
to complete testing and introduce these products in mid-1997. Software
products as complex as those currently under development by the Company are
subject to frequent delays, and there can be no assurance that the Company
will not encounter difficulties that could delay or prevent the successful and
timely development, introduction and marketing of these potential new
products. Moreover, even if such potential new products are developed and
introduced, there can be no assurance that they will achieve any significant
degree of market acceptance. Failure to release these or any other potential
new products on a timely basis, or failure of these or any other potential new
products, if and when released, to achieve any significant degree of market
acceptance, could have a material adverse effect upon the Company's business,
financial condition and results of operations.
GENESYS CALL CENTER PULSE. Genesys Call Center Pulse is being designed as a
real-time reporting application for the call center environment and is
expected to be a redesign of the Genesys Call Center Manager. Call Center
Pulse is being designed to include an improved GUI and to incorporate object-
based views of agents, groups, and call centers, allowing supervisors to
monitor one or more agents. Call Center Pulse is being designed to allow
supervisors to visually monitor various information regarding agent activity.
This information should enable managers to make real-time activity and
resource decisions.
GENESYS DART (DATA ANALYSIS AND REPORTING TOOL). Genesys DART is being
designed to be a historical call center reporting package to replace the Call
Concentrator product. Features being designed include built-in reports of call
center activity such as reports on agent, group, queue, routing and switch
activity. DART is also being designed to enable reporting on business
information derived from applications accessed as a result of a customer
inquiry. DART is expected to incorporate browser-based administration and be
accessible from virtually any UNIX, NT, Windows, Macintosh, or OS/2 based
machine. DART is being designed to include SNMP support.
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GENESYS VIDEO ICD. Genesys Video ICD is being designed to enable a customer
with video capability to place a video-call to a call center and be routed,
like any other incoming call, to an agent or agent group with video
capability. Traditional video-conferencing requires that a call be placed from
one predetermined number to another and does not allow calls to be routed.
GENESYS NET VECTOR. Genesys Net Vector is being designed to integrate the
Internet with the call center. An earlier, pre-release of the product won the
Call Center Magazine Product of The Year award for 1996. Net Vector is being
designed to allow a customer to click on a Web page and initiate an automatic
return call. The call center would then be able to utilize the Company's other
ECTI products to intelligently interact with the customer.
CUSTOMERS
As of December 31, 1996, Genesys had, directly or indirectly through VARs,
systems integrators and resellers, licensed its products to more than 125 end-
users worldwide. The following is a representative list of end-users that
accounted for more than $75,000 in license revenue to Genesys since July 1,
1995:
FINANCIAL SERVICES
ABN AMRO Services Co. TELECOMMUNICATIONS TECHNOLOGY
Bank of America National Airtouch Cellular Frame Technologies
Trust and Savings Ameritech Services, Inc. Gateway 2000, Inc.
Association Bell Mobility Cellular, (U.K.)
Charles Schwab & Co., Inc. Inc. Hewlett Packard
Hibernia National Bank BT
NationsBanc Services, Inc. MCI Telecommunications OTHER
Old Kent Bank NB Tel Blue Cross/Blue
Swinton Insurance (U.K.) Page Net Shield
T. Rowe Price Associates, Sprint/United Management FedEx
Inc. Company The SABRE Group
USAA Information Services Telia (Sweden)
The Vanguard Group U S West Communications
Wells Fargo & Company Vartec Telecom, Inc.
Westpac Banking
Corporation (NZ)
SALES, MARKETING AND SUPPORT
The Company's sales and marketing strategy is to target large organizations
through its worldwide direct sales force as well as through a broad range of
indirect channels, including telecommunications equipment vendors, systems
integrators, VARs, ISVs and NSPs. The Company has its sales headquarters in
San Francisco, California, and has domestic sales offices located in Boston,
Colorado, Georgia, Illinois, Massachusetts, New Jersey, New York and Texas and
international sales offices or other representation in Canada, the United
Kingdom, Japan, France and Australia.
DIRECT SALES
The Company employs a direct sales force to market is products and services
worldwide. As of December 31, 1996, the sales force consisted of 24 sales
representatives worldwide, of whom 22 were in the U.S. The sales force focuses
primarily on large accounts. Sales representatives are assigned quotas and
compensated for all license revenues, direct and indirect, generated within
their assigned territories. The Company intends to expand its sales
capabilities in the future. Many initial sales include a pilot implementation
of the Company's products, successful completion of which is typically a
prerequisite to full-scale deployment. While the sales cycle varies from
customer to customer, it typically ranges from three to nine months. See "Risk
Factors--Lengthy Sales Cycle".
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INDIRECT SALES
In order to enhance its revenue generation and implementation capabilities
and extend its market reach, the Company complements its direct sales
organization with a network of distribution partners, including
telecommunications equipment vendors, systems integrators, VARs, ISVs and NSPs.
While the substantial majority of the Company's U.S. sales are direct, a large
proportion of international sales are executed via the indirect channel.
. VARs and systems integrators such as Broadway & Seymour, CMP, Pragmatix
and Wiltel market, distribute and implement the Company's products. The
VARs and systems integrators represent a critical product delivery and
implementation channel for the Company.
. Telecommunications equipment and computer hardware vendors such as NCR,
Nortel, Periphonics, Rockwell and Unisys market and distribute Genesys
products as part of a packaged solution with their own products.
. ISV partners such as Scopus and Vantive integrate Genesys solutions with
their own software products. The Company's ISV relationships are also an
important source of sales leads.
. NSPs such as MCI, British Telecom, Ameritech and NBTel have entered into
a broad range of relationships with the Company, including resale of the
Company's products and the provision of services utilizing the Company's
products.
INTERNATIONAL
Revenues outside of the United States accounted for 40.6%, 30.9%, 36.2% and
46.7% for the fiscal years ended June 30, 1994, 1995 and 1996 and the six
months ended December 31, 1996, respectively. The Company currently has sales
offices in Canada, the United Kingdom, Japan, France and Australia, and intends
to broaden its international presence. A significant portion of international
sales is currently conducted through indirect sales channels. The Company
believes that international revenues will continue to represent a significant
portion of its total revenues. The ability of the Company to expand
internationally, however, is limited to those countries where there is
regulatory approval of the third party telephony hardware supported by T-
Server. See "Risk Factors--Risks Associated with International Sales and
Operations".
SUPPORT SERVICES
Support services, which include maintenance, implementation, installation,
training and sales support, are an important element of the Genesys solution.
Consulting and systems integration services are provided directly by the
Company's systems integration group, as well as through alliances with major
systems integrators and VARs. The Company intends to devote additional
resources to supporting its customers and providing training to indirect
channels as the Genesys platform becomes more widely adopted. There can be no
assurance the Company will be successful in its efforts to provide sufficient
resources to expand its customer support capabilities.
RESEARCH AND DEVELOPMENT
The market for the Company's products is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements
and emerging industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards
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could render the Company's existing products obsolete and unmarketable. The
life cycles of the Company's products are difficult to estimate. The Company's
future success will depend upon its ability to develop and introduce new
products and product enhancements on a timely basis that keep pace with
technological developments and emerging industry standards and address
increasingly sophisticated requirements of its customers. There can be no
assurance that the Company will be successful in developing and marketing new
products or product enhancements that respond to technological changes or
evolving industry standards, that the Company will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of these new products or product enhancements, or that its new
products or product enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. If the Company is unable, for
technological or other reasons, to develop and market new products or product
enhancements on a timely and cost-effective basis, the Company's business,
financial condition and results of operations would be materially adversely
affected.
Genesys believes that strong product development capabilities are essential
to its strategy of building an industry standard platform, maintaining the
competitiveness of its current product suite and adding new features and
functionality to the Genesys platform and applications. The Company's product
development team consists of professionals with expertise in software,
telecommunications and computer hardware. From its founding, the Company has
believed that this combination of diverse technical and communications
expertise contributes to the highly integrated functionality of its software
products and thereby provides the Company with a significant competitive
advantage.
Research and development expenses were $578,000, $959,000, $3.7 million and
$3.5 million for the fiscal years ended June 30, 1994, 1995 and 1996, and the
six-months ended December 31, 1996, respectively. The Company's total research
and development staff consisted of 94 employees as of June 30, 1996 and 102
employees as of December 31, 1996. The Company expects that it will continue
to increase research and development expenditures in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
The Company's current product development efforts are focused on
enhancements to the Genesys platform and on new releases of many of the
Company's applications. The Company is also developing a network-based call
center solution that is intended to be offered as a service by local and long-
distance telephone service providers, and an application that is intended to
perform intelligent, skills-based routing across multiple customer sites.
There can be no assurance that these development efforts will be completed
within the Company's anticipated schedules or that, if completed, they will
have the features necessary to make them successful in the marketplace.
Moreover, products as complex as the Company's may contain undetected errors
or failures when first introduced or as new versions are released. Errors in
new products may be found after commencement of commercial shipments,
resulting in loss of or delay in market acceptance. Future delays in the
development or marketing of product enhancements or new products could result
in a material adverse effect on the Company's business, financial condition
and results of operations. See "Risk Factors--Dependence on New Products;
Rapid Technological Change" and "Business--Products".
COMPETITION
The market for the Company's software products is highly competitive and
subject to rapid technological change. The Company expects competition to
increase significantly in the future. The Company's principal competition
currently comes from different market segments including computer telephony
platform developers, computer telephony applications software developers and
telecommunications equipment vendors. These competitors include Aspect,
Dialogic, GeoTel, Hewlett-Packard, IBM, IEX, Lucent, Northern Telecom and
Tandem. The Company also competes to a lesser extent with new or recent
entrants to the marketplace. The Company's competitors vary in size and in
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the scope and breadth of the products and services offered. Many of the
Company's current and potential competitors have longer operating histories,
significantly greater financial, technical, marketing, customer service and
other resources, greater name recognition and a larger installed base of
customers than the Company. As a result, such competitors may be able to
respond to new or emerging technologies and changes in customer requirements
more expediently than the Company, or to devote greater resources to the
development, promotion and sale of products than can the Company. Current and
potential competitors have established and may in the future establish
cooperative relationships among themselves or with third parties to increase
the ability of their products to address the needs of the Company's current or
prospective customers. In addition, as the ECTI market develops, a number of
companies with significantly greater resources than the Company could attempt
to increase their presence in the ECTI market by acquiring or forming
strategic alliances with competitors of the Company. Accordingly, it is likely
that new competitors or alliances among competitors will emerge and may
rapidly acquire significant market share, which would have a material adverse
effect on the Company's business, financial condition and results of
operations. In addition, because there are relatively low barriers to entry in
the software market, the Company expects additional competition from other
established and emerging companies if the ECTI market continues to develop and
expand. Increased competition is likely to result in price reductions, reduced
margins and loss of market share, any of which could materially adversely
affect the Company's business, financial condition and results of operations.
In order to be successful in the future, the Company must respond promptly and
effectively to the challenges of technological change, changing customer
requirements and competitors' innovations. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, financial condition and results of
operations.
INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon proprietary technology. The
Company relies primarily on a combination of copyright, trademark and trade
secret laws, as well as nondisclosure agreements and other contractual
provisions to protect its proprietary rights. The Company presently holds no
patents, and as of March 31, 1997, had filed sixteen United States patent
applications and one corresponding foreign patent application. There can be no
assurance that any of the Company's patent applications will be approved, that
the Company will develop additional proprietary products or technologies that
are patentable, that any issued patent will provide the Company with any
competitive advantages or will not be challenged by third parties or that the
patents of others will not have an adverse effect on the Company's ability to
do business. Furthermore, there can be no assurance that others will not
independently develop similar products, duplicate the Company's products or,
if patents are issued to the Company, design around the patents issued to the
Company. As part of its confidentiality procedures, the Company generally
enters into nondisclosure agreements with its employees, consultants and other
third-party providers who serve the Company in any technical capacity or who
have access to confidential information of the Company. In addition, the
Company limits access to, and distribution of, its software, documentation and
other proprietary information. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy may become a problem.
In addition, effective protection of intellectual property rights may be
unavailable or limited in certain countries in which the Company currently
sells products and countries the Company may target to expand its sales
efforts. Accordingly, there can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.
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There has also been a substantial amount of litigation in the software
industry regarding intellectual property rights. The Company has from time to
time received claims that it is infringing third parties' intellectual
property rights, and there can be no assurance that third parties will not in
the future claim infringement by the Company with respect to current or future
products, trademarks or other proprietary rights. The Company expects that
software product developers will increasingly be subject to infringement
claims as the number of products and competitors in the Company's industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require the
Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
GEOTEL LITIGATION
On December 17, 1996, GeoTel filed a lawsuit in the United States District
Court for the District of Massachusetts naming the Company as defendant, and
alleging infringement of a patent issued to GeoTel entitled "Communications
System Using a Central Controller to Control at Least One Network and Agent
System". On February 10, 1997, the Company filed an answer in response to the
complaint filed by GeoTel, asserting that the GeoTel patent is invalid,
denying the alleged patent infringement and seeking dismissal of the complaint
with prejudice. The Company believes that it has meritorious defenses to the
asserted claims and intends to defend the litigation vigorously. However, the
outcome of litigation is inherently unpredictable and there can be no
assurance that the results of these proceedings will be favorable to the
Company or that they will not have a material adverse effect on the Company's
business financial condition or results of connections. Regardless of the
ultimate outcome, the GeoTel litigation could result in substantial expense to
the Company and significant diversion of effort by the Company's technical and
managerial personnel. If the Court determines that the Company infringes
GeoTel's patent and that the GeoTel patent is valid and enforceable, it could
issue an injunction against the use or sale of certain of the Company's
products and it could assess significant damages against the Company.
Accordingly, an adverse determination in the proceeding could subject the
Company to significant liabilities and require the Company to seek a license
from GeoTel. Although patent and intellectual property disputes in the
software area have sometimes been settled through licensing or similar
arrangements, costs associated with such arrangements may be substantial, and
there can be no assurance that a license from GeoTel, if required, would be
available to the Company on acceptable terms or at all. Accordingly, an
adverse determination in the GeoTel litigation could prevent the Company from
licensing certain of its software products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
EMPLOYEES
At February 28, 1997, the Company had 293 employees worldwide, of which 106
were primarily engaged in research and development, 47 in customer service, 94
in sales and marketing and 46 in finance and administration. The Company's
future performance will depend significantly upon the continued contributions
of its executive officers, technical, marketing, sales and customer service
and financial personnel and its continuing ability to attract, train and
retain highly qualified personnel. Competition for such personnel is intense,
and the failure to attract, train and retain such personnel in the future on a
timely basis could have a material adverse effect on the Company's business,
financial condition and results of operations. None of the Company's employees
is represented by a collective bargaining agreement and the Company has never
experienced any work stoppages. See "Risk Factors--Dependence on Key
Personnel" and "--Management of Growth".
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Over 35% of the Company's employees, including approximately 75% of the
Company's technical staff, are foreign citizens. Accordingly, the Company must
comply with the immigration laws of the United States. Most of the Company's
foreign employees are working in the United States under H-1 temporary work
visas ("H-1 Visas"). An H-1 Visa allows the holder to work in the United
States for three years and, thereafter, to apply for a three-year extension.
Upon the expiration of such period, unless the holder thereof has become a
Lawful Permanent U.S. Resident or has obtained some other legal status
permitting continued employment, that holder must spend at least one year
abroad before reapplying for an H-1 Visa. Furthermore, Congress and the
administrative agencies with jurisdiction over immigration matters have
periodically expressed concerns over the level of immigration into the United
States. The inability of the Company to utilize the continued services of such
employees would have a material adverse effect on the Company's business,
financial condition and results of operations.
FACILITIES
The Company's headquarters are located in approximately 48,000 square feet
of office space in San Francisco, California under a lease, which expires on
September 30, 2000. The Company also leases space for its sales and support
offices in Colorado, Georgia, Illinois, Massachusetts, New Jersey, New York
and Texas, as well as for offices in Canada, the United Kingdom, Japan and
Australia. The Company believes that its existing facilities are adequate for
its current needs and that additional space will be available as needed.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their respective
ages and positions as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Gregory Shenkman..... 35 President, Chief Executive Officer and Director
Alec Miloslavsky..... 33 Vice Chairman of the Board, Chief Technical
Officer and Director
Michael J. McCloskey. 41 Vice President, Finance and International, Chief
Financial Officer and Secretary
Richard DeGolia...... 46 Vice President, Business Development
Seth Homayoon........ 49 Vice President, Network Services
John McNulty......... 50 Vice President, Channels
Igor Neyman.......... 39 Vice President, Advanced Development
Yuri Shtivelman...... 41 Vice President, Product Development
William Wesemann..... 40 Vice President, Sales
James Jordan(1)(2)... 57 Chairman of the Board and Director
Bruce Dunlevie(1)(2). 40 Director
Paul D. Levy(1)(2)... 41 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Shenkman co-founded the Company and has served as its President and
Chief Executive Officer since the Company's formation in October 1990 and as a
director since January 1993.
Mr. Miloslavsky co-founded the Company and has served as its Chief Technical
Officer since the Company's formation in October 1990, as a director since
January 1993 and as Vice Chairman of the Board since March 1997. Prior to co-
founding the Company, Mr. Miloslavsky worked as an independent software
consultant.
Mr. McCloskey joined the Company in September 1996 as its Vice President,
Finance and International, Chief Financial Officer and Secretary. From May
1995 to September 1996, Mr. McCloskey served as Vice President, Finance, Chief
Financial Officer and Vice President, Operations at Network Appliance, Inc., a
network data storage device company. From September 1993 to May 1995, he
served as Executive Vice President, Chief Financial Officer at Digital
Microwave, a telecommunications company. From September 1991 to September
1993, Mr. McCloskey was the Chief Operating Officer and a member of the Board
of Directors of Wavefront Technologies, a 3-D graphics visualization software
development company. From September 1986 to September 1991, he served as Chief
Financial Officer at Everex Systems, Inc., a computer equipment company.
Mr. McCloskey holds a B.S. in business administration from Santa Clara
University.
Mr. DeGolia joined the Company in September 1996 as Vice President, Business
Development. From August 1985 to September 1996, Mr. DeGolia was an attorney
with Wilson, Sonsini, Goodrich & Rosati, PC, a law firm located in Silicon
Valley. Mr. DeGolia holds a B.A. in American Studies from the University of
California at Berkeley and a J.D. from Harvard University.
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<PAGE>
Mr. Homayoon joined the Company in June 1996 as Vice President, Marketing
and became Vice President, Network Services in March 1997. From 1976 to 1996,
Mr. Homayoon was employed by Northern Telecom Limited ("Northern Telecom"), a
telecommunications company, in various capacities, including General Manager
of CTI and Desktop Applications, as well as Vice President, Marketing of the
FiberWorld products division. Mr. Homayoon holds a B.S. in engineering from
McGill University.
Mr. McNulty joined the Company in February 1997 as Vice President, Channels.
Prior to joining the Company, from July 1993 to February 1997, Mr. McNulty
served as Director of Enterprise Programs at Intel Corporation, a
semiconductor company. From July 1989 to June 1993, Mr. McNulty served as
President and Chief Executive Officer of Rose Communications, Inc., a wireless
telephone company. Prior to that, he served as President and Chief Executive
Officer for Integrated Solutions, Inc., a real-time systems company. Mr.
McNulty holds an associate's degree from RCA Technical Institute.
Mr. Neyman joined the Company in December 1990 and has served as Vice
President, Advanced Development since October 1993. Prior to joining the
Company, Mr. Neyman served as Director of Engineering for the Academy of
Science Research Institute in Moscow. Mr. Neyman holds an M.S. in computer
science from Moscow University.
Mr. Shtivelman joined the Company in July 1996 as Vice President, Product
Development. From 1986 to 1996, Mr. Shtivelman was employed in various
capacities by Northern Telecom, most recently as Assistant Vice President,
Meridian 1 Advanced Technology. Mr. Shtivelman holds an M.S. in mathematics
from Moscow University.
Mr. Wesemann joined the Company in May 1996 as Vice President, Sales. Prior
to joining the Company, Mr. Wesemann served as Vice President, Sales and
Professional Services at ParkPlace Systems, Inc., a software development tools
company, from December 1995 to May 1996. From May 1994 to December 1995, Mr.
Wesemann served as Vice President, Sales at NeXT Computer Inc., a software
development tools company, and from March 1989 to May 1993, he served as Vice
President, Sales and Marketing and as a member of the Board of Directors of
Viewpoint Systems, Inc., a software development tools company. Mr. Wesemann
holds a B.A. in marketing from Glassboro State College.
Mr. Jordan has served as director of the Company since November 1995 and as
Chairman of the Board since March 1997. Mr. Jordan is Chairman of the Board,
President and Chief Executive Officer of Kalpana, Inc., a provider of Ethernet
switches. Prior to joining Kalpana in July 1992, Mr. Jordan served as
President of Telebit Corporation, a provider of remote access solutions for
computer networks. Prior to this time, Mr. Jordan was a founder and Executive
Vice President of Ungermann-Bass, Inc., a network software company. Mr. Jordan
holds a B.S. in business and marketing from the University of Utah.
Mr. Dunlevie has served as director of the Company since July 1996. Mr.
Dunlevie is a General Partner of Benchmark Capital LLC, a venture capital firm
founded by Mr. Dunlevie in May 1995. Mr. Dunlevie is also a General Partner of
Merrill, Pickard, Anderson & Eyre. Mr. Dunlevie has also served as Vice
President and General Manager of the Personal Computer Division of Everex
Systems, Inc., a personal computer manufacturer, and as an investment banker
with Goldman, Sachs & Co. He is also a director of Geoworks, Inc. and Rambus,
Inc. Mr. Dunlevie holds an M.B.A. from Stanford Graduate School of Business
and a B.A. from Rice University.
Mr. Levy has served as director of the Company since February 1997. In 1981,
Mr. Levy co-founded Rational Software Corporation, a software company
providing products that automate component-based development of software. He
is currently Chairman of the Board and Chief Executive Officer of Rational.
Prior to September 1996, Mr. Levy served as President and Chief Executive
Officer of Rational. Since August 1996, he has served as a director of
Peerless Systems Corporation, a provider of software-based imaging systems for
the digital document product marketplace. Mr. Levy holds a B.S. degree in
economics from the United States Air Force Academy and an M.S. degree in
engineering-economic systems from Stanford University.
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The Company currently has authorized five directors. Each director holds
office until the next annual meeting of shareholders and until his successor
is duly elected and qualified. The officers serve at the discretion of the
Board. Except for grants of stock options, directors of the Company generally
do not receive compensation for services rendered as a director. The Company
also does not pay compensation for committee participation or special
assignments of the Board of Directors. Non-employee Board members will receive
option grants at periodic intervals under the Automatic Option Grant Program
of the 1997 Stock Incentive Plan and will also be eligible to receive
discretionary option grants under the Discretionary Option Grant Program of
such plan. See "Management--Stock Plans".
On January 18, 1996, Mr. Jordan purchased 528,000 shares of Common Stock at
a purchase price of $0.0167 per share, the fair market value of the Common
Stock on such date. The shares are unvested and subject to repurchase by the
Company, at the purchase price paid per share, upon Mr. Jordan's termination
of service as a Board member prior to vesting in the shares. The Company's
repurchase right shall lapse with respect to, and Mr. Jordan shall acquire a
vested interest in, 25% of the shares on November 27, 1996, and the balance in
a series of 36 equal monthly installments thereafter.
On February 28, 1997, the Company granted to each of Messrs. Dunlevie,
Jordan and Levy an option to purchase 30,000 shares of Common Stock and an
option to purchase 20,000 shares of Common Stock, each at an exercise price of
$7.50 per share. The options are immediately exercisable for all of the option
shares. However, the shares purchasable upon exercise of the options are
unvested and subject to repurchase, at the option exercise price paid per
share, upon the optionee's early termination of Board service. The shares
subject to each 30,000-share grant will vest as to 25% of the option shares
upon the optionee's completion of each of the four years of Board service
after the grant date. The shares subject to each 20,000-share grant will vest
as to 25% of the option shares on each of the fifth, sixth, seventh and eighth
anniversaries of the option grant date. However, vesting of the 20,000 shares
will be subject to acceleration after the close of each fiscal year, beginning
with the 1998 fiscal year, in the event that the optionee has served on a
committee of the Board of Directors in such fiscal year. Vesting of 2,500
shares will accelerate with respect to each committee of the Board of
Directors on which the optionee has served, up to a maximum of two committees,
and will be conditioned on the optionee having attended at least 75% of the
meetings held by such committee during the fiscal year. The shares to be
accelerated will be those shares that would otherwise have been the first
shares to vest in accordance with the vesting schedule described above. The
options have a maximum term of 10 years measured from the grant date, subject
to earlier termination following the optionee's cessation of Board service.
The options will immediately vest in the event that the Company is acquired by
merger or asset sale, unless such options are assumed by the successor
corporation.
In addition, on February 28, 1997, Mr. Levy purchased 30,000 vested shares
of Common Stock at a purchase price of $7.50 per share, the fair market value
of the Common Stock on such date.
COMMITTEES OF THE BOARD OF DIRECTORS
In February 1997, the Board of Directors established a Compensation
Committee and an Audit Committee. The Compensation Committee recommends
compensation levels of senior management and works with senior management on
benefit and compensation programs for the Company's employees. In addition,
the Compensation Committee will administer the Company's 1997 Stock Incentive
Plan and Employee Stock Purchase Plan. The Audit Committee's is responsible
for reviewing the scope and results of audits and other services provided by
the Company's independent public accountants.
45
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and Chief Technical Officer for the
1996 fiscal year for services rendered in all capacities to the Company and
its subsidiaries for that fiscal year. No executive officer of the Company
earned salary and bonus in such fiscal year in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
NAME AND PRESENT ------------ ------------
PRINCIPAL POSITION SALARY AWARDS(1)
------------------ ------------ ------------
<S> <C> <C>
Gregory Shenkman
President and Chief Executive Officer............ $83,786 1,206,000
Alec Miloslavsky
Vice Chairman and Chief Technical Officer........ $83,786 1,206,000
</TABLE>
- --------
(1) The shares were sold to Mr. Shenkman and Mr. Miloslavsky on August 8,
1995, at a purchase price of $0.0167 per share, the fair market value of
the Common Stock on such date. Payment of the purchase price was made with
promissory notes, secured by the purchased shares. The shares are unvested
and subject to repurchase, at the purchase price paid per share, upon
Mr. Shenkman and Mr. Miloslavsky's termination of service with the Company
prior to vesting in the shares. The Company's repurchase right lapses with
respect to, and each of Mr. Shenkman and Mr. Miloslavsky vest in, 25% of
their respective shares on October 15, 1995, and the balance in a series
of 36 equal monthly installments thereafter.
As of the end of the 1996 fiscal year, the aggregate value of the 1,206,000
shares held by each of Mr. Shenkman and Mr. Miloslavsky pursuant to the
stock awards described above was $251,210 (the excess of the fair market
value of the shares as of the end of the 1996 fiscal year, as determined by
the Board of Directors ($0.225 per share), less the purchase price paid by
Mr. Shenkman and Mr. Miloslavsky).
OPTION GRANTS IN LAST FISCAL YEAR
No stock options or stock appreciation rights were granted to Mr. Shenkman
or Mr. Miloslavsky during the fiscal year ended June 30, 1996.
In addition to the information provided above, the Company's current
executive officers received the following stock options and stock awards
during the period from the end of the 1996 fiscal year to March 31, 1997.
On September 17, 1996, Mr. McCloskey was awarded 480,000 shares of Common
Stock at $0.375 per share, which shares were purchased by him in November 1996
and January 1997 through the issuance of promissory notes in an aggregate
principal amount of $180,000, secured by the purchased shares. The shares are
unvested and subject to repurchase by the Company, at the purchase price paid
per share, upon Mr. McCloskey's termination of service with the Company prior
to vesting in the shares. The Company's repurchase right lapses with respect
to, and Mr. McCloskey vests in, 25% of the shares on July 17, 1997, and the
balance in a series of 36 equal monthly installments thereafter.
On November 30, 1996, Mr. McNulty was awarded an option under the 1995 Stock
Option Plan to purchase 240,000 shares of Common Stock at an exercise price of
$0.375 per share, the fair market value of the Common Stock on such date. On
February 24, 1997, Mr. McNulty exercised this option. Payment of the option
exercise price was made with a promissory note, secured by the purchased
shares. The shares are unvested and subject to repurchase, at the option
exercise price paid per
46
<PAGE>
share, upon Mr. McNulty's termination of service with the Company prior to
vesting in the shares. The Company's repurchase right lapses with respect to,
and Mr. McNulty vests in, 25% of the shares on the first anniversary of the
option grant date and the balance in a series of 36 equal monthly installments
thereafter.
On November 30, 1996, Mr. Shtivelman was awarded an option under the 1995
Stock Option Plan to purchase 90,000 shares of Common Stock at an exercise
price of $0.375 per share, the fair market value of the Common Stock on such
date. On January 30, 1997, Mr. Neyman was awarded an option under the 1995
Stock Option Plan to purchase 20,000 shares of Common Stock at an exercise
price of $3.50 per share, the fair market value of the Common Stock on such
date. On February 28, 1997, Mr. Shenkman and Mr. Miloslavsky were each awarded
an option under the 1995 Stock Option Plan to purchase 150,000 shares of
Common Stock at an exercise price of $7.50 per share, the fair market value of
the Common Stock on such date. Each option has a maximum term of 10 years
measured from the grant date, subject to earlier termination upon the
optionee's cessation of service with the Company. Each option becomes
exercisable as to 25% of the option shares on the first anniversary of the
option grant date and the balance in a series of 36 equal monthly installments
thereafter. However, Mr. Shtivelman's option is subject to acceleration as to
50% of the option shares on each of June 30, 1997 and July 31, 1997, in the
event that certain performance milestones are attained prior to each such
date. In the event of an acquisition of the Company by merger or asset sale,
the options will terminate unless assumed by the acquiring corporation.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
No stock options or stock appreciation rights were exercised by Mr. Shenkman
during the 1996 fiscal year and Mr. Shenkman held no such outstanding options
or rights at the end of such fiscal year.
STOCK PLANS
1997 STOCK INCENTIVE PLAN
The Company's 1997 Stock Incentive Plan (the "1997 Plan") is intended to
serve as the successor equity incentive program to the Company's 1995 Stock
Option Plan (the "Predecessor Plan"). The 1997 Plan was adopted by the Board
of Directors on March 27, 1997, subject to approval by the shareholders.
10,327,270 shares of Common Stock have been authorized for issuance under the
1997 Plan. This share reserve is comprised of (i) the shares that remained
available for issuance under the Predecessor Plan as of March 27, 1997,
including the shares subject to outstanding options thereunder, plus (ii) an
additional increase of 2,400,000 shares. In addition, upon the commencement of
each fiscal year of the Company, beginning with the 1999 fiscal year, the
share reserve will automatically be increased on the first trading day of such
year by a number of shares equal to five percent (5%) of the total number of
shares of Common Stock outstanding on the last trading day of the immediately
preceding fiscal year. However, in no event may any one participant in the
1997 Plan receive option grants or direct stock issuances for more than
750,000 shares per calendar year.
The 1997 Plan is divided into four separate components: (i) the
Discretionary Option Grant Program, under which eligible individuals in the
Company's employ or service (including officers and other employees, non-
employee Board members and independent consultants) may, at the discretion of
the Plan Administrator, be granted options to purchase shares of Common Stock
at an exercise price not less than their fair market value on the grant date,
(ii) the Stock Issuance Program, under which such individuals may, in the Plan
Administrator's discretion, be issued shares of Common Stock directly, either
through the purchase of such shares at a price not less than their fair market
value at the time of issuance or as a fully-vested bonus for services rendered
the Company, (iii) the Salary Investment Option Grant Program, under which
executive officers and other highly compensated employees may elect to apply a
portion of their base salary to the acquisition of special below-market
47
<PAGE>
stock option grants, and (iv) the Automatic Option Grant Program, under which
option grants will automatically be made at periodic intervals to eligible
non-employee Board members to purchase shares of Common Stock at an exercise
price equal to their fair market value on the grant date.
The Discretionary Option Grant and Stock Issuance Programs will be
administered by the Compensation Committee. A secondary committee of the Board
may be granted separate but concurrent jurisdiction to administer those
programs with respect to all individuals other than the Company's executive
officers and non-employee Board members. Each Plan Administrator will have
complete discretion, within the scope of its administrative jurisdiction under
the 1997 Plan, to determine which eligible individuals are to receive option
grants or stock issuances, the time or times when such option grants or stock
issuances are to be made, the number of shares subject to each such grant or
issuance, the vesting schedule to be in effect for the option grant or stock
issuance, the maximum term for which any granted option is to remain
outstanding and the status of any granted option as either an incentive stock
option or a non-statutory stock option under the Federal tax laws. The
Compensation Committee will have the discretion to determine the calendar
years in which the Salary Investment Option Grant Program is to be in effect,
the individuals who may participate in such program and the specific date on
which the option grants thereunder are to be awarded. The administration of
the Automatic Option Grant Program will be self-executing in accordance with
the express provisions of such program.
The exercise price for outstanding option grants under the 1997 Plan may be
paid in cash or in shares of Common Stock valued at fair market value on the
exercise date. The option may also be exercised through a same-day sale
program without any cash outlay by the optionee. In addition, the Plan
Administrator may provide financial assistance to one or more optionees in the
exercise of their outstanding options by allowing such individuals to deliver
a full-recourse, interest-bearing promissory note in payment of the exercise
price and any associated withholding taxes incurred in connection with such
exercise.
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program granted to an
optionee that has been employed with or providing services to the Company for
at least one year that is not to be assumed by the successor corporation will
automatically accelerate in full and all unvested shares under the Stock
Issuance Program will automatically vest in full except to the extent the
Company's repurchase rights with respect to those shares are to be assigned to
the successor corporation. The Plan Administrator will have the authority
under the Discretionary Option Grant and Stock Issuance Programs to grant
options and to structure repurchase rights so that the shares subject to those
options or repurchase rights will automatically vest in the event the
individual's service is terminated, whether involuntarily or through a
resignation for good reason, within a specified period (not to exceed 18
months) following (i) a merger or asset sale in which those options are
assumed or those repurchase rights are assigned or (ii) the completion of a
successful tender offer for more than 50% of the Company's outstanding voting
stock or a change in the majority of the Board through one or more contested
elections for Board membership. Finally, the Plan Administrator will have the
authority under the Discretionary Option Grant Program to grant options that
will automatically vest upon an acquisition of the Company by merger or asset
sale, whether or not those options are to be assumed by the acquiring entity.
Options currently outstanding under the Predecessor Plan will terminate upon
an acquisition of the Company by merger or asset sale, unless those options
are assumed by the acquiring entity. However, the Plan Administrator will have
the discretion to extend the acceleration provisions of the 1997 Plan to such
outstanding options.
Stock appreciation rights may be issued in tandem with option grants made
under the Discretionary Option Grant Program. The holders of such rights will
have the opportunity to elect between the exercise of their outstanding stock
options for shares of Common Stock or the surrender of those options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the
48
<PAGE>
aggregate exercise price payable for those shares. Such appreciation
distribution may be made in cash or in shares of Common Stock.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program in return for
the grant of new options for the same or different number of option shares
with an exercise price per share based upon the fair market value of the
Common Stock on the new grant date.
In the event the Compensation Committee elects to activate the Salary
Investment Option Grant Program for one or more calendar years, each executive
officer and other highly compensated employee of the Company selected for
participation may elect, prior to the start of the calendar year, to reduce
his or her base salary for that calendar year by a specified dollar amount not
less than $10,000 nor more than $150,000. In return, the officer will
automatically be granted, on or prior to the last trading day in January of
the calendar year for which the salary reduction is to be in effect, a non-
statutory option to purchase that number of shares of Common Stock determined
by dividing the salary reduction amount by two-thirds of the fair market value
per share of Common Stock on the grant date. The option will be exercisable at
a price per share equal to one-third of the fair market value of the option
shares on the grant date. As a result, the total spread on the option shares
at the time of grant will be equal to the salary reduction amount. The option
will vest in a series of 12 equal monthly installments over the calendar year
for which the salary reduction is in effect and will be subject to full and
immediate vesting upon certain changes in the ownership or control of the
Company.
Under the Automatic Option Grant Program, each individual who first becomes
a non-employee Board member after the date the underwriting agreement for this
offering is executed will receive two option grants at the time of his or her
commencement of Board service, provided such individual has not otherwise been
in the prior employ of the Company. One such option grant will be for 30,000
shares of Common Stock and the other for 20,000 shares of Common Stock. In
addition, at each Annual Shareholders Meeting, beginning with the 1998 Annual
Meeting, each individual who is to continue to serve as a non-employee Board
member will receive an option grant to purchase 7,500 shares of Common Stock,
whether or not such individual has been in the prior employ of the Company.
Each automatic grant will have an exercise price equal to the fair market
value per share of Common Stock on the grant date and will have a maximum term
of 10 years, subject to earlier termination following the optionee's cessation
of Board service. Each automatic option will be immediately exercisable for
all the option shares; however, any shares purchased upon exercise of the
option will be subject to repurchase, at the option exercise price paid per
share, should the optionee's service as a non-employee Board member cease
prior to vesting in those shares. The shares subject to each 30,000-share
grant will vest as to 25% of the option shares upon the optionee's completion
of each of the four (4) years of Board service after the grant date. The
shares subject to each 20,000-share option grant will vest as to 25% of the
option shares on each of the fifth, sixth, seventh and eighth anniversaries of
the option grant date. However, vesting of the shares will be subject to
acceleration after the close of each fiscal year, beginning with the 1998
fiscal year, in the event that the optionee has served on a committee of the
Board of Directors in such fiscal year. Vesting of 2,500 shares will
accelerate with respect to each committee of the Board of Directors on which
the optionee has served, up to a maximum of two committees, and will be
conditioned on the optionee having attended at least 75% of the meetings held
by such committee during the fiscal year. The shares to be accelerated will be
those shares which would otherwise have been the first shares to vest in
accordance with the vesting schedule described above. The shares subject to
each annual 7,500-share grant will vest upon the optionee's completion of one
year of Board service measured from the grant date. However, each outstanding
option will immediately vest upon (i) certain changes in the ownership or
control of the Company or (ii) the death or disability of the optionee while
serving as a Board member. In the event of a hostile tender offer for more
than 50% of the Company's outstanding voting stock, the holders of outstanding
options under the Automatic Option Grant Program will have the right surrender
those options, whether or not those options are otherwise at
49
<PAGE>
the time exercisable for vested shares, in return for a cash distribution from
the Company in an amount equal to the excess of (i) the take-over price of the
shares of Common Stock at the time subject to each surrendered option over
(ii) the aggregate exercise price payable for those shares. The take-over
price in clause (i) will be the greater of (a) the fair market value per share
of Common Stock on the date the option is surrendered to the Company in
connection with the hostile tender offer or (b) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such hostile
take-over.
The Board may amend or modify the 1997 Plan at any time. The 1997 Plan will
terminate on March 26, 2007, unless sooner terminated by the Board.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board of Directors on March 27, 1997, subject to approval by the
shareholders. The Purchase Plan is designed to allow eligible employees of the
Company and participating subsidiaries to purchase shares of Common Stock, at
semi-annual intervals, through their periodic payroll deductions under the
Purchase Plan, and a reserve of 500,000 shares of Common Stock has been
established for this purpose.
The Purchase Plan will be divided into two separate components: the U.S.
Employee Stock Purchase Plan, in which the Company's employees in the United
States will participate, and the International Employee Stock Purchase Plan,
in which the Company's employees located outside the United States will
participate. The Purchase Plan will be implemented in a series of successive
offering periods, each with a maximum duration of 24 months. However, the
initial offering period will begin on the day the Underwriting Agreement is
executed in connection with this Offering and will end on the last business
day in July 1999.
Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent
semi-annual entry date (the first business day of February or August each
year). Individuals who become eligible employees after the start date of this
offering period may join the Purchase Plan on any subsequent semi-annual entry
date within that period.
At the beginning of each offering period, the Compensation Committee, acting
as Plan Administrator, will designate the maximum percentage of the
participant's base salary that may be applied to the Purchase Plan for each
semi-annual period of participation, such percentage not to exceed 10% in any
offering period. The accumulated payroll deductions will be applied to the
purchase of shares on the participant's behalf on each semi-annual purchase
date (the last business day of January and July each year, with the first such
purchase date to occur on January 31, 1998) at a purchase price per share
equal to 85% of the lower of (i) the fair market value of the Common Stock on
the participant's entry date into the offering period or (ii) the fair market
value on the semi-annual purchase date. In no event, however, may any
participant purchase more than 1,000 shares on any one semi-annual purchase
date. Should the fair market value of the Common Stock on any semi-annual
purchase date be less than the fair market value of the Common Stock on the
first day of the offering period, then the current offering period will
automatically end and a new 24-month offering period will begin, based on the
lower fair market value.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AGREEMENTS AND
CHANGE OF CONTROL ARRANGEMENTS
The Company has not entered into an employment contract with any of its
current executive officers.
Should the Company be acquired by merger or asset sale, all outstanding
options granted to the Chief Executive Officer and the other executive
officers under the 1997 Plan will automatically accelerate, except to the
extent those options are to be assumed by the successor corporation. In
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<PAGE>
addition, the Compensation Committee as Plan Administrator of the 1997 Plan
will have the authority to provide for the accelerated vesting of the shares
of Common Stock subject to outstanding options held by the Chief Executive
Officer or any other executive officer or any unvested shares of Common Stock
subject to direct issuances held by such individual, in connection with the
termination of the officer's employment following: (i) a merger or asset sale
in which those options are assumed or the Company's repurchase rights with
respect to the unvested shares are assigned, (ii) the successful completion of
a tender offer for more than 50% of the Company's outstanding voting stock or
(iii) certain hostile changes in control of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board was formed in February
1997, and the members of the Compensation Committee are Messrs. Dunlevie,
Jordan and Levy. None of these individuals was at any time during the fiscal
year ended June 30, 1996, or at any other time, an officer or employee of the
Company. No executive officer of the Company serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
51
<PAGE>
CERTAIN TRANSACTIONS
On March 29, 1996, James Jordan, a director of the Company, purchased 67,668
shares of the Company's Series A Preferred Stock at a price of $2.2167 per
share.
On March 29, 1996, entities affiliated with Benchmark Capital LLC
("Benchmark"), a greater than 5% shareholder of the Company, purchased shares
of the Company's Series A Preferred Stock at a price of $2.2167 per share in
the following amounts: Benchmark Capital Partners, L.P. (199,812 shares); and
Benchmark Founders' Fund, L.P. (23,274 shares). On April 26, 1996, the Company
granted Benchmark a warrant to purchase 420,282 shares of Common Stock at an
exercise price of $5.9483 per share (subject to adjustment upon occurrence of
certain events) which is exercisable upon the earlier of April 26, 1997 or the
filing of the Company's initial public offering with proceeds of not less than
$10,000,000. This warrant was issued in exchange for consulting services
provided to the Company by Bruce Dunlevie, a director of the Company and an
affiliate of Benchmark. On June 13, 1996, Benchmark purchased shares of the
Company's Series B Preferred Stock at a price of $3.6883 per share in the
following amounts: Benchmark Capital Partners, L.P. (957,084); and Benchmark
Founders' Fund, L.P. (127,416 shares).
On June 13, 1996, entities affiliated with Weiss Peck & Greer Venture
Associates III, L.P., a greater than 5% shareholder of the Company at such
time, purchased 813,378 shares of the Company's Series B Preferred Stock at a
price of $3.6883 per share.
In connection with the acceptance of an employment offer, on September 17,
1996, Michael McCloskey, the Company's Vice President, Finance and
International, Chief Financial Officer and Secretary, was granted 480,000
shares of the Company's Common Stock at $0.375 per share, which shares were
purchased by him in November 1996 and January 1997 through the delivery of
promissory notes payable to the Company in the aggregate principal amount of
$180,000 at an interest rate of 6.5% per annum, compounded annually. Principal
and interest on such notes is due and payable on the earlier of (i) five years
from the date of issuance, (ii) the sale of such shares of the Company's
Common Stock by such purchaser and (iii) 90 days following the date of such
purchaser's termination of employment with the Company.
On November 30, 1996, John McNulty, the Company's Vice President, Channels,
was granted an option to purchase 240,000 shares of the Company's Common Stock
at $0.375 per share, which shares were purchased by him in February 1997
through the delivery of a promissory note payable to the Company in the
aggregate principal amount of $90,000 at an interest rate of 6.1% per annum,
compounded annually. Principal and interest on such notes are due and payable
on the earlier of (i) five years from the date of issuance, (ii) the sale of
such shares of the Company's Common Stock by such purchaser and (iii) 90 days
following the date of such purchaser's termination of employment with the
Company.
During fiscal 1995 and 1996, the Company borrowed an aggregate of $104,500
and $720,000, respectively, from officers, shareholders and their affiliates.
Of these amounts $39,000 and $25,000 was outstanding as of June 30, 1995 and
1996, respectively. Certain of these related party loans were non-interest
bearing, however, the computed interest related to the borrowings was
immaterial.
During fiscal 1995 and 1996, the Company received $394,000 and $50,000 of
revenue, respectively, from sales to a company in which Gregory Shenkman, the
Company's President and Chief Executive Officer and a director of the Company,
and Alec Miloslavsky, the Company's Vice Chairman of the Board and Chief
Technical Officer and a director of the Company, held an ownership interest.
The Company has also granted options to certain of its directors and
executive officers. See "Management--Executive Compensation" and "Principal
and Selling Shareholders".
52
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 1996, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by
(i) each person who is known by the Company to own beneficially more than five
percent of the Company's Common Stock, (ii) each of the Company's directors
and Named Officers, (iii) all executive officers and directors as a group and
(iv) each of the other Selling Shareholders.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES NUMBER OF
BENEFICIALLY OWNED SHARES BEING
NUMBER OF SHARES --------------------------------- OFFERED
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING(2) FOR SALE(3)
- ------------------------ --------------------- --------------- ----------------- ------------
<S> <C> <C> <C> <C>
Gregory Shenkman(4)..... 3,570,000 24.1% 21.3%
1155 Market Street
San Francisco, CA 94103
Alec Miloslavsky(5)..... 3,570,000 24.1 21.3
1155 Market Street
San Francisco, CA 94103
Entities affiliated with
Benchmark
Capital LLC(6)......... 1,307,586 8.8 7.8
2480 Sand Hill Rd.,
Suite 200
Menlo Park, CA 94025
Bruce Dunlevie(6)....... 1,307,586 8.8 7.8
Entities affiliated with
Weiss, Peck & Greer ... 813,378 5.5 4.8
555 California Street,
Suite 4760
San Francisco, CA 94104
James Jordan(7)......... 595,668 4.0 3.5
Paul Levy(8)............ -- * *
All directors and
officers as a group
(11 persons)(9)........ 11,111,754 73.6 65.0
OTHER SELLING
SHAREHOLDERS
</TABLE>
- --------
* Less than 1%.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock beneficially owned. Shares of Common Stock subject to options that
are currently exercisable or exercisable within 60 days of December 31,
1996 are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters exercise the over-allotment option, the Company and the
Selling Shareholders will sell up to an aggregate of 300,000 additional
shares in this offering.
(3) Represents shares that the Selling Shareholders have agreed to sell to
the Underwriters if the Underwriters exercise the over-allotment option.
(4) Includes 36,000 shares held by Norm and Maya Shendon and 180,000 shares
held by Dmitri and Maria Shenkman, of which Mr. Shenkman disclaims
beneficial ownership. Includes 360,000 shares held by Dmitri Shenkman,
Trustee of the Michelle Shenkman 1996 Trust u/t/a dated March 18, 1996,
360,000 shares held by Dmitri Shenkman, Trustee of the Nikita Anthony
Shenkman 1996 Trust u/t/a dated March 18, 1996, and 1,428,000 shares held
by Gregory and Yelena Shenkman, Trustees of the Shenkman Family Trust
u/t/a dated March 7, 1996.
(5) Includes 180,000 shares held by Anatoly and Zhanna Elkinbard and 180,000
shares held by Larry and Lidia Miloslavsky, of which Mr. Miloslavsky
disclaims beneficial ownership. Includes 360,000 shares held by Larry
Miloslavsky and Anatoly Elkinbard, Trustees of the Miloslavsky 1996
Irrevocable Trust u/t/a dated March 13, 1996 and 120,000 shares held by
Larry and Lidia Miloslavsky, Trustees of the Joshua Trobnikov Miloslavsky
1996 Trust u/t/a dated March 15, 1996.
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<PAGE>
(6) Consists of 150,690 shares held by Benchmark Founders' Fund, L.P., and
1,156,896 shares held by Benchmark Capital Partners, L.P. Mr. Dunlevie, a
director of the Company, is an affiliate of the foregoing entities and
may be deemed to share voting and investment power with respect to such
shares. Mr. Dunlevie disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest in such shares arising
from his interests in the entities referred to above. Excludes (i)
420,282 shares issuable to Benchmark Capital Partners, L.P., upon
exercise of an outstanding warrant, which warrant became exercisable upon
the filing of the Registration Statement to which this Prospectus is a
part, and (ii) options exercisable by Mr. Dunlevie to purchase a total of
50,000 shares of Common Stock, which options were issued and became
exercisable on February 28, 1997.
(7) Excludes options exercisable by Mr. Jordan to purchase a total of 50,000
shares of Common Stock, which options were issued and became exercisable
on February 28, 1997.
(8) Excludes (i) 30,000 shares of Common Stock purchased by Mr. Levy on
February 28, 1997, and (ii) options exercisable by Mr. Levy to purchase a
total of 50,000 shares of Common Stock, which options were issued and
became exercisable on February 28, 1997. Mr. Levy was elected as a
director of the Company in February 1997.
(9) Includes 292,500 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of December 31, 1996. Includes Mr.
Levy, who was elected as a director of the Company in February 1997.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of the Company will consist of 120,000,000 shares of Common Stock, no
par value, and 5,000,000 shares of Preferred Stock, no par value, after giving
effect to the amendment to the Company's Articles of Incorporation to delete
references to Series A, Series B and Series C Preferred Stock, which will
occur upon conversion of such Preferred Stock into Common Stock upon the
closing of this offering, and the subsequent authorization of shares of
undesignated Preferred Stock, as described below.
COMMON STOCK
As of December 31, 1996, there were 14,799,812 shares of Common Stock
outstanding that were held of record by 55 shareholders. There will be
16,799,812 shares of Common Stock outstanding (assuming (i) no exercise of the
Underwriters' over-allotment option, (ii) no exercise after December 31, 1996
of outstanding options, (iii) no exercise of a warrant to purchase 420,282
shares of Common Stock, (iv) no exercise of warrants to purchase 494,629
shares of Series C Preferred Stock issued on February 26, 1997, and (v) the
exclusion of 854,363 shares of Series C Preferred Stock and 675,000 shares of
Common Stock issued on February 26, 1997) after giving effect to the sale of
the shares of Common Stock to the public offered hereby and the conversion of
the Company's Series A and Series B Preferred Stock into Common Stock at a
one-to-one ratio.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may
be applicable to any outstanding Preferred Stock, the holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy". In the event of the liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to
share ratably in all assets remaining after payment of liabilities, subject to
prior distribution rights of Preferred Stock, if any, then outstanding. The
Common Stock has no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are fully paid and
nonassessable, and the shares of Common Stock to be issued upon completion of
this offering will be fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the Company's Articles of Incorporation
will authorize 5,000,000 shares of Preferred Stock. The Board of Directors
will have the authority to issue the Preferred Stock in one or more series and
to fix the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series, without
further vote or action by the shareholders. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control
of the Company without further action by the shareholders and may adversely
affect the voting and other rights of the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no current plans to issue any of the
Preferred Stock.
WARRANTS
As of February 26, 1997, the Company had warrants outstanding to purchase an
aggregate of (i) 44,965 shares of Series C Preferred Stock at an exercise
price per share equal to 110% of the current fair value on the date such
shares vest pursuant to the vesting schedule, which warrants expire
55
<PAGE>
on February 26, 2000, (ii) 449,664 shares of Series C Preferred Stock at an
exercise price per share equal to 110% of the current market price on December
31, 1997 (subject to certain adjustments) if the Company has completed an
initial public offering of its Common Stock otherwise $13.34, which warrants
expire on February 26, 2004, and (iii) 420,282 shares of Common Stock at a
price per share equal to $5.9483, which warrant expires on the earlier of the
closing of this offering or April 26, 2001. The Company anticipates that the
warrant to purchase 420,282 shares of Common Stock will be exercised prior to
the completion of this offering. Upon consummation of this offering, the
outstanding warrants to purchase shares of the Company's Series C Preferred
Stock will become exercisable for shares of Common Stock only at the same
respective exercise prices per share as noted above. The holders of shares
acquired upon the exercise of the warrants to purchase Series C Preferred
Stock are entitled to certain registration rights. See "--Registration
Rights".
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE BYLAWS
Upon the closing of this offering, the Bylaws will provide that all
shareholder actions must be effected at a duly called meeting and not by a
consent in writing. The Bylaws will also provide that the Company's
shareholders may call a special meeting of shareholders only upon a request of
shareholders owning at least 50% of the Company's capital stock. Furthermore,
the Company's shareholders are currently entitled to cumulate their votes for
the election of directors so long as at least one shareholder has given notice
at the shareholder meeting prior to the voting of that shareholder's desire to
cumulate his or her votes. Cumulative voting will no longer be permitted at
such time as (1) the Company's shares of Common Stock are listed on the Nasdaq
National Market and the Company has at least 800 holders of its equity
securities as of the record date of the Company's most recent annual meeting
of shareholders or (ii) the Company's shares of Common Stock are listed on the
New York Stock Exchange or the American Stock Exchange. The Company expects to
have its shares listed on the Nasdaq National Market and to have at least 800
holders of its equity securities by the record date for its next annual
meeting of shareholders. These provisions of the Bylaws and the existence of
authorized, but undesignated, Preferred Stock could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. The provisions also are intended to discourage certain tactics that
may be used in proxy fights. However, such provisions could have the effect of
discouraging others from making tender offers for the Company's shares and, as
a consequence, they also may inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
Such provisions also may have the effect of preventing changes in the
management of the Company. See "Risk Factors--Effect of Certain Charter
Provisions; Anti-takeover Effects of Provisions of the Bylaws".
REGISTRATION RIGHTS
After this offering, the holders of approximately 2,797,878 shares of Common
Stock (excluding the following shares issued on February 26, 1997, the holders
of which are entitled to such registration rights, (i) 854,363 shares of
Common Stock issuable upon conversion of Series C Preferred Stock, (ii)
675,000 shares of Common Stock and (iii) 494,629 shares of Common Stock
underlying warrants to purchase Series C Preferred Stock) will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. Under the terms of the agreements between the Company and the
holders of such registrable securities, if the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account of other security holders exercising registration rights, such
holders are entitled to notice of such registration and are entitled to
include shares of such Common Stock therein. Certain of such shareholders
benefitting from these rights may also require the Company to file a
registration statement under the Securities Act at the Company's expense with
respect to their
56
<PAGE>
shares of Common Stock, and the Company is required to use its diligent
reasonable efforts to effect such registration. Further, holders may require
the Company at the Company's expense to file additional registration
statements on Form S-3 when such form becomes available to the Company. These
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares included in
such registration in certain circumstances. See "Risk Factors--Shares Eligible
for Future Sale; Registration Rights".
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 16,799,812 shares of
Common Stock outstanding (assuming (i) no exercise of the Underwriters' over-
allotment option, (ii) no exercise after December 31, 1996 of outstanding
options, (iii) no exercise of a warrant to purchase 420,282 shares of Common
Stock, (iv) no exercise of warrants to purchase 494,629 shares of Series C
Preferred Stock issued on February 26, 1997, and (v) the exclusion of 854,363
shares of Series C Preferred Stock and 675,000 shares of Common Stock issued
on February 26, 1997). Of these shares, the 2,000,000 shares sold in this
offering will be freely tradeable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined under the Securities Act ("Affiliates"),
may generally only be sold in compliance with the limitations of Rule 144
described below.
SALES OF RESTRICTED SHARES
The remaining 14,799,812 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. The number of shares of Common Stock available for
sale in the public market is limited by restrictions under the Securities Act
and lock-up agreements under which the holders of such shares have agreed not
to sell or otherwise dispose of any of their shares for a period of 180 days
after the date of this Prospectus without the prior written consent of the
Representatives of the Underwriters. However, such Representatives may, in
their sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. As a result of these
restrictions, based on shares outstanding and options granted as of December
31, 1996, the following shares of Common Stock will be eligible for future
sale. On the date of this Prospectus, no shares other than the 2,000,000
shares offered hereby will be eligible for sale. Upon the expiration of the
lock-up period 180 days after the date of this Prospectus, an additional
14,739,812 shares will become available for sale. In addition, 1,529,363
shares, which were issued in February 1997, will become eligible for sale in
February 1998.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, a person (or persons whose shares are
aggregated) who has beneficially owned "restricted" shares for at least one
year, including a person who may be deemed an Affiliate of the Company, is
entitled to sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then-outstanding shares of
Common Stock of the Company (approximately 167,998 shares after giving effect
to this offering) and the average weekly trading volume of the Common Stock on
Nasdaq during the four calendar weeks preceding such sale. Sales under Rule
144 of the Securities Act are subject to certain restrictions relating to
manner of sale, notice and the availability of current public information
about the Company. A person who is not an Affiliate of the Company at any time
during the ninety days preceding a sale, and who has beneficially owned shares
for at least two years, would be entitled to sell such shares immediately
following this offering without regard to the volume limitations, manner of
sale provisions or notice or other requirements of Rule 144 of the Securities
Act. However, the transfer agent may require an opinion of counsel that a
57
<PAGE>
proposed sale of shares comes within the terms of Rule 144 of the Securities
Act prior to effecting a transfer of such shares. Such opinion would be
provided by and at the cost of the transferor.
Rule 701 under the Securities Act permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any employee, officer or director of
or consultant to the Company who purchased his or her shares pursuant to a
written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period requirements
of Rule 144. Rule 701 further provides that non-affiliates may sell such
shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule
144. All holders of Rule 701 shares are required to wait until 90 days after
the date of this Prospectus before selling such shares.
The Company intends to register on a registration statement on Form S-8,
approximately 30 days after the effective date of this offering, a total of
approximately 10,315,957 shares of Common Stock subject to outstanding options
or reserved for issuance under the Company's 1997 Stock Incentive Plan and a
total of 500,000 shares of Common Stock reserved for issuance under the
Company's Employee Stock Purchase Plan. Such registration statement will
automatically become effective upon filing. Accordingly, shares registered
under such registration statement will, subject to Rule 144 volume limitations
applicable to Affiliates of the Company, be available for sale in the open
market immediately after the 180-day lock-up agreements expire. Also,
beginning six months after the date of this Prospectus, the holders of
2,797,878 Restricted Shares will be entitled to certain rights with respect to
registration of such shares for sale in the public market. See "Description of
Capital Stock--Registration Rights".
Prior to this offering, there has been no public market for the Common Stock
of the Company and no predictions can be made of the effect, if any, that the
sale or availability for sale of shares of additional Common Stock will have
on the market price of the Common Stock. Nevertheless, sales of substantial
amounts of such shares in the public market, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Brobeck, Phleger & Harrison LLP, Palo
Alto, California. Certain legal matters in connection with this offering will
be passed upon for the Underwriters by Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, Menlo Park, California.
EXPERTS
The financial statements and schedule included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods indicated in their reports and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
The statements in the Prospectus under the captions "Risk Factors--GeoTel
Litigation" and "Business--GeoTel Litigation" have been reviewed and approved
by Blakely Sokoloff Taylor & Zafman as experts in such matters, and are
included herein in reliance upon such review and approval.
58
<PAGE>
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
In February 1997, the Company's Board of Directors retained Arthur Andersen
LLP as its independent public accountants and dismissed the Company's former
public accountants, Coopers and Lybrand LLP. The decision to change
independent public accountants was approved by resolution of the Board of
Directors. The former independent public accountants' report on the Company's
financial statements at and for the years ended June 30, 1994 and 1995 did not
contain an adverse opinion, a disclaimer of opinion or any qualifications or
modifications related to uncertainty, limitation of audit scope or application
of accounting principles. The former independent public accountants' report
does not cover any of the consolidated financial statements of the Company
included in this Prospectus. Coopers & Lybrand LLP did not issue an audit
report on the Company's financial statements for any other period. There were
no disagreements with the former public accountants on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure with respect to the Company's consolidated financial
statements up through the time of dismissal that, if not resolved to the
former public accountants' satisfaction, would have caused them to make
reference to the subject matter of the disagreement in connection with their
report. Prior to retaining Arthur Andersen LLP, the Company had not consulted
with Arthur Andersen LLP regarding accounting principles.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
with respect to the Company and such Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part of the Registration Statement. Statements contained in this Prospectus
concerning the contents of any contract or any other document referred to are
not necessarily complete; reference is made in each instance to the copy of
such contract or document filed as an exhibit to the Registration Statement.
Each such statement is qualified in all respects by such reference to such
exhibit. The Registration Statement, including exhibits and schedules thereto,
may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from
such office after payment of fees prescribed by the Commission.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes", "anticipates",
"estimates", "expects" and words of similar import, constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: the limited operating history of the Company; the
potential fluctuations in quarterly operating results; the lengthy sales
cycle; the lengthy implementation cycle and dependence on third party
consultants; the risks related to dependence on new products and rapid
technological change; competition; product concentration; the management of
growth; the dependence on third-party resellers; the GeoTel litigation;
customer concentration; the dependence on the emerging ECTI market; the risks
associated with international sales and operations; the dependence on key
personnel; government regulation of immigration; the dependence on ability to
integrate with third-party technology; risks related to product liability; the
risks related to protection of intellectual property; the
59
<PAGE>
concentration of stock ownership; the lack of a prior public market and the
possible volatility of stock price; the shares eligible for future sale and
the registration rights of certain shareholders; the effect of certain charter
provisions and the anti-takeover effects of provisions of the bylaws;
dilution; and other factors referenced in this Prospectus. Certain of these
factors are discussed in more detail elsewhere in this Prospectus, including,
"Risk Factors", "Capitalization", "Selected Consolidated Financial Data",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business" and "Principal and Selling Shareholders". Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect any events
or developments.
60
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................... F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Shareholders' Equity (Deficit)................... F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Genesys Telecommunications Laboratories, Inc.:
We have audited the accompanying consolidated balance sheets of Genesys
Telecommunications Laboratories, Inc. (a California Corporation) and
subsidiaries as of June 30, 1995 and 1996, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for
each of the three years in the period ended June 30, 1996. 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 Genesys Telecommunications
Laboratories, Inc. and subsidiaries as of June 30, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended June 30, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Jose, California
April 2, 1997
F-2
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
JUNE 30, PRO FORMA
----------------- DECEMBER 31, SHAREHOLDERS'
1995 1996 1996 EQUITY (DEFICIT)
----------------- ------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS (NOTE 9)
CURRENT ASSETS:
Cash and cash equivalents...... $ 203 $ 5,926 $ 1,816
Accounts receivable, net of
allowance for doubtful
accounts of $16, $426, and
$366, respectively............ 1,675 4,607 10,905
Prepaid expenses and other..... 51 173 324
------- -------- -------
Total current assets......... 1,929 10,706 13,045
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
and amortization............... 327 1,224 2,807
OTHER ASSETS.................... -- 31 349
------- -------- -------
$ 2,256 $ 11,961 $16,201
======= ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank line of credit............ $ -- $ -- $ 500
Advances from related parties.. 39 25 50
Current portion of capital
lease obligations............. 23 37 40
Accounts payable............... 835 1,113 1,327
Accounts payable to related
parties....................... -- 268 100
Accrued payroll and related
benefits...................... 126 625 1,141
Other accrued liabilities...... 334 948 1,147
Deferred revenues.............. 1,087 3,081 5,607
------- -------- -------
Total current liabilities.... 2,444 6,097 9,912
------- -------- -------
CAPITAL LEASE OBLIGATIONS, net
of current portion............. 57 37 16
------- -------- -------
CONVERTIBLE DEBT TO RELATED
PARTY.......................... -- 367 731
------- -------- -------
COMMITMENTS AND CONTINGENCIES
(Notes 5 and 6)
SHAREHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock,
no par value:
Series A:
Authorized-900,000 shares
Issued and outstanding-none
in 1995, and
900,000 shares in 1996 and
at December 31, 1996 and
none on a pro forma basis
Liquidation value-$1,995... -- 1,995 1,995 --
Series B:
Authorized-2,400,000 shares
Issued and outstanding-none
in 1995, 1,897,878 shares
in 1996 and at December
31, 1996 and none on a
pro forma basis
Liquidation value-$7,000... -- 7,000 7,000 --
Common stock, no par value:
Authorized-120,000,000
shares
Issued and outstanding-
6,801,000 shares in 1995,
11,319,000 shares in 1996,
12,001,934 shares at
December 31, 1996 and
15,220,094 shares on a pro
forma basis............... 23 154 352 11,847
Shareholder notes receivable... (18) (112) (297) (297)
Cumulative translation
adjustment.................... -- -- 92 92
Accumulated deficit............ (250) (3,577) (3,600) (3,600)
------- -------- ------- --------
Total shareholders' equity
(deficit)................... (245) 5,460 5,542 $ 8,042
------- -------- ------- ========
$ 2,256 $ 11,961 $16,201
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
JUNE 30, ENDED DECEMBER 31,
----------------------- --------------------
1994 1995 1996 1995 1996
------ ------ ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
License........................ $ 460 $3,077 $ 7,369 $ 2,839 $ 10,233
Service........................ 1,272 1,403 1,950 600 1,571
------ ------ ------- --------- --------
Total revenues............... 1,732 4,480 9,319 3,439 11,804
------ ------ ------- --------- --------
COST OF REVENUES:
License........................ 23 123 308 122 465
Service........................ 595 1,190 2,568 819 1,572
------ ------ ------- --------- --------
Total cost of revenues....... 618 1,313 2,876 941 2,037
------ ------ ------- --------- --------
GROSS MARGIN..................... 1,114 3,167 6,443 2,498 9,767
------ ------ ------- --------- --------
OPERATING EXPENSES:
Research and development....... 578 959 3,673 1,562 3,527
Sales and marketing............ 162 705 3,030 911 5,038
General and administrative..... 534 1,343 2,979 1,500 1,440
------ ------ ------- --------- --------
Total operating expenses..... 1,274 3,007 9,682 3,973 10,005
------ ------ ------- --------- --------
INCOME (LOSS) FROM OPERATIONS.... (160) 160 (3,239) (1,475) (238)
OTHER INCOME (EXPENSE):
Interest income (expense), net. (7) (17) (78) -- 202
Other, net..................... 30 11 (10) (50) 13
------ ------ ------- --------- --------
NET INCOME (LOSS)................ $ (137) $ 154 $(3,327) $ (1,525) $ (23)
====== ====== ======= ========= ========
PRO FORMA NET INCOME (LOSS) PER
SHARE........................... $ (0.18) $ (0.09) $ --
======= ========= ========
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES.... 18,644 17,760 20,154
======= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-------------------------------
SERIES A SERIES B COMMON STOCK SHAREHOLDER CUMULATIVE TOTAL
-------------- ---------------- ------------------ NOTES TRANSLATION ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE ADJUSTMENT DEFICIT EQUITY (DEFICIT)
------- ------ --------- ------ ---------- ------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, JULY 1,
1993............. -- $ -- -- $-- 1,200,000 $ 2 $ (2) $-- $ (267) $ (267)
Net loss........ -- -- -- -- -- -- -- -- (137) (137)
------- ------ --------- ------ ---------- ------- ----- ---- ------- -------
BALANCES,
JUNE 30, 1994.... -- -- -- -- 1,200,000 2 (2) -- (404) (404)
Issuances of
Common Stock.... -- -- -- -- 5,601,000 21 (16) -- -- 5
Net income...... -- -- -- -- -- -- -- -- 154 154
------- ------ --------- ------ ---------- ------- ----- ---- ------- -------
BALANCES,
JUNE 30, 1995.... -- -- -- -- 6,801,000 23 (18) -- (250) (245)
Issuance of
Common Stock.... -- -- -- -- 4,518,000 129 (102) -- -- 27
Issuance of
Series A
Preferred Stock. 900,000 1,995 -- -- -- -- -- -- -- 1,995
Issuance of
Series B
Preferred Stock. -- -- 1,897,878 7,000 -- -- -- -- -- 7,000
Payments on
shareholder
notes
receivable...... -- -- -- -- -- -- 8 -- -- 8
Deferred
Compensation
Charge.......... -- -- -- -- -- 2 -- -- -- 2
Net loss........ -- -- -- -- -- -- -- -- (3,327) (3,327)
------- ------ --------- ------ ---------- ------- ----- ---- ------- -------
BALANCES,
JUNE 30, 1996.... 900,000 1,995 1,897,878 7,000 11,319,000 154 (112) -- (3,577) 5,460
Exercise of
stock options... -- -- -- -- 190,934 4 -- -- -- 4
Issuances of
Common Stock.... -- -- -- -- 888,000 192 (185) -- -- 7
Repurchase of
Common Stock.... -- -- -- -- (396,000) (7) -- -- -- (7)
Cumulative
translation
adjustment...... -- -- -- -- -- -- -- 92 -- 92
Deferred
Compensation
Charge.......... -- -- -- -- -- 9 -- -- -- 9
Net loss........ -- -- -- -- -- -- -- -- (23) (23)
------- ------ --------- ------ ---------- ------- ----- ---- ------- -------
BALANCES,
DECEMBER 31, 1996
(Unaudited)...... 900,000 $1,995 1,897,878 $7,000 12,001,934 $ 352 $(297) $ 92 $(3,600) $ 5,542
======= ====== ========= ====== ========== ======= ===== ==== ======= =======
PRO FORMA
BALANCES,
DECEMBER 31, 1996
(Unaudited)...... -- $ -- -- $ -- 15,220,094 $11,847 $(297) $ 92 $(3,600) $ 8,042
======= ====== ========= ====== ========== ======= ===== ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS SIX MONTHS ENDED
ENDED JUNE 30, DECEMBER 31,
------------------------ ------------------
1994 1995 1996 1995 1996
------ ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss).............. $ (137) $ 154 $(3,327) $ (1,525) $ (23)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Common stock issued for
services rendered............ -- 1 -- -- --
Deferred Compensation
expense...................... -- -- 2 -- 9
Depreciation and
amortization................. 11 56 264 77 317
Provision for doubtful
accounts..................... 51 4 410 -- 10
Changes in operating assets
and liabilities:
Accounts receivable......... (297) (1,324) (3,342) (86) (6,308)
Prepaid expenses and other.. (3) (43) (122) (83) (151)
Accounts payable............ 257 631 278 (141) 214
Accounts payable to related
parties.................... -- -- 268 -- (168)
Accrued payroll and related
benefits................... -- 126 499 236 516
Other accrued liabilities... 88 2 614 184 291
Deferred revenues........... 272 688 1,994 1,045 2,526
------ ------- ------- -------- --------
Net cash provided by (used
in) operating activities. 242 295 (2,462) (293) (2,767)
------ ------- ------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment..................... (83) (227) (1,161) (311) (1,900)
Increase in other assets....... -- -- (31) (19) (318)
------ ------- ------- -------- --------
Net cash used in investing
activities............... (83) (227) (1,192) (330) (2,218)
------ ------- ------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from bank line of
credit........................ -- -- -- -- 500
Principal payments on capital
lease obligations............. -- (4) (34) (5) (18)
Proceeds from advances from
related parties............... 202 102 771 -- 25
Repayments of advances from
related parties............... (145) (221) (757) (22) --
Proceeds from convertible debt
to related parties............ -- -- 367 -- 364
Proceeds from promissory note.. -- -- 1,500 500 --
Repayment of promissory note... -- -- (600) -- --
Repayment of shareholder notes
receivable.................... -- -- 8 -- --
Repurchases of Common Stock.... -- -- -- -- (7)
Proceeds from sales of
preferred stock............... -- -- 8,095 -- --
Proceeds from sales of common
stock......................... -- 5 27 34 11
------ ------- ------- -------- --------
Net cash provided by (used
in) financing activities. 57 (118) 9,377 507 875
------ ------- ------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............ 216 (50) 5,723 (116) (4,110)
CASH AND CASH EQUIVALENTS:
Beginning of Period............ 37 253 203 203 5,926
------ ------- ------- -------- --------
End of Period.................. $ 253 $ 203 $ 5,926 $ 87 $ 1,816
====== ======= ======= ======== ========
ADDITIONAL DISCLOSURES OF NON-
CASH TRANSACTIONS:
Repayment of convertible debt
with issuance of preferred
stock......................... $ 900
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(INFORMATION RELATING TO THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS
UNAUDITED)
1. THE COMPANY:
Genesys Telecommunications Laboratories, Inc. (formerly Enhanced Voice
Processing, Inc.), was incorporated in California on October 11, 1990. During
fiscal 1995, Genesys Telecommunications Laboratories, Inc. established a
wholly-owned subsidiary in the United Kingdom, and in fiscal 1996 it
established a wholly-owned subsidiary in Russia. Also in fiscal 1996, Genesys
Telecommunications Laboratories, Inc. entered into a joint venture in Canada
through which it owned 51% of a Canadian corporation, Genesys Laboratories
Canada, Inc. In February 1997, Genesys Telecommunications Laboratories, Inc.
acquired the remaining 49% of Genesys Laboratories Canada, Inc.
Genesys Telecommunications Laboratories, Inc. and subsidiaries (the
"Company") operate in a single industry segment and are involved in the
design, development, marketing and support of a suite of Enterprise Computer
Telephony Integration ("ECTI") products, including platform and applications
software that enable organizations to integrate critical business information
and computing resources with telephony and other telecommunications media. The
Company's products are marketed primarily in North America, Europe and Asia.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Genesys
Telecommunications Laboratories, Inc. and its subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.
UNAUDITED INTERIM FINANCIAL DATA
The unaudited financial statements as of December 31, 1996 and for the six
months ended December 31, 1995 and 1996 have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, include all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial information set forth
therein, in accordance with generally accepted accounting principles. The data
disclosed in the notes to the consolidated financial statements for these
periods are unaudited. The Company believes the results of operations for the
interim periods are not necessarily indicative of the results to be expected
for any future period.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's subsidiaries is the local currency.
Accordingly, the Company applies the current rate method to translate the
subsidiaries' financial statements into U.S. dollars. Translation adjustments
are included as a separate component of shareholders' equity (deficit) in the
accompanying consolidated financial statements.
Foreign exchange gains and losses resulting from foreign currency
transactions are recorded in other income (expense) in the accompanying
consolidated financial statements and were not material in any of the periods
presented.
F-7
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STOCK-BASED COMPENSATION
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") in October 1995. This accounting standard permits the use of either a
fair value based method or the method defined in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") to account
for stock-based compensation arrangements. Companies that elect to employ the
valuation method provided in APB 25 are required to disclose the pro forma net
income (loss) and net income (loss) per share that would have resulted from
the use of the fair value based method. The Company has elected to continue to
determine the value of stock-based compensation arrangements under the
provisions of APB 25, and accordingly, it has included the pro forma
disclosures required under SFAS 123 in its consolidated financial statements.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
REVENUE RECOGNITION
The Company generates revenues from licensing the rights to use its software
products directly to end users and indirectly through value-added resellers.
The Company also generates revenues from sales of post-contract support,
consulting and training services performed for customers who license the
Company's products.
Revenues from software license agreements are recognized upon shipment of
the software if there are no significant post-delivery obligations and if
collection is probable. If a software license agreement provides for
acceptance criteria that extend beyond the published specifications of the
applicable product, then revenues are recognized upon the earlier of customer
acceptance or the expiration of the acceptance period.
Revenues from post-contract support services are recognized ratably over the
term of the support period. If post-contract support services are included
free or at a discount in a license agreement, such amounts are allocated out
of the license fee at their fair market value based on the value established
by independent sale of such post-contract support services to customers.
Consulting revenues are primarily related to implementation services performed
on a time and materials basis under separate service arrangements related to
the installation of the Company's software products. Revenues from consulting
and training services are recognized as services are performed. If a
transaction includes both license and service elements, license fee revenue is
recognized upon shipment of the software, provided services do not include
significant customization or modification of the base product and the payment
terms for licenses are not subject to acceptance criteria. In cases where
license fee payments are contingent upon the acceptance of services, revenues
from both the license and the service elements are deferred until the
acceptance criteria are met.
Cost of license revenues includes the costs of product media, product
duplication and manuals, as well as allocated labor and overhead costs related
to preparation and shipment of the product. Cost
F-8
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of service revenues consists primarily of salaries, benefits and allocated
overhead costs related to consulting personnel and the customer service
department.
Deferred revenues include software license fees and services that have been
invoiced to the customer for which the revenue earnings process has not been
completed.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less at the time of purchase to be cash
equivalents. The Company's investments have consisted of certificates of
deposit with original maturities of three months or less and money market
accounts.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation is provided using the straight-line method over the
estimated useful lives of the related assets (or over the lease term if it is
shorter for leasehold improvements), which range from 3 to 5 years. Property
and equipment leased under capital leases is amortized over the lesser of its
useful life or the lease term.
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes eligible computer software development costs upon
the establishment of technological feasibility, which the Company has defined
as completion of a working model. For fiscal 1994, 1995 and 1996, and the six
months ended December 31, 1995 and 1996, costs that were eligible for
capitalization were insignificant and, thus, the Company has charged all
software development costs to research and development expense in the
accompanying consolidated statements of operations.
PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income (loss) per share is computed using the weighted average
number of common and common equivalent shares outstanding during the period.
Common equivalent shares consist of Preferred Stock (using the "if converted"
method) and stock options and warrants (using the treasury stock method).
Common equivalent shares are excluded from the computation if their effect is
anti-dilutive except that, pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins and staff policy, such computations include all
common and common equivalent shares issued within the 12 months preceding the
initial filing date as if they were outstanding for all periods presented
(using the treasury stock method and an assumed initial public offering price
of $15.00 per share). In addition, Preferred Stock is included in the
computation (using the "if converted" method) even when the effect of their
inclusion is anti-dilutive. Pro forma net loss per share data prior to fiscal
1996 have not been presented since such amounts are not deemed meaningful due
to the significant change in the Company's capital structure that will occur
in connection with the proposed offering.
STOCK SPLITS
In August 1996, the Company effected a 3:1 stock split of its Common Stock,
and in November 1996 the Company effected a 2:1 stock split of its Common
Stock. In February 1997, the Company effected a 6:1 stock split of its Series
A and Series B Preferred Stock.
F-9
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
All share and per share data in the accompanying consolidated financial
statements have been retroactively restated to reflect the stock splits,
including the reflection of all preferred share and per share data on an "as
converted" basis.
3. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK:
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of accounts receivable. As of
June 30, 1995, approximately 30% of accounts receivable were concentrated with
three customers. As of June 30, 1996, approximately 43% of accounts receivable
were concentrated with three different customers. As of December 31, 1996,
approximately 30% of accounts receivable were concentrated with three
different customers. The Company generally does not require collateral on
accounts receivable, as the majority of the Company's customers are large,
well established companies. The Company provides reserves for credit losses
and such losses have been insignificant in all periods presented in the
accompanying consolidated financial statements.
For cash equivalents, the carrying amount approximates fair value because of
the short maturity of those instruments. For debt, the fair value is estimated
based on market prices for similar debt instruments, and the carrying amount
approximates fair value. Substantially all of the Company's cash and cash
equivalents are held in five financial institutions.
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------- DECEMBER 31,
1995 1996 1996
----- ------ ------------
<S> <C> <C> <C>
Computer and office equipment.................... $ 227 $1,326 $2,260
Furniture and fixtures........................... 86 104 488
Leasehold improvements and other................. 82 120 707
----- ------ ------
395 1,550 3,455
Less accumulated depreciation and amortization... (68) (326) (648)
----- ------ ------
$ 327 $1,224 $2,807
===== ====== ======
</TABLE>
Included in property and equipment are assets acquired under capital lease
obligations with an original cost of approximately $84,000, $108,000 and
$108,000 as of June 30, 1995 and 1996 and December 31, 1996, respectively.
Accumulated amortization on the leased assets was approximately $3,000,
$31,000 and $43,000 as of June 30, 1995 and 1996 and December 31, 1996,
respectively.
5. COMMITMENTS AND CAPITAL LEASE OBLIGATIONS
The Company leases its facilities under noncancellable operating lease
agreements, which expire on various dates through September 2000.
F-10
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Minimum future lease payments under noncancellable capital and operating
leases as of December 31, 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
----------- ------- ---------
<S> <C> <C>
1997 (six months).......................................... $ 24 $ 353
1998....................................................... 40 700
1999....................................................... -- 566
2000....................................................... -- 519
2001....................................................... -- 129
---- ------
Total minimum lease payments............................. 64 $2,267
======
Less: Amount representing interest at 14% to 19%........... (8)
----
Present value of minimum lease payments.................... 56
Less: Current portion...................................... (40)
----
Long-term portion.......................................... $ 16
====
</TABLE>
Rent expense was approximately $61,000, $98,000 and $341,000 in fiscal 1994,
1995 and 1996, respectively, and $134,000 and $378,000 for the six months
ended December 31, 1995 and 1996, respectively.
6. LITIGATION
On December 17, 1996, GeoTel Communications Corporation ("GeoTel") filed a
lawsuit in the United States District Court for the District of Massachusetts
naming the Company as defendant, and alleging infringement of a patent issued
to GeoTel. On February 10, 1997, the Company filed an answer in response to
the complaint filed by GeoTel, asserting that the GeoTel patent is invalid,
denying the alleged patent infringement and seeking dismissal of the complaint
with prejudice. The Company believes that it has meritorious defenses to the
asserted claims and intends to defend the litigation vigorously. The Company
does not believe that any of its current products infringe any valid claims of
GeoTel's patent. However, the outcome of litigation is inherently
unpredictable, and there can be no assurance that the results of these
proceedings will be favorable to the Company or that they will not have a
material adverse effect on the Company's business, financial condition or
results of operations. Regardless of the ultimate outcome, the GeoTel
litigation could result in substantial expense to the Company and significant
diversion of effort by the Company's technical and managerial personnel. If
the Court determines that the Company infringes GeoTel's patent and that the
GeoTel patent is valid and enforceable, it could issue an injunction against
the use or sale of certain of the Company's products and it could assess
significant damages against the Company. Accordingly, an adverse determination
in the proceeding could subject the Company to significant liabilities and
require the Company to seek a license from GeoTel. Although patent and
intellectual property disputes in the software area have sometimes been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial, and there can be no assurance that a license
from GeoTel, if required, would be available to the Company on acceptable
terms or at all. Accordingly, an adverse determination in the GeoTel
litigation could prevent the Company from licensing certain of its software
products, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
F-11
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. BANK LINE OF CREDIT
In October 1996, the Company entered into a line of credit agreement that
has no expiration terms. Under the terms of the agreement, the Company may
borrow up to $3.0 million under a revolving line of credit, which includes
sublimits of $500,000 for equipment purchases and $500,000 for letters of
credit. The line of credit is secured by substantially all of the Company's
assets and advances are limited to 80% of eligible accounts receivable.
Advances under the line accrue interest at the bank's prime rate plus 0.5%
(8.75% at December 31, 1996) for line of credit borrowings and 1.0% for
equipment loans. The line of credit contains provisions that prohibit the
payment of cash dividends, and require the maintenance of specified levels of
tangible net worth and certain financial ratios. The Company was in compliance
with these financial covenants as of December 31, 1996.
As of December 31, 1996, $500,000 was outstanding under this line of credit,
and none of this balance related to the equipment sublimit.
8. RELATED PARTY TRANSACTIONS
LOANS FROM OFFICERS, SHAREHOLDERS AND THEIR AFFILIATES
During fiscal 1995 and 1996, the Company borrowed an aggregate of $104,500
and $720,000, respectively, from officers, shareholders and their affiliates.
Of these borrowings, $39,000 and $25,000 was outstanding as of June 30, 1995
and 1996, respectively. Certain of these related party loans were non-interest
bearing; however, the imputed interest related to the borrowings was
immaterial.
In July 1995, the Company issued a $1.5 million promissory note to a
business associate of the Company's founders. The promissory note bore
interest at a rate of 8% per annum. In May 1996, the principal and accrued
interest of $50,499 was converted into 428,796 shares of Series A Preferred
Stock, and the balance of the note was repaid.
In February 1996, the minority interest shareholder of the Company's
Canadian subsidiary provided the subsidiary with a convertible revolving line
of credit for CDN $2.0 million (US $1,462,000 as of December 31, 1996), of
which US $367,000 and US $731,100 were outstanding as of June 30,1996 and
December 31, 1996, respectively. Loan amounts are due on December 31, 1997 and
bear interest at a rate charged by the Royal Bank of Canada for 30 day Bankers
Acceptances plus approximately 42 basis points. Borrowings under this facility
are secured by all of the assets of the subsidiary. In March 1997, subsequent
to the Company's acquisition of the minority shareholders' shares in the
Canadian subsidiary (Note 12), all amounts outstanding under this facility
were repaid, and the facility was canceled.
OTHER RELATED PARTY TRANSACTIONS
During fiscal 1995 and 1996, the Company recognized $394,000 and $50,000 of
revenue, respectively, from a contract with a company in which two of the
Company's significant shareholders held an ownership interest. As of June 30,
1995, $200,000 of accounts receivable related to this transaction were
outstanding, and as of June 30, 1996 all amounts due from this related party
had been paid.
F-12
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. PREFERRED STOCK
In March 1996, the Company issued 900,000 shares of Series A Preferred Stock
at a price of $2.2167 per share. In June 1996, the Company issued 1,897,878
shares of Series B Preferred Stock at a price of $3.6883 per share. In
February 1997, the Company issued 854,363 shares of Series C Preferred Stock
at a price of $11.12 per share.
The rights, preferences, privileges and restrictions granted to the
preferred shareholders are as follows:
Dividends
The holders of Series A, Series B and Series C preferred stock are entitled,
when and as declared by the Board of Directors, to annual dividends at a rate
of $0.1333, $0.225 and $0.6672 per share, respectively, prior to the
declaration, setting aside or payment of any dividend to the holders of Common
Stock. Dividends are not cumulative. To date, no dividends have been declared.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the assets and funds of the Company available
for distribution will be distributed as follows:
The holders of Series C Preferred Stock are entitled to receive, prior and
in preference to any distribution to the holders of Series A and Series B
Preferred Stock and Common Stock, an amount equal to $11.12 per share, plus
any declared but unpaid dividends with respect to such share.
Thereafter, the holders of Series A and Series B Preferred Stock are
entitled to receive, prior and in preference to any distribution to the
holders of Common Stock, an amount equal to $2.2167 and 3.6883 per share,
respectively, plus any declared but unpaid dividends with respect to such
shares.
After payment to the holders of Series A, Series B and Series C Preferred
Stock as described above, the holders of Common Stock of the Company receive
any remaining assets of the Company.
Conversion
The holders of Series A, Series B and Series C Preferred Stock have the
following conversion rights:
Each share is convertible into Common Stock at the option of the holder at
any time after the date of issuance. Each share is initially convertible into
one share of Common Stock, subject to adjustment for dilution, as defined in
the Articles of Incorporation.
Each share of Preferred Stock will be automatically converted into Common
Stock upon the consummation of a public offering of the Company's Common Stock
if the public offering price is not less than $11.12 per share and if the
aggregate proceeds are more than $15,000,000. Series A and Series B Preferred
Stock will be converted into Common Stock upon the written consent of holders
of more than 50% of such series (voting together as a class).
F-13
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Voting Rights
The holder of each share of Preferred Stock has the right to one vote for
each share of Common Stock into which such share of Preferred Stock is
convertible.
Protective Provisions
The Company cannot take certain actions, as defined in the Company's
Articles of Incorporation, without obtaining the affirmative vote or written
consent of (i) the holders of a majority of the outstanding shares of Series A
and Series B Preferred Stock (voting together as a class), and (ii) the
holders of at least seventy-five percent of the outstanding shares of Series C
Preferred Stock.
Registration Rights
The holders of Preferred Stock and certain other security holders of the
Company have certain demand and piggyback registration rights as defined in
the Company's Registration Rights Agreement dated February 26, 1997.
PRO FORMA SHAREHOLDERS' EQUITY (DEFICIT)
In connection with the initial public offering of the Company's Common
Stock, all outstanding Preferred Stock will automatically convert into Common
Stock upon the closing of the offering. The pro forma effects on shareholders'
equity (deficit) of the conversion of Series A and B Preferred Stock and the
assumed issuance of 420,282 shares of Common Stock upon the exercise of
certain warrants prior to the closing of the offering have been reflected in
the accompanying consolidated balance sheet as of December 31, 1996.
10. COMMON STOCK:
RESTRICTED STOCK PURCHASE AGREEMENTS
Since inception, the Company has sold an aggregate of 6,165,000 shares of
Common Stock to certain employees in connection with their employment and to
certain vendors. All of these shares were sold at the fair market value as of
the date of purchase as determined by Board of Directors. All of these shares
are subject to stock repurchase agreements whereby the Company has the right
to repurchase unvested shares upon termination of employment or engagement at
the original price paid for the shares. Vesting generally occurs 25% on the
first anniversary date of employment or engagement and monthly thereafter over
the following 36 months. As of December 31, 1996, an aggregate of 396,000
shares of Common Stock have been repurchased under these agreements, and
4,068,800 shares are subject to the Company's repurchase right at prices
ranging from $0.01667 to $0.375 per share.
STOCK OPTION PLAN
Under the Company's 1995 Stock Option Plan (the "Option Plan"), the Board of
Directors may grant incentive and nonqualified stock options to employees,
directors and consultants. The exercise price per share for an incentive stock
option cannot be less than the fair market value, as determined by the Board
of Directors, on the date of grant. The exercise price per share for a
nonqualified stock option cannot be less than 85% of the fair market value, as
determined by the Board of Directors, on the date of grant. Options granted
under the Option Plan generally expire ten years after the date of
F-14
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
grant and generally vest over a four year period. As of December 31, 1996, a
total of 5,292,834 shares of Common Stock have been authorized for grant under
the Option Plan.
Details of option activity under the Option Plan are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ------------------------------
AVAILABLE NUMBER PRICE WEIGHTED
FOR GRANT OF SHARES PER SHARE AVERAGE
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Inception of Option Plan......... 2,875,500 -- -- --
---------- ---------
Balances, June 30, 1995.......... 2,875,500 -- -- --
Authorized..................... 437,334 -- -- --
Granted........................ (2,622,000) 2,622,000 $.02-$ .23 $.04
---------- ---------
Balances, June 30, 1996.......... 690,834 2,622,000 $.02-$ .23 $.04
Authorized..................... 1,980,000
Granted........................ (2,718,500) 2,718,500 $.38-$1.25 $.43
Exercised...................... -- (190,934) $.02 $.02
Canceled....................... 90,375 (90,375) $.02-$ .23 $.03
---------- ---------
Balances, December 31, 1996
(unaudited)..................... 42,709 5,059,191 $.02-$1.25 $.25
========== =========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------- ------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AVERAGE
EXERCISE DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
PRICES 1996 LIFE PRICE 1996 PRICE
-------- -------------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.02 2,109,691 8.80 $0.02 530,325 $0.02
$0.23 231,000 9.43 $0.23 -- $0.23
$0.38 2,552,500 9.78 $0.38 20,396 $0.38
$1.25 166,000 10.00 $1.25 20,000 $1.25
- ----------- --------- ----- ----- ------- -----
$0.02-$1.25 5,059,191 9.36 $0.25 570,721 $0.07
</TABLE>
As of December 31, 1996, 570,721 shares were vested and exercisable under
the Option Plan. The weighted average of fair values of options granted during
fiscal 1996 and the six months ended December 31, 1996 was $0.01 and $0.06,
respectively.
The Company accounts for options granted under the Option Plan under APB 25,
and accordingly, records compensation expense for any option grants for which
the exercise price is below the fair market value of the underlying Common
Stock on the date of grant.
Had compensation cost been determined under a fair value method consistent
with SFAS 123, the Company's net loss and net loss per share would have
increased to the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JUNE 30, 1996 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Net loss (In thousands):
As reported................................ $(3,327) $(23)
Pro forma.................................. $(3,331) $(70)
Net loss per share:
As reported................................ $ (0.18) $--
Pro forma.................................. $ (0.18) $--
</TABLE>
F-15
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of each option grant under the Option Plan is estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions used for grants: risk-free rates ranging from 5-7% and
corresponding to government securities with original maturities similar to the
vesting periods; expected dividend yield of 0%; expected lives of 3 years
beyond vest dates; and expected volatility of 0%.
ISSUANCE OF WARRANTS
Warrants Issued to Consultant
In connection with a services consulting agreement, in April 1996, the
Company issued a warrant to a shareholder for the purchase of 420,282 shares
of Common Stock at an exercise price of $5.95 per share. The warrant is first
exercisable on the earlier of April 26, 1997 or upon the filing of a
registration statement for an initial public offering of the Company's Common
Stock with aggregate proceeds of not less than $10,000,000. The warrant
expires on the earlier of the closing of an initial public offering or April
26, 2001. The fair value of the warrant at the date of grant was not material.
Warrants Issued to Series C Shareholders
Concurrent with the closing of the sale of Series C Preferred Stock to two
corporate investors, the Company issued warrants for the purchase of 449,664
shares of Common Stock to one investor (exercisable at a price of 110% of the
market price of Common Stock on December 31, 1997, subject to certain
adjustments, if the Company has completed an initial public offering;
otherwise $13.34 per share), and 44,965 shares of Common Stock to the other
investor (exercisable at a price of 110% of the fair market value of Common
Stock on the date such shares vest). The warrants expire in February 2004 and
February 2000, respectively. Each of these warrants becomes exercisable upon
the achievement of certain sales and development objectives specified in the
warrant agreements. In accordance with SFAS 123 and related interpretations,
the Company recorded the aggregate estimated fair value of the warrants of
$650,000 in February 1997, and will amortize the value of the warrants to cost
of license revenues as the sales and development milestones are achieved.
SHARES RESERVED FOR ISSUANCE
As of December 31, 1996, the Company has shares of Common Stock for future
issuance as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Conversion of Series A Preferred Stock............................. 900,000
Conversion of Series B Preferred Stock............................. 1,897,878
Conversion of Series C Preferred Stock............................. 854,363
Exercise of stock options.......................................... 5,059,191
Exercise of warrants............................................... 914,911
---------
9,626,343
=========
</TABLE>
F-16
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES:
The components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-------------
1995 1996
---- -------
<S> <C> <C>
Net operating loss carryforwards.............................. $ -- $ 261
Reserves and accruals not currently deductible................ 49 856
Tax credit carryforwards...................................... 28 51
Other......................................................... 6 (22)
---- -------
83 1,146
Valuation allowance........................................... (83) (1,146)
---- -------
Net deferred tax asset...................................... $-- $ --
==== =======
</TABLE>
A valuation allowance has been record for the entire deferred tax asset as a
result of uncertainties regarding the realization of the asset including the
limited operating history of the Company, the lack of profitability to date
and the variability of operating results.
As of June 30, 1996, the Company had federal and state net operating loss
carryforwards of approximately $685,000 and $464,000, respectively. In
addition, as of June 30, 1996, the Company had research and development tax
credit carryforwards of approximately $51,000. These carryforwards expire in
various periods from 2010 to 2011. The Tax Reform Act of 1986 contains
provisions that may limit the net operating loss and research and development
credit carryforwards to be used in any given year upon the occurrence of
certain events, including a significant change in ownership interest.
12. ACQUISITION OF MINORITY INTEREST IN CANADIAN SUBSIDIARY
In February 1996, the Company entered into a joint venture in Canada through
which it owned 51% of a Canadian corporation, Genesys Laboratories Canada,
Inc. ("GenCan"). In January 1997, the respective Boards of Directors of the
Company and the minority shareholder of GenCan reached agreement on the terms
and conditions of and signed a memorandum of understanding for the purchase by
the Company of the 49% minority shares of GenCan in exchange for 675,000
shares of Common Stock of the Company. In February 1997, the Company issued
675,000 shares of Common Stock to the minority shareholder in accordance with
the terms of the January agreement. In connection with this acquisition, which
will be accounted for as a purchase, the Company will allocate the purchase
price based upon the estimated fair value of the assets acquired and
liabilities assumed. The Company estimates that intangible assets acquired
will total approximately $2,000,000.
F-17
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. INTERNATIONAL OPERATIONS AND MAJOR CUSTOMERS
Major Customers
The following customers accounted for 10% or more of total revenues in the
periods indicated:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
FOR THE YEARS ENDED ENDED
JUNE 30, DECEMBER 31,
---------------------- -------------
1994 1995 1996 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Customer A............................. 26.5% * * * *
Customer B............................. * 11.2% * * *
Customer C............................. * 12.8% * * *
Customer D............................. * 11.1% 10.2% * *
Customer E............................. * * 10.8% * *
Customer F............................. * * 10.0% * *
</TABLE>
- --------
*Less than 10% of total revenues
International Operations
A summary of the Company's operations by geographic area is presented below
(in thousands):
<TABLE>
<CAPTION>
FOR THE
FOR THE FISCAL YEARS ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
----------------------------- ------------------
1994 1995 1996 1995 1996
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers:
North America............ $ 1,732 $ 4,212 $ 6,654 $ 3,092 $ 8,559
Europe................... -- 268 2,665 347 3,245
-------- -------- --------- -------- --------
$ 1,732 $ 4,480 $ 9,319 $ 3,439 $ 11,804
Intercompany revenues
between geographic areas:
North America............ $ -- $ -- $ 1,013 $ -- $ 1,841
Europe................... -- -- -- -- --
Eliminations............. -- -- (1,013) -- (1,841)
-------- -------- --------- -------- --------
$ -- $ -- $ -- $ -- $ --
Operating income (loss):
North America............ $ (160) $ 158 $ (3,263) $ (1,327) $ 63
Europe................... -- 20 21 (148) (257)
Eliminations............. -- (18) 3 -- (44)
-------- -------- --------- -------- --------
$ (160) $ 160 $ (3,239) $ (1,475) $ (238)
Identifiable assets:
North America............ $ 689 $ 2,184 $ 12,524 $ 2,506 $ 16,198
Europe................... -- 431 2,960 818 3,722
Eliminations............. -- (360) (3,523) (814) (3,719)
-------- -------- --------- -------- --------
$ 689 $ 2,255 $ 11,961 $ 2,510 $ 16,201
</TABLE>
The information presented above may not be indicative of results if the
geographic areas were independent organizations. Intercompany transactions are
made at established transfer prices.
Revenues generated from international sales of the Company's products, which
includes export shipments originating in the United States to unaffiliated
customers and sales to unaffiliated customers from the Company's foreign
offices, represented 40.6%, 30.9% and 36.2% of total revenues in fiscal 1994,
1995 and 1996, respectively, and represented 28.3% and 46.7% of total revenues
in the six months ended December 31, 1995 and 1996, respectively.
F-18
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS
1997 Employee Stock Purchase Plan
In March 1997, the Board adopted the 1997 Employee Stock Purchase Plan (the
"Purchase Plan") subject to shareholder approval. The Company has reserved
500,000 shares of Common Stock for issuance under the Purchase Plan. The
Purchase Plan will enable eligible employees to purchase common stock at 85%
of the lower of the fair market value of the Company's common stock on the
first or the last day of each offering period.
1997 Stock Incentive Plan
In March 1997, the Board adopted the 1997 Stock Incentive Plan (the "1997
Plan"), subject to shareholder approval, which will serve as a successor to
the Company's 1995 Stock Option Plan (the "Predecessor Plan"). The Company
will reserve shares of Common Stock for issuance under the 1997 Plan equal to
the sum of (i) the shares which remain available for issuance under the
Predecessor Plan, including the shares subject to outstanding options
thereunder, and (ii) an additional increase of 2,400,000 shares. In addition,
upon the completion of each fiscal year of the Company, beginning with the
1998 fiscal year, the share reserve will automatically be increased on the
first trading day of July each year by a number of shares equal to five
percent (5%) of the total number of shares of Common Stock outstanding on the
last trading day of the immediately preceding calendar month.
The 1997 Plan is divided into four separate components: (i) the
Discretionary Option Grant Program, under which eligible individuals in the
Company's employ or service (including officers and other employees, non-
employee Board members and independent consultants) may, at the discretion of
the Plan Administrator, be granted options to purchase shares of Common Stock
at an exercise price not less than their fair market value on the grant date,
(ii) the Stock Issuance Program, under which such individuals may, in the Plan
Administrator's discretion, be issued shares of Common Stock directly, either
through the purchase of such shares at a price not less than their fair market
value at the time of issuance or as a fully-vested bonus for services rendered
the Company, (iii) the Salary Investment Option Grant Program, under which
executive officers and other highly compensated employees may elect to apply a
portion of their base salary to the acquisition of special below-market stock
option grants, and (iv) the Automatic Option Grant Program, under which option
grants will automatically be made at periodic intervals to eligible non-
employee Board members to purchase shares of Common Stock at an exercise price
equal to their fair market value on the grant date.
F-19
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters, for whom Goldman, Sachs & Co., Lehman Brothers Inc. and
Robertson, Stephens & Company LLC are acting as representatives, have
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
----------- ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Lehman Brothers Inc.........................................
Robertson, Stephens & Company LLC...........................
---------
Total................................................... 2,000,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain brokers and dealers. After the shares of Common Stock are released
for sale to the public, this offering price and other selling terms may from
time to time be varied by the representatives.
The Company and the Selling Shareholders have granted the Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 300,000 additional shares of Common Stock to cover over-
allotments, if any. If the Underwriters exercise their over-allotment option,
the Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
2,000,000 shares of Common Stock offered.
The Company and its officers, directors and shareholders have agreed that,
during the period beginning from the date of this Prospectus and continuing to
and including the date 180 days after the date of the Prospectus, they will
not, subject to certain exceptions, offer, sell, contract to sell, grant an
option to sell, transfer or otherwise dispose of any securities of the Company
without the prior written consent of the representatives of the Underwriters.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Common Stock offered by them.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated between the
Company and the representatives of the Underwriters. Among the factors to be
considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, will be the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the
U-1
<PAGE>
Company's management and the consideration of the above factors in relation to
market valuations of companies in related businesses.
The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "GCTI".
The Company and, if the Underwriters' over-allotment option is exercised,
the Selling Shareholders, have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
Lehman Brothers Inc., one of the Representatives of the Underwriters,
performed certain consulting services to the Company in connection with the
Company's Series C Preferred Stock financing.
In connection with this offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock
than they are required to purchase from the Company in this offering. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the
securities sold in this offering for their account may be reclaimed by the
syndicate if such securities are repurchased by the syndicate in stabilizing
or covering transactions. These activities may stabilize, maintain or
otherwise affect the market price of the securities, which may be higher than
the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the Nasdaq Stock Market, in the over-the-counter market or
otherwise.
U-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
The Company............................................................... 17
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Dilution.................................................................. 18
Capitalization............................................................ 19
Selected Consolidated Financial Data...................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 29
Management................................................................ 43
Certain Transactions...................................................... 52
Principal and Selling Shareholders........................................ 53
Description of Capital Stock.............................................. 55
Shares Eligible for Future Sale........................................... 57
Legal Matters............................................................. 58
Experts................................................................... 58
Change in Independent Public Accountants.................................. 59
Additional Information.................................................... 59
Special Note Regarding Forward-Looking Statements......................... 59
Financial Statements...................................................... F-1
Underwriting.............................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO-
SPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,000,000 SHARES
GENESYS
TELECOMMUNICATIONS
LABORATORIES, INC.
COMMON STOCK
(NO PAR VALUE)
------------
[LOGO]
------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
ROBERTSON, STEPHENS & COMPANY
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates,
except the SEC registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 11,152
NASD fee ........................................................ 4,180
Nasdaq National Market listing fee ..............................
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Officers' and directors' liability insurance..................... *
Blue sky fees and expenses....................................... 5,000
Transfer agent fees.............................................. *
Miscellaneous fees and expenses.................................. *
----------
Total.......................................................... $1,100,000
==========
</TABLE>
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As allowed by the California General Corporation Law, the Company's Articles
of Incorporation provide that the liability of the directors of the Company
for monetary damages shall be eliminated to the fullest extent permissible
under California law. This is intended to eliminate the personal liability of
a director for monetary damages in an action brought by or in the right of the
Company for breach of a director's duties to the Company or its shareholders,
except for liability: (1) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law; (2) for acts or
omissions that a director believes to be contrary to the best interests of the
Company or its shareholders or that involve the absence of good faith on the
part of the director; (3) for any transaction from which a director derived an
improper personal benefit; (4) for acts or omissions that show a reckless
disregard for the director's duty to the Company or its shareholders in
circumstances in which the director was aware, or should have been aware, in
the ordinary course of performing a director's duties, of a risk of serious
injury to the Company or its shareholders; (5) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication
of the director's duty to the Company or its shareholders; (6) with respect to
certain transactions, or the approval of transactions, in which a director has
a material financial interest; and (7) with respect to approval of certain
improper distributions to shareholders or certain loans or guarantees. This
provision does not eliminate or limit the liability of an officer for any act
or omission as an officer, notwithstanding that the officer is also a director
or that his actions, if negligent or improper, have been ratified, by the
Board of Directors. Further, the provision has no effect on claims arising
under federal or state securities laws and does not affect the availability of
injunctions and other equitable remedies available to the Company's
shareholders for any violation of a director's fiduciary duty to the Company
or its shareholders. Although the validity and scope of the legislation
underlying the provision have not yet been interpreted to any significant
extent by the California courts, the provision may relieve directors of
monetary liability to the Company for grossly negligent conduct, including
conduct in situations involving attempted takeovers of the Company.
The Company's Bylaws permit it to indemnify its officers and directors to
the fullest extent permitted by law. In addition, the Company's Articles of
Incorporation expressly authorize the use of
II-1
<PAGE>
indemnification agreements, and the Company has entered into separate
indemnification agreements with each of its directors and its executive
officers. These agreements required the Company to indemnify its officer and
directors to the fullest extent permitted by law, including circumstances in
which indemnification would otherwise be discretionary. Among other things the
agreements require the Company to indemnify directors and officers against
certain liabilities that may arise by reason of their status or service as
directors and officers and to advance their expenses incurred as a result of
any proceeding against them as to which they could be indemnified.
The Underwriting Agreement provides for indemnification of the Company by
the Underwriters for certain liabilities, including liabilities arising under
the Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1993, the Registrant has issued and sold the following
securities:
1. As of December 31, 1996, the Registrant issued and sold 5,811,000 shares
(net of repurchases) of its Common Stock to employees at prices ranging from
$.0167 to $.225 pursuant to direct issuances under Restricted Stock Purchase
Agreements (Exhibit 10.3).
2. As of December 31, 1996, the Registrant issued and sold 190,934 shares of
its Common Stock to employees at a price of $.0167 pursuant to exercises of
options under its 1995 Stock Option Plan (Exhibit 10.2).
3. On January 20, 1993 and October 15, 1994, the Registrant issued and sold
6,000,000 shares of Common Stock for an aggregate purchase price of $10,000 to
the five founders of the Registrant.
4. On March 29, 1996, the Registrant issued and sold 900,000 shares of
Series A Preferred Stock for an aggregate purchase price of approximately
$1,995,000 to a group of seven investors and a director of the Registrant.
5. On April 26, 1996, the Registrant issued and sold warrants to purchase
420,282 shares of Common Stock with an aggregate exercise price of
approximately $2,500,000 for advisory services provided by one investor.
6. On June 13, 1996, the Registrant issued and sold 1,897,878 shares of
Series B Preferred Stock for an aggregate purchase price of approximately
$7,000,000 to a group of four investors.
7. On February 26, 1997, the Registrant issued and sold 854,363 shares of
Series C Preferred Stock for an aggregate purchase price of approximately
$9,500,517 to two investors and warrants to purchase 44,965 and 449,664 shares
of Series C Preferred Stock, respectively, with an exercise price per share of
110% of the current fair value on the date such shares vest pursuant to the
vesting schedule, which expire on February 26, 2000, and at an exercise price
per share of 110% of the current market price on December 31, 1997 (subject to
certain adjustments) if the Company has completed an initial public offering
of its Common Stock; otherwise $13.34, which expire on February 26, 2004.
8. On February 26, 1997, the Registrant issued and sold 675,000 shares of
Common Stock in exchange for a 49% equity interest in Genesys Laboratories
Canada, Inc. to one investor.
The issuances described in Items 15(a)(1) and 15(a)(2) were deemed exempt
from registration under the Act in reliance upon Rule 701 promulgated under
the Act. The issuances of the securities described in Items 15(a)(3) through
15(a)(8) were deemed to be exempt from registration under the Act in reliance
on Section 4(2) of such Act as transactions by an issuer not involving any
public offering. In addition, the recipients of securities in each such
transaction represented their intentions to
II-2
<PAGE>
acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and warrants issued in such transactions.
All recipients had adequate access, through their relationships with the
Registrant, to information about the Registrant.
ITEM 16. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement (preliminary form).
3.1 Amended and Restated Articles of Incorporation of the Registrant,
as amended to date.
3.2 Form of Restated Articles of Incorporation to be filed after the
closing of this offering made pursuant to this Registration
Statement.
3.3 Bylaws of the Registrant, as amended.
3.4 Form of Bylaws to be effective upon the effectiveness of this
Registration Statement.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2* Specimen Common Stock certificate.
4.3 Series A Preferred Stock Purchase Agreement, dated March 29, 1996
among the Registrant and the investors named therein.
4.4 Common Stock Purchase Warrant, dated April 26, 1996 between the
Registrant and Benchmark Capital Partners, L.P.
4.5 Series B Preferred Stock Purchase Agreement, dated June 13, 1996
among the Registrant and the investors named therein.
4.6 Securities Purchase Agreement, dated February 26, 1997 between the
Registrant and MCI Telecommunications Corporation ("MCI").
4.7+ Warrant to Purchase Shares of Series C Preferred Stock, dated
February 26, 1997 between the Registrant and MCI.
4.8 Series C Preferred Stock and Warrant Purchase Agreement, dated
February 26, 1997 between the Registrant and Intel Corporation
("Intel").
4.9+ Warrant to Purchase Shares of Series C Preferred Stock, dated
February 26, 1997 between the Registrant and Intel.
4.10 Stock Exchange Agreement, dated February 26, 1997 between the
Registrant and Bruncor, Inc. ("Bruncor").
4.11 Registration Rights Agreement, dated February 26, 1997, among the
Registrant and the investors named therein.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Form of Indemnification Agreement entered into between the
Registrant and its directors and officers.
10.2 The Registrant's 1995 Stock Option Plan, as amended.
10.3 Form of the Registrant's Restricted Stock Purchase Agreement.
10.4* The Registrant's 1997 Stock Incentive Plan.
10.5* The Registrant's Employee Stock Purchase Plan.
10.6 [Intentionally left blank]
10.7 Credit Line with Imperial Bank, dated October 28, 1996.
10.8 Facilities Lease dated July 1, 1996 between the Registrant and
1155 Market Partners, with modifications dated January 21, 1997
and January 30, 1997.
10.9+ Master Software License Agreement dated January 31, 1996,
including Addendum to Master License Agreement dated February 1,
1996, as amended on February 26, 1997 by and between the
Registrant and MCI.
10.10+ Software Maintenance Agreement dated January 31, 1996, as amended
on February 26, 1997 by and between the Registrant and MCI.
11.1 Computation of Pro Forma Net Loss Per Share.
16.1 Change in Independent Auditor's Letter.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Public Accountants (see page II-6)
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
23.3 Consent of Counsel.
24.1 Power of Attorney (see page II-5)
27 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
+Confidential treatment requested as to certain portions of these exhibits.
(b) Consolidated Financial Statement Schedules
SCHEDULE II--VALUATION OF QUALIFYING SECURITIES
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The 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 California General Corporation Law, the Articles of
Incorporation or the Bylaws of the Registrant, Indemnification Agreements
entered into between the Registrant and its officers and directors, the
Underwriting Agreement, 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 hereunder, 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 of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The 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 this
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<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 SAN
FRANCISCO, STATE OF CALIFORNIA, ON THIS 2 DAY OF APRIL, 1997.
Genesys Telecommunications Laboratories,
Inc.
By: /s/ Gregory Shenkman
----------------------------------------
Gregory Shenkman
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Gregory Shenkman and
Michael J. McCloskey, and each one of them, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign any and
all amendments to this Registration Statement (including post effective
amendments), and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
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 DATE
--------- ----- ----
<C> <S> <C>
/s/ Gregory Shenkman President, Chief Executive Officer April 2, 1997
________________________________ (Principal Executive Officer),
Gregory Shenkman Director
/s/ Alec Miloslavsky Vice Chairman, Chief Technical Officer, April 2, 1997
________________________________ Director
Alec Miloslavsky
/s/ Michael J. McCloskey Vice President, Finance and April 2, 1997
________________________________ International, Chief Financial Officer
Michael J. McCloskey and Secretary
/s/ James Jordan Chairman of the Board and Director April 2, 1997
________________________________
James Jordan
/s/ Bruce Dunlevie Director April 2, 1997
________________________________
Bruce Dunlevie
/s/ Paul Levy Director April 2, 1997
________________________________
Paul Levy
</TABLE>
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
April 2, 1997
----------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Genesys Telecommunications Laboratories, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Genesys Telecommunications
Laboratories, Inc. and subsidiaries included in this registration statement
and have issued our report thereon dated April 2, 1997. Our audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the index is presented for purposes of complying
with the Securities and Exchange Commissions rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
San Jose, California
April 2, 1997
II-6
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING OF CHARGED TO WRITE- AT END OF
PERIOD EXPENSE OFFS PERIOD
------------ ---------- -------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended June 30, 1994......... -- $ 51,500 -- $ 51,500
Year ended June 30, 1995......... $51,500 $ 4,000 $(40,000) $ 15,500
Year ended June 30, 1996......... $15,500 $410,500 -- $426,000
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement (preliminary form).
3.1 Amended and Restated Articles of Incorporation of
the Registrant, as amended to date.
3.2 Form of Restated Articles of Incorporation to be
filed after the closing of this offering made
pursuant to this Registration Statement.
3.3 Bylaws of the Registrant, as amended.
3.4 Form of Bylaws to be effective upon the
effectiveness of this Registration Statement.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and
3.4.
4.2* Specimen Common Stock certificate.
4.3 Series A Preferred Stock Purchase Agreement, dated
March 29, 1996 among the Registrant and the
investors named therein.
4.4 Common Stock Purchase Warrant, dated April 26, 1996
between the Registrant and Benchmark Capital
Partners, L.P.
4.5 Series B Preferred Stock Purchase Agreement, dated
June 13, 1996 among the Registrant and the
investors named therein.
4.6 Securities Purchase Agreement, dated February 26,
1997 between the Registrant and MCI
Telecommunications Corporation ("MCI").
4.7+ Warrant to Purchase Shares of Series C Preferred
Stock, dated February 26, 1997 between the
Registrant and MCI.
4.8 Series C Preferred Stock and Warrant Purchase
Agreement, dated February 26, 1997 between the
Registrant and Intel Corporation ("Intel").
4.9+ Warrant to Purchase Shares of Series C Preferred
Stock, dated February 26, 1997 between the
Registrant and Intel.
4.10 Stock Exchange Agreement, dated February 26, 1997
between the Registrant and Bruncor, Inc.
("Bruncor").
4.11 Registration Rights Agreement, dated February 26,
1997, among the Registrant and the investors named
therein.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Form of Indemnification Agreement entered into
between the Registrant and its directors and
officers.
10.2 The Registrant's 1995 Stock Option Plan, as
amended.
10.3 Form of the Registrant's Restricted Stock Purchase
Agreement.
10.4* The Registrant's 1997 Stock Incentive Plan.
10.5* The Registrant's Employee Stock Purchase Plan.
10.6 [Intentionally left blank]
10.7 Credit Line with Imperial Bank, dated October 28,
1996.
10.8 Facilities Lease dated July 1, 1996 between the
Registrant and 1155 Market Partners, with
modifications dated January 21, 1997 and January
30, 1997.
10.9+ Master Software License Agreement dated January 31,
1996, including Addendum to Master License
Agreement dated February 1, 1996, as amended on
February 26, 1997 by and between the Registrant and
MCI.
10.10+ Software Maintenance Agreement dated January 31,
1996, as amended on February 26, 1997 by and
between the Registrant and MCI.
11.1 Computation of Pro Forma Net Loss Per Share.
16.1 Change in Independent Auditor's Letter.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Public Accountants (see page
II-6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<C> <S> <C>
23.2 Consent of Counsel. Reference is made to
Exhibit 5.1.
23.3 Consent of Counsel.
24.1 Power of Attorney (see page II-5)
27 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
+Confidential treatment requested as to certain portions of these exhibits.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
----------------------------------------------
OF
--
GENESYS TELECOMMUNICATIONS LABORATORIES
---------------------------------------
Michael McCloskey and Richard C. DeGolia certify that:
1. They are the Vice President and the Secretary, respectively, of Genesys
Telecommunications Laboratories, a California corporation (the "CORPORATION").
2. The Articles of Incorporation of this Corporation are amended and
restated to read as follows:
"ARTICLE I
The name of this Corporation is Genesys Telecommunications Laboratories,
Inc.
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
This Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock ("COMMON STOCK") and Preferred Stock
("PREFERRED STOCK"). The total number of shares of Common Stock this
Corporation shall have authority to issue is 120,000,000 shares, and the total
number of shares of Preferred Stock this Corporation shall have authority to
issue is 4,146,870 shares. Of the shares of Preferred Stock, 900,000 shares are
hereby designated as Series A Preferred Stock ("SERIES A PREFERRED"), 1,897,878
shares are hereby designated as Series B Preferred Stock ("SERIES B PREFERRED")
and 1,348,992 shares are hereby designated as Series C Preferred Stock ("SERIES
C PREFERRED").
Upon the effective date of these Amended and Restated Articles of
Incorporation, (i) every one (1) outstanding share of Series A Preferred Stock
shall be converted
1
<PAGE>
into six (6) shares of Series A Preferred Stock of this Corporation and (ii)
every one (1) outstanding share of Series B Preferred Stock shall be converted
into six (6) shares of Series B Preferred Stock of this Corporation.
The Corporation shall from time to time in accordance with the laws of the
State of California increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to or
imposed on the Preferred Stock and the holders thereof are as set forth below.
Section 1. Dividends. The holders of the Series A Preferred shall be
---------
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available therefor, dividends at the rate of $.1333 per share per
annum. The holders of the Series B Preferred shall be entitled to receive, when
and as declared by the Board by Directors, out of funds legally available
therefor, dividends at the rate of $.225 per share per annum. The holders of
the Series C Preferred shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available therefor, dividends at the
rate of $.6672 per share per annum. Such dividends shall not be cumulative and
no right to such dividends shall accrue to holders of Series A Preferred, Series
B Preferred and Series C Preferred unless declared by the Board of Directors. No
dividends shall be declared on the Series A Preferred, Series B Preferred or
Common Stock until dividends at the rate specified above calculated for each
year the Series C Preferred has been outstanding have been declared with respect
to the Series C Preferred. No dividends or other distributions shall be made
with respect to the Series A Preferred, the Series B Preferred or Common Stock,
other than dividends payable solely in Common Stock, until all declared
dividends on the Series C Preferred have been paid or set apart. No dividends
or other distributions shall be made with respect to the Common Stock, other
than dividends payable solely in Common Stock, until all declared dividends on
the Preferred Stock have been paid or set apart.
Section 2. Liquidation Preference. In the event of any liquidation,
----------------------
dissolution, or winding up of the Corporation, either voluntary or involuntary
(a "LIQUIDATION"), distributions to the shareholders of the Corporation shall be
made in the following manner:
(a) Series C Preferred. In the event of a Liquidation, the holders of
------------------
Series C Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of Series A Preferred, Series B Preferred and Common Stock by reason of
their ownership of such stock, an amount equal to $11.12 per share for each
share of Series C Preferred then held by them, adjusted for any combinations,
consolidations, or stock distributions or dividends with respect to such shares
and, in addition, an amount equal to all declared but unpaid dividends on the
Series C Preferred (the
2
<PAGE>
"SERIES C LIQUIDATION PREFERENCE"), to be paid out of the Corporation's assets
legally available for distribution to its shareholders (the "LIQUIDATION
ASSETS"). If upon a Liquidation, the Liquidation Assets to be distributed among
the holders of Series C Preferred shall be insufficient to permit the payment to
such holders of the full aforesaid Series C Liquidation Preference, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of Series C Preferred in a manner
such that the amount to be distributed to each holder of Series C Preferred
shall equal the amount obtained by multiplying the Liquidation Assets hereunder
by a fraction, the numerator of which shall be equal to the number of shares of
Series C Preferred then held by such holder multiplied by the Series C
Liquidation Preference, and the denominator of which shall be equal to the total
number of shares of Series C Preferred then outstanding multiplied by the Series
C Liquidation Preference.
(b) Series A and Series B Preferred. After payment has been made to the
-------------------------------
holders of the Series C Preferred of the full amounts to which they shall be
entitled as aforesaid in subparagraph (a), the holders of Series A Preferred and
Series B Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership of such stock, an
amount equal to (i) $2.2167 per share for each share of Series A Preferred then
held by them, adjusted for any combinations, consolidations, or stock
distributions or dividends with respect to such shares and, in addition, an
amount equal to all declared but unpaid dividends on the Series A Preferred (the
"SERIES A LIQUIDATION PREFERENCE"), and (ii) $3.6883 per share for each share of
Series B Preferred then held by them, adjusted for any combinations,
consolidations, or stock distributions or dividends with respect to such shares
and, in addition, an amount equal to all declared but unpaid dividends on the
Series B Preferred (the "SERIES B LIQUIDATION PREFERENCE"), to be paid out of
the remaining Liquidation Assets. If upon a Liquidation, such remaining
Liquidation Assets to be distributed among the holders of Series A Preferred and
Series B Preferred shall be insufficient to permit the payment to such holders
of the full aforesaid Series A Liquidation Preference and Series B Liquidation
Preference, then the entire assets and funds of the Corporation legally
available for distribution to the holders of Series A Preferred and Series B
Preferred shall be distributed ratably among such holders in a manner such that
the amount to be distributed to each holder of Series A Preferred and Series B
Preferred shall equal the amount obtained by multiplying the remaining
Liquidation Assets hereunder by a fraction, the numerator of which shall be
equal to the sum of (a) the number of shares of Series A Preferred then held by
such holder multiplied by the Series A Liquidation Preference and (b) the number
of shares of Series B Preferred then held by such holder multiplied by the
Series B Liquidation Preference, and the denominator of which shall be equal to
the sum of (A) the total number of shares of Series A Preferred then outstanding
multiplied by the Series A Liquidation Preference and (B) the total number of
shares of Series B Preferred then outstanding multiplied by the Series B
Liquidation Preference.
3
<PAGE>
(c) Common Stock. After payment has been made to the holders of the Series
------------
A Preferred, Series B Preferred and Series C Preferred of the full amounts to
which they shall be entitled as aforesaid in subparagraphs (a) and (b), all
remaining Liquidation Assets shall be distributed ratably among the holders of
the Common Stock in a manner such that the remaining amount distributed to each
holder of Common Stock shall equal the amount obtained by multiplying the entire
assets and funds of the Corporation legally available for distribution hereunder
by a fraction, the numerator of which shall be the number of shares of Common
Stock then held by such holder, and the denominator of which shall be the total
number of shares of Common Stock then outstanding.
(d) Deemed Liquidation. For purposes of this Section 2, a merger or
------------------
consolidation of the Corporation with or into any other corporation or
corporations (except where a majority of the outstanding equity securities of
the surviving corporation immediately after the merger or consolidation is held
by persons who were shareholders of this Corporation immediately prior to the
merger or consolidation), or a sale or other transfer of all or substantially
all of the assets of the Corporation (or any series of related transactions
resulting in the sale or other transfer of all or substantially all of the
assets of the Corporation), shall be treated as a Liquidation.
(e) Consent. Each holder of an outstanding share of Preferred Stock shall
-------
be deemed to have consented, for purposes of Sections 502, 503 and 506 of the
General Corporation Law of California, to distributions made by the Corporation
in connection with the repurchase of shares of Common Stock issued to or held by
employees or consultants upon termination of their employment or services
pursuant to agreements between the Corporation and such persons providing for
the Corporation's right of said repurchase.
Section 3. Voting Rights. Except as otherwise required by law or by
-------------
Section 5 hereof, the holder of each share of Common Stock issued and
outstanding shall have one vote and the holder of each share of Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Preferred Stock could be converted at the record
date for determination of the shareholders entitled to vote on such matters, or,
if no such record date is established, at the date such vote is taken or any
written consent of shareholders is solicited, such votes to be counted together
with all other shares of stock of the Corporation having general voting power
and not separately as a class. Holders of Common Stock and Preferred Stock shall
be entitled to notice of any shareholders' meeting in accordance with the Bylaws
of the Corporation. Fractional votes by the holders of Preferred Stock shall
not, however, be permitted and any fractional voting rights shall (after
aggregating all shares into which shares of Preferred Stock held by each holder
could be converted) be rounded to the nearest whole number.
Section 4. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "CONVERSION RIGHTS"):
4
<PAGE>
(a) Right to Convert. Each share of Preferred Stock shall be convertible,
----------------
without the payment of any additional consideration by the holder thereof and at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing (i) for the Series A Preferred, $2.2167 by the
Series A Conversion Price for each share of Series A Preferred to be converted,
(ii) for the Series B Preferred, $3.6883 by the Series B Conversion Price for
each share of Series B Preferred to be converted, and (iii) for the Series C
Preferred, $11.12 by the Series C Conversion Price for each share of Series C
Preferred to be converted, with each such Conversion Price determined as
hereinafter provided and as in effect at the time of conversion for such series
of Preferred Stock. The prices at which shares of Common Stock shall be
deliverable upon conversion of Series A Preferred, Series B Preferred and Series
C Preferred without the payment of any additional consideration by the holders
thereof shall initially be (A) $2.2167 per share of Common Stock in the case of
the Series A Preferred (the "SERIES A CONVERSION PRICE"), (B) $3.6883 per share
of Common Stock in the case of the Series B Preferred (the "SERIES B CONVERSION
PRICE"), and (C) $11.12 per share of Common Stock in the case of the Series C
Preferred (the "SERIES C CONVERSION PRICE"). Such initial Conversion Prices
shall be subject to adjustment, in order to adjust the number of shares of
Common Stock into which the respective series of Preferred Stock is convertible,
as hereinafter provided. Upon conversion, all declared and unpaid dividends on
the Series A Preferred, Series B Preferred and Series C Preferred shall be paid
either in cash or in shares of Common Stock of the Corporation, at the election
of the Corporation, wherein the shares of Common Stock shall be valued at the
fair market value at the time of such conversion, as determined by the Board of
Directors of the Corporation.
(b) Automatic Conversion.
--------------------
(i) Preferred Stock shall automatically be converted into shares of Common
Stock at the then effective Conversion Price upon the closing of an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public with aggregate offering price
to the public of not less than $15,000,000, and at a price per share (prior to
underwriter commissions and offering expenses) of not less than $11.12 per share
(appropriately adjusted for any recapitalization, stock split or like event).
(ii) The Series A Preferred Stock and the Series B Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon the date upon which the Corporation obtains the consent of
the holders of a majority of the Series A Preferred and Series B Preferred then
outstanding, voting together as a class.
In the event of the automatic conversion of the Preferred Stock upon a public
offering as aforesaid, the person(s) entitled to receive the Common Stock
issuable upon such conversion of
5
<PAGE>
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock shall be
-----------------------
issued upon conversion of Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation at its election
shall either (i) pay cash equal to such fraction multiplied by the then
effective Conversion Price or (ii) issue one whole share of Common Stock for
each fractional share to which the holder would otherwise be entitled. Before
any holder of Preferred Stock shall be entitled to convert the same into full
shares of Common Stock and to receive certificates therefor, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Preferred Stock, and shall
give written notice to the Corporation at such office that such holder elects to
convert the same; provided, however, that in the event of an automatic
conversion pursuant to Section 4(b), the outstanding shares of Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent, and provided further that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Preferred Stock are either delivered to
the Corporation or its transfer agent as provided above, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such
delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Preferred Stock,
a certificate or certificates for the number of shares of Common Stock to which
the holder shall be entitled as aforesaid and a check payable to the holder in
the amount of any cash amounts payable as the result of a conversion into
fractional shares of Common Stock. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, or in the case of automatic
conversion on the date of closing of the offering or the effective date of such
written consent, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(d) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this subsection 4(d), the
-------------------
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to subscribe for,
------
purchase or otherwise acquire either Common Stock or Convertible Securities.
6
<PAGE>
(2) "Original Issue Date" shall mean the date on which the first share
-------------------
of Series C Preferred was issued.
(3) "Convertible Securities" shall mean any evidences of indebtedness,
----------------------
shares or other securities convertible into or exchangeable for Common Stock.
(4) "Additional Shares of Common" shall mean all shares of Common
---------------------------
Stock issued (or, pursuant to Section 4(d)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, other than shares of Common Stock
issued or issuable:
(A) upon conversion of shares of Preferred Stock (i) outstanding as of
the Original Issue Date or (ii) acquired upon exercise of any Preferred Stock
warrants outstanding as of the Original Issue Date;
(B) as a dividend or distribution on Preferred Stock or as a result of
any event for which adjustment is made pursuant to subparagraph (d)(vi) hereof;
(C) to officers, directors and employees of, and consultants to, the
Corporation pursuant to the Corporation's 1995 Stock Option Plan or such other
arrangement approved by the Corporation's Board of Directors (up to an
additional 2,300,000 shares after the Original Issue Date, with such 2,300,000
limitation not applicable to any shares of Common Stock issued or issuable upon
exercise of any option, warrant or other right issued, granted or outstanding on
or prior to the Original Issue Date);
(D) upon exercise of any option, warrant or other right issued,
granted or outstanding on or prior to the Original Issue Date;
(E) by way of dividend or other distribution on shares of Common Stock
excluded from the definition of Additional Shares of Common by the foregoing
clause(s) (A), (B), (C) and (D).
(ii) No Adjustment of Conversion Price. Notwithstanding anything to
---------------------------------
the contrary, no adjustment in the number of shares of Common Stock into which
any series of Preferred Stock is convertible shall be made, by adjustment in the
Conversion Price of such series of Preferred Stock in respect of the issuance of
Additional Shares of Common or otherwise, unless the consideration per share for
an Additional Share of Common issued or deemed to be issued by the Corporation
is less than the Conversion Price of such series in effect on the date of, and
immediately prior to, the issue of such Additional Share of Common.
7
<PAGE>
(iii) Deemed Issuances of Additional Shares of Common.
-----------------------------------------------
(1) Options and Convertible Securities. In the event 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 (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
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 issued as of the
time of such issue or, in the 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 shall not be deemed to have been issued with respect to an adjustment of
the Conversion Price for a series of Preferred Stock unless the consideration
per share (determined pursuant to subsection 4(d)(v) hereof) of such Additional
Shares of Common would be less than the Conversion Price of such series of
Preferred Stock 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 are deemed to be issued:
(A) no further adjustment in the Conversion Price shall be made upon
the subsequent issue of 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, or decrease or increase in the number
of shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the 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 in
consideration or increase or decrease in the number of shares issuable 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 of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the 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 such expiration, be recomputed
as if:
(a) in the case of Convertible Securities or Options for Common Stock
the only Additional Shares of Common issued were the shares of Common Stock, if
any, actually issued upon the exercise of such Options or the conversion or
8
<PAGE>
exchange of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation for the issue of such
exercised Options plus the consideration actually received by the Corporation
upon such exercise or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or exchange, and
(b) in the case of Options for Convertible Securities, the only
Additional Shares of Common deemed to have been issued were the Convertible
Securities, if any, that were actually issued upon the exercise of such Options,
and the consideration received by the Corporation for the Additional Shares of
Common deemed to have been then issued was the consideration actually received
by the Corporation for the issue of such exercised Options, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to subsection 4(d)(v)) upon the issue of the Convertible Securities
with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above shall have the
effect of increasing the Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price as it existed on the original adjustment date, or
(ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common between the original adjustment date and such
readjustment date;
(E) in the case of any Options which expire by their terms not more
than 30 days after the date of issue thereof, no adjustment of the Conversion
Price shall be made until the expiration or exercise of all such Options issued
on the same date, whereupon such adjustment shall be made in the same manner
provided in clause (C) above; and
(F) if such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed therefor, the adjustment
previously made in the Conversion Price which became effective on such record
date shall be cancelled as of the close of business on such record date, and
thereafter the Conversion Price shall be adjusted pursuant to this subsection
4(d)(iii) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In the
-----------------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall declare or pay any dividend or make any other distribution on the
Common Stock payable in Common Stock, or effect a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then and in any such event, Additional Shares of
Common shall be deemed to have been issued:
9
<PAGE>
(A) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of holders
of any class of securities entitled to receive such dividend or distribution, or
(B) in the case of any such subdivision, at the close of business on
the date immediately prior to the date upon which such corporate action becomes
effective.
If such record date shall have been fixed and such dividend shall not
have been paid on the date fixed therefor, the adjustment previously made in the
Conversion Price which became effective on such record date shall be cancelled
as of the close of business on such record date, and thereafter the Conversion
Price shall be adjusted pursuant to this subsection 4(d)(iii) as of the time of
actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares
-----------------------------------------------------------------
of Common. In the event the Corporation shall issue Additional Shares of Common
- ---------
(including Additional Shares of Common deemed to be issued pursuant to
subsection 4(d)(iii), but excluding Additional Shares of Common issued pursuant
to subsection 4(d)(iii)(2), which event is dealt with in subsection 4(d)(vi)
hereof), without consideration or for a consideration per share less than the
applicable Conversion Price in effect on the date of and immediately prior to
such issue, then and in such event, the applicable Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying the Conversion Price by a fraction (x) 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 by the Corporation for the total
number of Additional Shares of Common so issued would purchase at the Conversion
Price, and (y) the denominator of which shall be (1) the number of shares of
Common Stock outstanding immediately prior to such issue plus (2) the number of
such Additional Shares of Common so issued;
provided that for the purposes of this subsection (iv), all shares of Common
- --------
Stock issuable upon exercise, conversion or exchange of outstanding Options or
Convertible Securities, as the case may be, shall be deemed to be outstanding,
and immediately after any Additional Shares of Common are deemed issued pursuant
to subsection (iii) above, such Additional Shares of Common shall be deemed to
be outstanding, and provided further that the Conversion Price shall not be so
reduced at such time if the amount of such reduction would be an amount less
than $0.05, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.05 or more.
(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 shall be computed as follows:
10
<PAGE>
(1) Cash and Property. Such consideration shall:
-----------------
(A) insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be computed at
the fair value thereof at the time of such issue, as determined in good faith by
the Board of Directors; and
(C) in the event Additional Shares of Common 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 (A) and (B) above, as determined in good faith by the
Board of Directors.
(2) Options and Convertible Securities. The consideration per share
----------------------------------
received by the Corporation for Additional Shares of Common deemed to have been
issued pursuant to subsection 4(d)(iii)(1), 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.
(vi) Adjustments for Subdivisions, Combinations, Consolidations or
------------------------------------------ -----------------
Stock Dividends. In the event the outstanding shares of Common Stock shall be
- ---------------
subdivided (by stock split or otherwise), into a greater number of shares of
Common Stock, or shares of Common Stock shall have been issued by stock
dividend, the Conversion Price then in effect shall, concurrently with the
effectiveness of such subdivision or stock dividend, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated by reclassification or otherwise, into a lesser number
of shares of Common Stock,
11
<PAGE>
the Conversion Price then in effect shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased.
(vii) Adjustments for Other Distributions. In the event the
-----------------------------------
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section 4, then and in
each such event provision shall be made so that the holders of 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
which they would have received had their 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 date of conversion,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 4 with respect to the rights of the holders of the Preferred Stock. In
the event the Corporation shall declare a distribution payable in securities of
other persons, evidences of indebtedness issued by the Corporation or other
persons, assets (excluding cash dividends), or options or rights not referred to
in subsection 4(d)(iii), then, in each such case for the purpose of this
subsection 4(d), the holders of the Series A Preferred shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Series A Preferred are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(viii) Adjustments for Reclassification, Exchange and Substitution.
-----------------------------------------------------------
If the Common Stock issuable upon conversion of the Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for
above), the Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted such that the Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of the Preferred Stock immediately
before that change.
(e) No Impairment. Except as provided in Section 5, the Corporation
-------------
will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or
12
<PAGE>
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the 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
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
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of Preferred Stock.
(g) Notices of Record Date. In the event that this Corporation shall
----------------------
propose at any time:
(i) to declare any dividend or distribution upon its Common Stock,
whether in cash, property, stock or other securities, whether or not a regular
cash dividend and whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series or
other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other corporation or
entity, or sell, lease or convey all or substantially all of its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, this Corporation shall send to the holders of the Preferred Stock:
(1) at least 10 days prior written notice of the date on which a
record shall be taken for such dividend, distribution or subscription rights
(and specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of the matters referred to
in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and (iv) above, at
least 10 days prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event).
13
<PAGE>
Each such written notice shall be delivered personally or given by
registered, certified or first class mail, postage prepaid, addressed to the
holders of the Preferred Stock at the address for each such holder as shown on
the books of this Corporation.
Section 5. Covenants.
---------
(a) In addition to any other rights provided by law, so long as any
shares of Series A Preferred or Series B Preferred are outstanding, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of a majority of such outstanding shares of Series A
Preferred and Series B Preferred, voting together as a single class:
(i) amend or repeal any provision of, or add any provision to, this
Corporation's Articles of Incorporation if such action would adversely alter or
change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series A Preferred or Series B Preferred;
(ii) authorize shares of any class of 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 A Preferred or Series B Preferred;
(iii) reclassify any shares of Common Stock and any other shares of
this Corporation 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 the
Series A Preferred or Series B Preferred; or
(iv) authorize a merger, sale of substantially all the assets,
recapitalization, or reorganization of the Corporation (except where a majority
of the outstanding equity securities of the Corporation after the merger, sale,
recapitalization or reorganization is held by persons who were shareholders of
this Corporation immediately prior to the merger or consolidation).
(b) In addition to any other rights provided by law, so long as any
shares of Series C Preferred is outstanding, this Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of at
least seventy-five percent (75%) of such outstanding shares of Series C
Preferred:
(i) amend or repeal any provision of, or add any provision to, this
Corporation's Articles of Incorporation if such action would adversely alter or
change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series C Preferred;
14
<PAGE>
(ii) authorize shares of any class of 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 C Preferred;
(iii) reclassify any shares of Common Stock and any other shares of
this Corporation 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 the
Series C Preferred;
(iv) declare the payment of any dividends on or redeem, purchase or
otherwise acquire (or pay into or set aside for a sinking fund for such purpose)
any share or shares of Series A Preferred, Series B Preferred or Common Stock;
provided, however, that this restriction shall not apply to the repurchase of
shares of Common Stock from (A) employees, officers, directors, consultants or
other persons performing services for the Company or any subsidiary pursuant to
agreements under which the Company has the option to repurchase such shares at
cost upon the occurrence of certain events, such as the termination of
employment, or (B) the repurchase of shares pursuant to repurchase or similar
rights outstanding as of the Original Issue Date.
(v) authorize a merger, sale of substantially all the assets,
recapitalization, or reorganization of the Corporation (except where a majority
of the outstanding equity securities of the Corporation after the merger, sale,
recapitalization or reorganization is held by persons who were shareholders of
this Corporation immediately prior to the merger or consolidation).
Section 6. No Reissuance of Preferred Shares. No share or shares of
---------------------------------
Preferred Stock which are converted, redeemed, purchased or otherwise acquired
by the Corporation shall be reissued, and all such shares of Preferred Stock
shall be cancelled and eliminated from the shares which the Corporation shall be
authorized to issue.
Section 7. Residual Rights. All rights accruing to the outstanding
---------------
shares of this Corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock.
ARTICLE IV
Section 1. Limitation of Directors' Liability. The liability of the
----------------------------------
directors of the Corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents. This corporation is
-----------------------------------
authorized to provide indemnification of agents (as defined in Section 317 of
the California Corporations Code) to the fullest extent permissible under
California law.
15
<PAGE>
Section 3. Repeal or Modification. Any repeal or modification of the
----------------------
foregoing provisions of this Article IV by the shareholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification."
* * *
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors of this
Corporation.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the California Corporations Code. The
total number of outstanding shares of Common Stock of the Corporation is
12,069,086 shares. The total number of outstanding shares of Series A Preferred
Stock of the Corporation is 150,000. The total number of outstanding shares of
Series B Preferred Stock of the Corporation is 316,313. The number of shares
voting in favor of the amendment and restatement of the Articles of
Incorporation equaled or exceeded the vote required. The percentage vote
required was (i) more than 50% of the outstanding shares of Common Stock and,
(ii) more than 50% of the outstanding shares of Series A Preferred Stock and the
Series B Preferred Stock, voting together as a separate class.
16
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge. Executed at San Francisco, California on January 31, 1997.
/s/ Michael J. McCloskey
-------------------------------------------
Michael J. McCloskey, Vice President, Chief
Financial Officer
/s/ Richard C. DeGolia
-------------------------------------------
Richard C. DeGolia, Secretary
17
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
a California Corporation
The undersigned, Gregory Shenkman and Michael J. McCloskey, hereby
certify that:
ONE: They are the duly elected and acting President and Secretary
respectively, of said corporation.
TWO: The Articles of Incorporation of said corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Genesys Telecommunications
Laboratories, Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares that this corporation is authorized to issue
is One Hundred Twenty Five Million (125,000,000) shares. One Hundred Twenty
Million (120,000,000) shares shall be Common Stock and Five Million (5,000,000)
shares shall be Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by these Restated Articles of Incorporation may be
issued from time to time in one or more series. The Board of Directors is
hereby authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon additional series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or of any of them. Subject to compliance with applicable protective
voting rights that have been or may be granted to the Preferred Stock or series
thereof in this corporation's Articles of Incorporation
<PAGE>
("Protective Provisions"), but notwithstanding any other rights of the Preferred
Stock or any series thereof, the rights, privileges, preferences and
restrictions of any such additional series may be subordinated to, pari passu
---- -----
with (including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences, redemption and/or approval of matters
by vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized to
increase or decrease the number of shares of any series, prior or subsequent to
the issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status that they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
1. Repurchase of Shares. In connection with repurchases by this
--------------------
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Subject to the prior rights of holders of
------------------
all classes of stock at the time outstanding having prior rights as to
liquidation, upon the liquidation, dissolution or winding up of this
corporation, the assets of this corporation shall be distributed to the holders
of Common Stock.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
Section 1. The liability of the directors of this corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
<PAGE>
Section 2. This corporation is authorized to provide indemnification
of agents (as defined in Section 317 of the California Corporations Code)
through bylaw provisions, agreements with the agents, vote of shareholders or
disinterested directors, or otherwise in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code, subject
only to applicable limits set forth in Section 204 of the California
Corporations Code with respect to actions for breach of duty to this corporation
and its shareholders.
* * *
THREE: The foregoing amendment has been approved by the Board of
Directors of said corporation.
FOUR: All of the outstanding Series A, Series B and Series C
Preferred Stock, including any options, warrants or rights to purchase such
shares of Series A, Series B or Series C Preferred Stock (specifically warrants
to purchase 548,886 shares of Series C Preferred Stock), have been converted
into Common Stock, or options, warrants or rights to purchase such shares of
Common Stock, of the corporation pursuant to Section 4.(b) of Article III of the
present Articles of Incorporation.
FIVE: The present Articles of Incorporation of the corporation
provide in Section 6 of Article III that in the event shares of Series A, Series
B or Series C Preferred Stock shall be converted pursuant to Section 4 thereof,
the shares so converted shall be cancelled and shall not be issuable by the
corporation. Therefore upon such conversion and cancellation, and after giving
effect to the increase in the authorized number of shares of Preferred Stock,
the total authorized number of shares of the corporation became 125,000,000 and
the authorized number of shares of Preferred Stock of the corporation became
5,000,000.
SIX: The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the California Corporations Code. The
total number of outstanding shares of Common Stock of the Corporation is
___________________ shares. The total number of outstanding shares of Series A
Preferred Stock of the Corporation is 150,000. The total number of outstanding
shares of Series B Preferred Stock of the Corporation is 316,313. The total
number of outstanding shares of Series C Preferred Stock of the Corporation is
854,363. The number of shares voting in favor of the amendment and restatement
of the Articles of Incorporation equaled or exceeded the vote required. The
percentage vote required was (i) more than 50% of the outstanding shares of
Common Stock, (ii) more than 50% of the outstanding shares of Series A Preferred
Stock and the Series B Preferred Stock, voting together as a separate class, and
(iii) at least 75% of the outstanding shares of Series C Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
________________, 1997.
-------------------------------------------
Gregory Shenkman
President
-------------------------------------------
Michael J. McCloskey
Secretary
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true and correct of his
knowledge, and that this declaration was executed on ____________, 1997, at San
Francisco, California.
-------------------------------------------
Gregory Shenkman
President
-------------------------------------------
Michael J. McCloskey
Secretary
<PAGE>
AMENDED BYLAWS EXHIBIT 3.3
OF
GENESYS TELECOMMUNICATIONS
LABORATORIES
<PAGE>
TABLE OF CONTENTS
-----------------
(CONTINUED)
-----------
PAGE
----
PAGE
----
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - OFFICES 1
ARTICLE II - SHAREHOLDERS' MEETINGS 1
Section 1. Annual Meetings 1
Section 2. Special Meetings 1
Section 3. Place 2
Section 4. Notice 2
Section 5. Adjourned Meetings 3
Section 6. Quorum 3
Section 7. Consent to Shareholder Action 3
Section 8. Waiver of Notice 4
Section 9. Voting 4
Section 10. Record Dates 4
Section 11. Cumulative Voting for Election of Directors 5
ARTICLE III - BOARD OF DIRECTORS 6
Section 1. Powers 6
Section 2. Number, Tenure and Qualifications 6
Section 3. Regular Meetings 7
Section 4. Special Meetings 7
Section 5. Place of Meetings 7
Section 6. Participation by Telephone 7
Section 7. Quorum 8
Section 8. Action at Meeting 8
Section 9. Waiver of Notice 8
Section 10. Action Without Meeting 8
Section 11. Removal 9
Section 12. Resignations 9
Section 13. Vacancies 9
Section 14. Compensation 10
Section 15. Committees 10
ARTICLE IV - OFFICERS 11
Section 1. Number and Term 11
Section 2. Inability to Act 11
Section 3. Removal and Resignation 11
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
(CONTINUED)
--------- PAGE
<TABLE> ----
<S> <C>
Section 4. Vacancies 12
Section 5. Chairman of the Board 12
Section 6. President 12
Section 7. Vice President 12
Section 8. Secretary 12
Section 9. Chief Financial Officer 13
Section 10. Salaries 13
Section 11. Officers Holding More than One Office 13
Section 12. Approval of Loans to Officers 13
ARTICLE V - MISCELLANEOUS 14
Section 1. Record Date and Closing of Stock Books 14
Section 2. Certificates 15
Section 3. Representation of Shares in Other Corporations 15
Section 4. Fiscal Year 15
Section 5. Annual Reports 15
Section 6. Amendments 15
Section 7. Indemnification of Corporate Agents 16
</TABLE>
-ii-
<PAGE>
AMENDED BYLAWS
--------------
OF
--
GENESYS TELECOMMUNICATIONS LABORATORIES
---------------------------------------
ARTICLE
--------
OFFICES
-------
Section The principal executive offices of Genesys Telecommunications
Laboratories (the "Corporation") shall be at such place inside or outside the
State of California as the Board of Directors may determine from time to time.
Section The Corporation may also have offices at such other places as the
Board of Directors may from time to time designate, or as the business of the
Corporation may require.
ARTICLE
SHAREHOLDERS' MEETINGS
----------------------
A. Section Annual Meetings. The annual meeting of the shareholders of
---------------
the Corporation for the election of directors to succeed those whose terms
expire and for the transaction of such other business as may properly come
before the meeting shall be held at such place and at such time as may be fixed
from time to time by the Board of Directors and stated in the notice of the
meeting. If the annual meeting of the shareholders be not held as herein
prescribed, the election of directors may be held at any meeting thereafter
called pursuant to these Bylaws.
B. Section Special Meetings. Special meetings of the shareholders,
-----------------
for any purpose whatsoever, unless otherwise prescribed by statute, may be
called at any time by the
<PAGE>
Chairman of the Board, the President, or by the Board of Directors, or by one or
more shareholders holding not less than ten percent (l0%) of the voting power of
the Corporation.
3 Section Place. All meetings of the shareholders shall be at any
-----
place within or without the State of California designated either by the Board
of Directors or by written consent of the holders of a majority of the shares
entitled to vote thereat, given either before or after the meeting. In the
absence of any such designation, shareholders' meetings shall be held at the
principal executive office of the Corporation.
Section Notice. Notice of meetings of the shareholders of the
------
Corporation shall be given in writing to each shareholder entitled to vote,
either personally or by first-class mail (unless the Corporation has 500 or more
shareholders determined as provided by the California Corporations Code on the
record date for the meeting, in which case notice may be sent by third-class
mail) or other means of written communication, charges prepaid, addressed to the
shareholder at his address appearing on the books of the Corporation or given by
the shareholder to the Corporation for the purpose of notice. Notice of any
such meeting of shareholders shall be sent to each shareholder entitled thereto
not less than ten (10) (or, if sent by third-class mail, thirty (30) days) nor
more than sixty (60) days before the meeting. Said notice shall state the
place, date and hour of the meeting and, (1) in the case of special meetings,
the general nature of the business to be transacted, and no other business may
be transacted, or (2) in the case of annual meetings, those matters which the
Board of Directors, at the time of the mailing of the notice, intends to present
for action by the shareholders, but subject to Section 601(f) of the California
Corporations Code any proper matter may be presented at the meeting for
shareholder action, and (3) in the case of any meeting at which directors are to
be elected, the names of the
<PAGE>
nominees intended at the time of the mailing of the notice to be presented by
management for election.
Section Adjourned Meetings. Any shareholders' meeting may be adjourned
------------------
from time to time by the vote of the holders of a majority of the voting shares
present at the meeting either in person or by proxy. Notice of any adjourned
meeting need not be given unless a meeting is adjourned for forty-five (45) days
or more from the date set for the original meeting.
Section Quorum. The presence in person or by proxy of the persons
------
entitled to vote a majority of the shares entitled to vote at any meeting
constitutes a quorum for the transaction of business. The shareholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
In the absence of a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares, the holders
of which are either present in person or represented by proxy thereat, but no
other business may be transacted, except as provided above.
Section Consent to Shareholder Action. Any action which may be taken at
-----------------------------
any meeting of shareholders may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take each action at a
meeting at which all shares entitled to vote thereon were present and voted;
provided, however, that (1) unless the consents of all shareholders entitled to
vote have been solicited in writing, notice of any shareholder approval without
a meeting by less than unanimous
<PAGE>
written consent shall be given as required by the California Corporations Code,
and (2) directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors.
Any written consent may be revoked by a writing received by the
Secretary of the Corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed with
the Secretary.
Section Waiver of Notice. The transactions of any meeting of
----------------
shareholders, however called and noticed, and whenever held, shall be as valid
as though a meeting had been duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting, or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section Voting. The voting at all meetings of shareholders need not be
------
by ballot, but any qualified shareholder before the voting begins may demand a
stock vote whereupon such stock vote shall be taken by ballot, each of which
shall state the name of the shareholder voting and the number of shares voted by
such shareholder, and if such ballot be cast by a proxy, it shall also state the
name of such proxy.
At any meeting of the shareholders, every shareholder having the right
to vote shall be entitled to vote in person, or by proxy appointed in a writing
subscribed by such shareholder and bearing a date not more than eleven (Il)
months prior to said meeting, unless the writing states that it is irrevocable
and satisfies Section 705(e) of the California Corporations Code, in which event
it is irrevocable for the period specified in said writing and said Section
705(e).
<PAGE>
Section Record Dates. In the event the Board of Directors fixes a day
------------
for the determination of shareholders of record entitled to vote as provided in
Section 1 of Article V of these Bylaws, then, subject to the provisions of the
General Corporation Law of the State of California, only persons in whose name
shares entitled to vote stand on the stock records of the Corporation at the
close of business on such day shall be entitled to vote.
If no record date is fixed:
The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day notice is given or, if notice is waived, at
the close of business on the business day next preceding the day on which the
meeting is held;
The record date for determining shareholders entitled to give consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is given; and
The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto, or the sixtieth (60th) day prior to the
date of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five (45) days.
Section Cumulative Voting for Election of Directors. Provided the
-------------------------------------------
candidate's name has been placed in nomination prior to the voting and one or
more shareholders has given notice at the meeting prior to the voting of the
shareholder's intent to cumulate the shareholder's votes, every shareholder
entitled to vote at any election for directors shall have the right to
<PAGE>
cumulate such shareholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which the shareholder's shares are normally entitled, or distribute the
shareholder's votes on the same principle among as many candidates as the
shareholder shall think fit. The candidates receiving the highest number of
votes of the shares entitled to be voted for them up to the number of directors
to be elected by such shares are elected.
ARTICLE
BOARD OF DIRECTORS
------------------
Section Powers. Subject to any limitations in the Articles of
------
Incorporation or these Bylaws and to any provision of the California
Corporations Code requiring shareholder authorization or approval for a
particular action, the business and affairs of the Corporation shall be managed
and all corporate powers shall be exercised by, or under the direction of, the
Board of Directors. The Board of Directors may delegate the management of the
day-to-day operation of the business of the Corporation to a management company
or other person provided that the business and affairs of the Corporation shall
be managed and all corporate powers shall be exercised, under the ultimate
direction of the Board of Directors.
Section Number, Tenure and Qualifications. The authorized number of
---------------------------------
directors of this corporation shall be not less than three (3) nor more than
five (5), the exact number of directors to be fixed from time to time within
such limit by a duly adopted resolution of the Board of Directors or
shareholders, the exact number of directors presently authorized shall be three
(3) until changed within the limits specified above by a duly adopted resolution
of the Board of Directors or shareholders.
<PAGE>
Directors shall hold office until the next annual meeting of
shareholders and until their respective successors are elected. If any such
annual meeting is not held, or the directors are not elected thereat, the
directors may be elected at any special meeting of shareholders held for that
purpose. Directors need not be shareholders.
Section Regular Meetings. A regular annual meeting of the Board of
----------------
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide for other regular meetings from time to time by
resolution.
Section Special Meetings. Special meetings of the Board of Directors
----------------
may be called at any time by the Chairman of the Board, or the President or any
Vice President, or the Secretary or any two (2) directors. Written notice of
the time and place of all special meetings of the Board of Directors shall be
delivered personally or by telephone or telegraph to each director at least
forty-eight (48) hours before the meeting, or sent to each director by first-
class mail, postage prepaid, at least four (4) days before the meeting. Such
notice need not specify the purpose of the meeting. Notice of any meeting of
the Board of Directors need not be given to any director who signs a waiver of
notice, whether before or after the meeting, or who attends the meeting without
protesting prior thereto or at its commencement, the lack of notice to such
director.
Section Place of Meetings. Meetings of the Board of Directors may be
-----------------
held at any place within or without the State of California, which has been
designated in the notice, or if not stated in the notice or there is no notice,
the principal executive office of the Corporation or as designated by the
resolution duly adopted by the Board of Directors.
<PAGE>
Section Participation by Telephone. Members of the Board of Directors
--------------------------
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another.
Section Quorum. A majority of the Board of Directors shall constitute a
------
quorum at all meetings. In the absence of a quorum a majority of the directors
present may adjourn any meeting to another time and place. If a meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place shall be given prior to the time of the reconvened meeting
to the directors who were not present at the time of adjournment.
Section Action at Meeting. Every act or decision done or made by a
-----------------
majority of the directors present at a meeting duly held at which a quorum is
present is the act of the Board of Directors. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section Waiver of Notice. The transactions of any meeting of the Board
----------------
of Directors, however called and noticed or wherever held, are as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents and approvals
shall be filed with the corporate records or' made a part of the minutes of the
meeting.
Section Action Without Meeting. Any action required or permitted to be
----------------------
taken by the Board of Directors may be taken without a meeting, if all members
of the Board individually or collectively consent in writing to such action.
Such written consent or consents shall be filed
<PAGE>
with the minutes of the proceedings of the Board. Such action by written consent
shall have the same force and effect as a unanimous vote of such directors.
Section Removal. The Board of Directors may declare vacant the office
-------
of a director who has been declared of unsound mind by an order of court or who
has been convicted of a felony.
The entire Board of Directors or any individual director may be
removed from office without cause by a vote of shareholders holding a majority
of the outstanding shares entitled to vote at an election of directors;
provided, however, that unless the entire Board is removed, no individual
director may be removed when the votes cast against removal, or not consenting
in writing to such removal, would be sufficient to elect such director if voted
cumulatively at an election at which the same total number of votes cast were
cast (or, if such action is taken by written consent, all shares entitled to
vote were voted) and the entire number of directors authorized at the time of
the director's most recent election were then being elected.
In the event an office of a director is so declared vacant or in case
the Board or any one or more directors be so removed, new directors may be
elected at the same meeting.
Section Resignations. Any director may resign effective upon giving
------------
written notice to the Chairman of the Board, the President, the Secretary or the
Board of Directors of the Corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
Section Vacancies. Except for a vacancy created by the removal of a
---------
director, all vacancies in the Board of Directors, whether caused by
resignation, death or otherwise, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining
<PAGE>
director, and each director so elected shall hold office until his successor is
elected at an annual, regular or special meeting of the shareholders. Vacancies
created by the removal of a director may be filled only by approval of the
shareholders. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors. Any such election by written consent
requires the consent of a majority of the outstanding shares entitled to vote.
Section Compensation. No stated salary shall be paid directors, as
------------
such, for their services, but, by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of such Board; provided that nothing herein contained
shall be construed to 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 Committees. The Board of Directors may, by resolution adopted
----------
by a majority of the authorized number of directors, designate one or more
committees, each consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. Any such committee, to the extent provided in the resolution of
the Board of Directors, shall have all the authority of the Board of Directors
in the management of the business and affairs of the Corporation, except with
respect to (a) the approval of any action requiring shareholder approval or
approval of the outstanding shares, (b) the filling of vacancies on the Board or
any committee, (c) the fixing of compensation of directors for serving on the
Board or a committee, (d) the adoption, amendment or repeal of Bylaws, (e) the
amendment or
<PAGE>
repeal of any resolution of the Board which by its express terms is not so
amendable or repealable, (f) a distribution to shareholders, except at a rate or
in a periodic amount or within a price range determined by the Board, and (g)
the appointment of other committees of the Board or the members thereof.
ARTICLE
OFFICERS
--------
Section Number and Term. The officers of the Corporation shall be a
---------------
President, a Vice President, a Chief Financial Officer and a Secretary all of
which shall be chosen by the Board of Directors. In addition, the Board of
Directors may appoint such other officers as may be deemed expedient for the
proper conduct of the business of the Corporation, each of whom shall have such
authority and perform such duties as the Board of Directors may from time to
time determine. The officers to be appointed by the Board of Directors shall be
chosen annually at the regular meeting of the Board of Directors held after the
annual meeting of shareholders and shall serve at the pleasure of the Board of
Directors. If officers are not chosen at such meeting of the Board of
Directors, they shall be chosen as soon thereafter as shall be convenient. Each
officer shall hold office until his successor shall have been duly chosen or
until his removal or resignation.
Section Inability to Act. In the case of absence or inability to act of
----------------
any officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer, or any director or other person
whom it may select.
<PAGE>
Section Removal and Resignation. Any officer chosen by the Board of
-----------------------
Directors may be removed at any time, with or without cause, by the affirmative
vote of a majority of all the members of the Board of Directors.
Any officer chosen by the Board of Directors may resign at any time by
giving written notice of said resignation to the Corporation. Unless a
different time is specified therein, such resignation shall be effective upon
its receipt by the Chairman of the Board, the President, the Secretary or the
Board of Directors.
A. Section Vacancies. A vacancy in any office because of any cause
---------
may be filled by the Board of Directors for the unexpired portion of the term.
B. Section Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the Board.
C. Section President. The President shall be the general manager and
---------
chief executive officer of the Corporation, subject to the control of the Board
of Directors, and as such shall beside at all meetings of shareholders, shall
have general supervision of the affairs of the Corporation, shall sign or
countersign or authorize another officer to sign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of
Directors, shall make reports to the Board of Directors and shareholders, and
shall perform all such other duties as are incident to such office or are
properly required by the Board of Directors.
Section Vice President. In the absence of the President, or in the
--------------
event of such officer's death, disability or refusal to act, the Vice President,
or in the event there be more than one Vice President, the Vice Presidents in
the order designated at the time of their selection, or in the absence of any
such designation, then in the order of their selection, shall perform the duties
of President, and when so acting, shall have all the powers and be subject to
all restrictions upon
<PAGE>
the President. Each Vice President shall have such powers and discharge such
duties as may be assigned from time to time by the President or by the Board of
Directors.
A. Section Secretary. The Secretary shall see that notices for all
---------
meetings are given in accordance with the provisions of these Bylaws and as
required by law, shall keep minutes of all meetings, shall have charge of the
seal and the corporate books, and shall make such reports and perform such other
duties as are incident to such office, or as are properly required by the
President or by the Board of Directors.
B. Section Chief Financial Officer. The Chief Financial Officer may
-----------------------
also be designated by the alternate title of "Treasurer." The Chief Financial
Officer shall have custody of all moneys and securities of the Corporation and
shall keep regular books of account. Such officer shall disburse the funds of
the Corporation in payment of the just demands against the Corporation, or as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors from time to time as
may be required of such officer, an account of all transactions as Chief
Financial Officer and of the financial condition of the Corporation. Such
officer shall perform all duties incident to such office or which are properly
required by the President or by the Board of Directors.
Section Salaries. The salaries of the officers shall be fixed from time
--------
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the Corporation.
Section Officers Holding More than One Office. Any two or more offices
-------------------------------------
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity.
<PAGE>
Section Approval of Loans to Officers. */The Corporation may, upon
-----------------------------
the approval of the Board of Directors alone, make loans of money or property
to, or guarantee the obligations of, any officer of the Corporation or its
parent or subsidiary, whether or not a director, or adopt an employee benefit
plan or plans authorizing such loans or guaranties provided that (i) the Board
of Directors determines that such a loan or guaranty or plan may reasonably be
expected to benefit the Corporation, (ii) the Corporation has outstanding shares
held of record by 100 or more persons (determined as provided in Section 605 of
the California Corporations Code) on the date of approval by the Board of
Directors, and (iii) the approval of the Board of Directors is by a vote
sufficient without counting the vote of any interested director or directors.
ARTICLE
MISCELLANEOUS
-------------
Section Record Date and Closing of Stock Books. The Board of Directors
--------------------------------------
may fix a time in the future as a record date for the determination of the
shareholders entitled to notice of and to vote at any meeting of shareholders or
entitled to receive payment of any dividend or distribution, or any allotment of
rights, or to exercise
- -----------------------
* This section is effective only if it has been approved by the shareholders
--------------------------------------------------------------------------
in accordance with Sections 315(b) and 152 of the California Corporations Code.
- ------------------------------------------------------------------------------
<PAGE>
rights in respect to any other lawful action. The record date so fixed shall not
be more than sixty (60) nor less than ten (10) days prior to the date of the
meeting or event for the purposes of which it is fixed. When a record date is so
fixed, only shareholders of record at the close of business on that date are
entitled to notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment of rights, or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the Corporation
after the record date.
The Board of Directors may close the books of the Corporation against
transfers of shares during the whole or any part of a period of not more than
sixty (60) days prior to the date of a shareholders' meeting, the date when the
right to any dividend, distribution, or allotment of rights vests, or the
effective date of any change, conversion or exchange of shares.
Section Certificates. Certificates of stock shall be issued in
------------
numerical order and each shareholder shall be entitled to a certificate signed
in the name of the Corporation by the Chairman of the Board or the President or
a Vice President, and the Chief Financial Officer, the Secretary or an Assistant
Secretary, certifying to the number of shares owned by such shareholder. Any or
all of the signatures on the certificate may be facsimile. Prior to the due
presentment for registration of transfer in the stock transfer book of the
Corporation, the registered owner shall be treated as the person exclusively
entitled to vote, to receive notifications and otherwise to exercise all the
rights and powers of an owner, except as expressly provided otherwise by the
laws of the State of California.
Section Representation of Shares in Other Corporations. Shares of other
----------------------------------------------
corporations standing in the name of this Corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
Corporation by the Chairman of the Board, the President or any Vice President
and the Chief Financial Officer or the Secretary or an Assistant Secretary.
Section Fiscal Year. The fiscal year of the Corporation shall end on
-----------
June 30 of each year.
<PAGE>
Section Annual Reports. The Annual Report to shareholders, described in
--------------
the California Corporations Code, is expressly waived and dispensed with.
Section Amendments. Bylaws may be adopted, amended, or repealed by the
----------
vote or the written consent of shareholders entitled to exercise a majority of
the voting power of the Corporation. Subject to the right of shareholders to
adopt, amend, or repeal Bylaws, Bylaws may be adopted, amended, or repealed by
the Board of Directors, except that a Bylaw amendment thereof changing the
authorized number of directors may be adopted by the Board of Directors only if
these Bylaws permit an indefinite number of directors and the Bylaw or amendment
thereof adopted by the Board of Directors changes the authorized number of
directors within the limits specified in these Bylaws.
Section Indemnification of Corporate Agents. The Corporation shall
-----------------------------------
indemnify each of its agents against expenses, judgments, fines, settlements and
other amounts, actually and reasonably incurred by such person by reason of such
person's having been made or having threatened to be made a party to a
proceeding to the fullest extent permissible under California law and the
Corporation shall advance the expenses reasonably expected to be incurred by
such agent in defending any such proceeding upon receipt of the undertaking
required by subdivision (f) of Section 317 of the California Corporations Code.
The terms "agent", "proceeding" and "expenses" made in this Section 7 shall have
the same meaning as such terms in said Section 317.
<PAGE>
CERTIFICATE OF AMENDED BYLAWS
OF
GENESYS TELECOMMUNICATIONS LABORATORIES
Certificate by Secretary
------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Genesys Telecommunications Laboratories and that the
foregoing Bylaws, comprising 17 pages, were adopted as the amended Bylaws of the
corporation on April 15, 1995 by the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 15th day of April, 1995.
/s/ Richard C. DeGolia
_______________________________
Richard C. DeGolia, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF BYLAWS OF
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
The undersigned, being the Secretary of Genesys Telecommunications
Laboratories, Inc., hereby certifies that Article III, Section 2 of the Bylaws
of this Corporation was amended effective February 28, 1997 by the Board of
Directors of the Corporation to change the paragraph to read as follows:
"The number of directors of the corporation shall be not less than three
(3) nor more than five (5). The exact number of directors shall be five (5)
until changed, within the limits specified above, by a bylaw amending this
Section 2 duly adopted by the Board of Directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
of the minimum number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum numbers of
directors minus one (1)."
Dated: February 28, 1997
/s/ Michael McCloskey
----------------------------
Michael McCloskey
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
------------------------
OF BYLAWS OF
------------
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
---------------------------------------------
The undersigned, being the Secretary of Genesys Telecommunications
------------------------------------------------------------------
Laboratories, Inc., hereby certifies that Article III, Section 2 of the Bylaws
- ------------------------------------------------------------------------------
of this Corporation was amended effective November 27, 1995 by the Board of
- ---------------------------------------------------------------------------
Directors of the Corporation to change the paragraph to read as follows:
- ------------------------------------------------------------------------
"The number of directors of the corporation shall be not less than
------------------------------------------------------------------
three (3) nor more than five (5). The exact number of directors shall be
-------------------------------------------------------------------------
three (3) until changed, within the limits specified above, by a bylaw
----------------------------------------------------------------------
amending this Section 2 duly adopted by the Board of Directors or by the
------------------------------------------------------------------------
shareholders. The indefinite number of directors may be changed, or a
----------------------------------------------------------------------
definite number may be fixed without provision for an indefinite number, by
---------------------------------------------------------------------------
a duly adopted amendment to the articles of incorporation or by an
------------------------------------------------------------------
amendment to this bylaw duly adopted by the vote or written consent of
----------------------------------------------------------------------
holders of a majority of the outstanding shares entitled to vote; provided,
---------------------------------------------------------------------------
however, that an amendment reducing the fixed number of the minimum number
--------------------------------------------------------------------------
of directors to a number less than three (3) cannot be adopted if the votes
---------------------------------------------------------------------------
cast against its adoption at a meeting, or the shares not consenting in the
---------------------------------------------------------------------------
case of an action by written consent, are equal to more than sixteen and
------------------------------------------------------------------------
two-thirds percent (16-2/3%) of the outstanding shares entitled to vote
-----------------------------------------------------------------------
thereon. No amendment may change the stated maximum number of authorized
-------------------------------------------------------------------------
directors to a number greater than two (2) times the stated minimum number
--------------------------------------------------------------------------
of directors minus one (1)."
----------------------------
Dated: November 27, 1995
- ------ -----------------
Richard C. DeGolia
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
------------------------
OF BYLAWS OF
------------
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
---------------------------------------------
The undersigned, being the Secretary of Genesys Telecommunications
------------------------------------------------------------------
Laboratories, Inc., hereby certifies that Article III, Section 2 of the Bylaws
- ------------------------------------------------------------------------------
of this Corporation was amended effective July 5, 1996 by the Board of Directors
- --------------------------------------------------------------------------------
of the Corporation to change the paragraph to read as follows:
- --------------------------------------------------------------
"The number of directors of the corporation shall be not less than
------------------------------------------------------------------
three (3) nor more than five (5). The exact number of directors shall be
-------------------------------------------------------------------------
four (4) until changed, within the limits specified above, by a bylaw
---------------------------------------------------------------------
amending this Section 2 duly adopted by the Board of Directors or by the
------------------------------------------------------------------------
shareholders. The indefinite number of directors may be changed, or a
----------------------------------------------------------------------
definite number may be fixed without provision for an indefinite number, by
---------------------------------------------------------------------------
a duly adopted amendment to the articles of incorporation or by an
------------------------------------------------------------------
amendment to this bylaw duly adopted by the vote or written consent of
----------------------------------------------------------------------
holders of a majority of the outstanding shares entitled to vote; provided,
---------------------------------------------------------------------------
however, that an amendment reducing the fixed number of the minimum number
--------------------------------------------------------------------------
of directors to a number less than four (4) cannot be adopted if the votes
--------------------------------------------------------------------------
cast against its adoption at a meeting, or the shares not consenting in the
---------------------------------------------------------------------------
case of an action by written consent, are equal to more than sixteen and
------------------------------------------------------------------------
two-thirds percent (16-2/3%) of the outstanding shares entitled to vote
-----------------------------------------------------------------------
thereon. No amendment may change the stated maximum number of authorized
-------------------------------------------------------------------------
directors to a number greater than two (2) times the stated minimum number
--------------------------------------------------------------------------
of directors minus one (1)."
----------------------------
Dated: July 5, 1996
- ------ ------------
Richard C. DeGolia
Secretary
23
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
ARTICLE I
OFFICES
-------
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix
-----------------
the location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office is
located outside this state, and the corporation has one or more business offices
in this state, the Board of Directors shall fix and designate a principal
business office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at any time
-------------
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be
-----------------
held at any place within or outside the State of California designated by the
Board of Directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meeting of shareholders
--------------
shall be held each year on such date and at a time designated by the Board of
Directors. At each annual meeting Directors shall be elected, and any other
proper business may be transacted.
Section 3. SPECIAL MEETING. A special meeting of the shareholders
---------------
may be called at any time by the Board of Directors, or by the chairman of the
Board, or by the president, or by one or more shareholders holding shares in the
aggregate entitled to cast not less than fifty percent (50%) of the votes at
that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of such
meeting and the general
<PAGE>
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the Board, the president, any vice president, or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 4 and 5 of this Article II, that a meeting will
be held at the time requested by the person or persons calling the meeting, not
less than thirty-five (35) nor more than sixty (60) days after the receipt of
the request. If the notice is not given within twenty (20) days after receipt of
the request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 3 shall be construed as
limiting, fixing or affecting the time when a meeting of shareholders called by
action of the Board of Directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of
--------------------------------
meetings of shareholders shall be sent or otherwise given in accordance with
Section 5 of this Article II not less than ten (10) (or, if sent by third-class
mail, thirty (30) days) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted, or (ii) in the case of the annual meeting, those matters which the
Board of Directors, at the time of giving the notice, intends to present for
action by the shareholders. The notice of any meeting at which Directors are to
be elected shall include the name of any nominee or nominees whom, at the time
of notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a Director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (ii)
an amendment of the Articles of Incorporation, pursuant to Section 902 of that
Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section
1900 of that Code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of
that Code, the notice shall also state the general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice
--------------------------------------------
of any meeting of shareholders shall be given either personally or by first-
class mail (unless the corporation has 500 or more shareholders determined as
provided by the California Corporations Code on the record date for the meeting,
in which case notice may be sent by third-class mail) or telegraph or other
written communication, charges prepaid, addressed to the shareholder at the
address of that shareholder appearing on the books of the corporation or given
by the shareholder to the corporation for the purpose of notice. If no such
address appears on the corporation's books or is given, notice shall be deemed
to have been given if sent to that shareholder by first-class mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written
<PAGE>
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice.
Any affidavit of the mailing or other means of giving any notice of
any shareholders' meeting shall be executed by the secretary, assistant
secretary, or any transfer agent of the corporation giving the notice, and shall
be filed and maintained in the minute book of the corporation.
Section 6. QUORUM. The presence in person or by proxy of the
------
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting,
-------------------------
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of the majority of the shares represented at that
meeting, either in person or by proxy, but in the absence of a quorum, no other
business may be transacted at that meeting, except as provided in Section 6 of
this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place; notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from the
date set for the original meeting, in which case the Board of Directors shall
set a new record date. Notice of any such adjourned meeting shall be given to
each shareholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
Section 8. VOTING. The shareholders entitled to vote at any
------
meeting of shareholders shall be determined in accordance with the provisions of
Section 11 of this Article II, subject to the provisions of Sections 702 to 704,
inclusive, of the Corporations Code of California (relating to voting shares
held by a fiduciary, in the name of a corporation, or in joint ownership).
<PAGE>
The voting at all meetings of shareholders need not be by ballot, but
any qualified shareholder before the voting begins may demand a stock vote
whereupon such stock vote shall be taken by ballot, each of which shall state
the name of the shareholder voting and the number of shares voted by such
shareholder, and if such ballot be cast by a proxy, it shall also state the name
of such proxy.
At any meeting of the shareholders, every shareholder having the right
to vote shall be entitled to vote in person, or by proxy appointed in a writing
subscribed by such share holder and bearing a date not more than eleven (11)
months prior to said meeting, unless the writing states that it is irrevocable
and is held by a person specified in Section 705(e) of the Cali fornia
Corporations Code, in which event it is irrevocable for the period specified in
said writing.
Except as otherwise provided in the Articles of Incorporation, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote of shareholders. No shareholder shall be entitled to
cumulate such shareholder's votes for any Director. The preceding sentence of
this provision shall become effective only when the Corporation becomes a listed
corporation within the meaning of Section 301.5 of the California Corporations
Code.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
--------------------------------------------------
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though a
meeting had been duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting, each
person entitled to vote, who was not present in person or by proxy, signs a
written waiver of notice or a consent to a holding of the meeting, or an
approval of the minutes. The waiver of notice or consent need not specify either
the business to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of Section 4
of this Article II, the waiver of notice or consent shall state the general
nature of the proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.
Section 10. SHAREHOLDER ACTION. Any action required or permitted
------------------
to be taken by the holders of the Common Stock or Preferred Stock of the
Corporation must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing.
<PAGE>
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING
------------------------------------------------------
CONSENTS. For purposes of determining the shareholders entitled to give consent
- --------
to corporate action without a meeting, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) days nor less
than ten (10) days before the date of any such meeting, and in this event only
shareholders of record on the date so fixed are entitled to notice and to vote
or to give consents, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date, except as
otherwise provided in California General Corporations Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to notice of
or to a vote at a meeting of shareholders shall be at the close of business on
the business date next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held.
(b) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto, or the sixtieth (60th) day before the
date of such other action, whichever is later.
Section 12. PROXIES. Every person entitled to vote for Directors
-------
or on any other matter shall have the right to do so either in person or by one
or more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of
Sections 705(e) and 705(f) of the Corporations Code of California.
Section 13. INSPECTORS OF ELECTION. Before any meeting of
----------------------
shareholders, the Board of Directors may appoint any persons other than nominees
for office to act as inspectors of election at the meeting or its adjournment.
If no inspectors of election are so appointed, the chairman of the meeting may,
and on the request of any shareholder or a shareholder's proxy shall appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one
<PAGE>
or more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the meeting may, and upon the
request of any shareholder or a shareholder's proxy shall, appoint a person to
fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of
each, the shares' represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
---------
Section 1. POWERS. Subject to the provisions of the California
------
General Corporation Law and any limitation in the Articles of Incorporation and
these Bylaws relating to action required to be approved by the shareholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the Board of Directors.
Without prejudice to these general powers, and subject to the same
limitations, the Directors shall have the power to:
(a) Select and remove all officers, agents, and employees of the
corporation; prescribe any powers and duties for them that are consistent with
law, with the Articles of Incorporation, and with these Bylaws; fix their
compensation; and require from them security for faithful service.
<PAGE>
(b) Change the principal executive office or the principal business
office in the State of California from one location to another; cause the
corporation to be qualified to do business in any other state, territory,
dependency, or country an conduct business within or without the State of
California; and designate any place within or without the State of California
for the holding of any shareholders' meeting, or meetings, including annual
meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates.
(d) Authorize the issuance of shares of stock of the corporation on
any lawful terms, in consideration of money paid, labor done, services actually
rendered, debts or securities cancelled, or tangible or intangible property
actually received.
(e) Borrow money and incur indebtedness on behalf of the corporation,
and cause to be executed and delivered for the corporation' s purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, and other evidences of debt and securities.
Section 2. NUMBER OF DIRECTORS. The number of Directors of the
-------------------
corporation shall be no less than four (4) nor more than six (6), the exact
number of Directors to be fixed from time to time within such limit by a duly
adopted resolution of the Board of Directors or shareholders. The exact number
of Directors presently authorized shall be five (5) until changed within the
limits specified above by a duly adopted resolution of the Board of Directors or
shareholders.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
----------------------------------------
shall be elected at each annual meeting of the shareholders to hold office until
the next annual meeting. Each Director, including a Director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been qualified and elected.
Section 4. VACANCIES. Vacancies in the Board of Directors may be
---------
filled by a majority of the remaining Directors, though less than a quorum, or
by a sole remaining Director, except that a vacancy created by the removal of a
Director by the vote of the shareholders or by court order may be filled only by
the vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present. Each Director so elected shall hold office
until the next annual meeting of the shareholders and until a successor has been
elected or qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of death or resignation or removal of any Director, of if the
Board of Directors by resolution declares vacant the office of a Director who
has been declared of unsound mind, by an
<PAGE>
order of Court or convicted of a felony, or if the authorized number of
Directors is increased, or if the shareholders fail, at any meeting of
shareholders at which any Director or Directors are elected, to elect the number
of Directors to be voted for at that meeting.
Any Director may resign effective on giving written notice to the
chairman of the board, the president, the secretary, or the Board of Directors,
unless the notice specifies a later time for the resignation to become
effective. If the resignation of a Director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of Directors shall have the
effect of removing any Director before that Director's term of office expires.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
-------------------------------------------
meetings of the Board of Directors may be held at any place within or outside
the State of California that has been designated from time to time by resolution
of the Board. In the absence of such a designation, regular meetings shall be
held at the principal executive office of the corporation. Special meetings of
the Board shall be held at any place within or outside the State of California
that has been designated in the notice of the meeting or, if not stated in the
notice or there is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all Directors
participating in the meeting can hear one another, and all such Directors shall
be deemed to be present in person at the meeting.
Section 6. ANNUAL MEETING. Immediately following each annual
--------------
meeting of shareholders, the Board of Directors shall hold a regular meeting for
the purpose of organization, any desired election of officers, and the
transaction of other business. Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the
----------------------
Board of Directors shall be held without call at such time as shall from time to
time be fixed by the Board of Directors. Such regular meetings may be held
without notice.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of
----------------
Directors for any purpose or purposes may be called at any time by the chairman
of the Board or the president or any vice president or the secretary or any two
Directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Director or sent by first class mail or
telegram, charges prepaid, addressed to each Director at that Director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least four (4) days before
the time of the holding of the meeting. In case the notice is mailed, it shall
be deposited in the United States mail at least four (4) days before the time of
the holding of the meeting. In case the
<PAGE>
notice is delivered personally, or by telephone or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least forty-
eight (48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the Director or
to a person at the office of the Director who the person giving the notice has
reason to believe will promptly communicate it to the Director. The notice need
not specify the purpose of the meeting nor the place if the meeting is to be
held at the principal executive office of the corporation.
Section 9. QUORUM. A majority of the authorized number of
------
Directors shall constitute a quorum for the transaction of business, except to
adjourn as provided in Section 11 of this Article III. Every act or decision
done or made by a majority of the Directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the Board of
Directors, subject to the provisions of Section 310 of the Corporations Code of
California (as to approval of contracts or transactions in which a Director has
direct or indirect material financial interest), Section 311 of that Code (as to
appointment of committee), and Section 317(e) of that Code (as to
indemnification of Directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of Directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.
Section 10. WAIVER OF NOTICE. The transactions of any meeting of
----------------
the Board of Directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if, either before or after the meeting, each of the
Directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any Director who
attends the meeting without protesting before or at its commencement, the lack
of notice to that Director.
Section 11. ADJOURNMENT. A majority of the Directors present,
-----------
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
---------------------
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four hours, in which case notice of the adjourned meeting,
in the manner specified in Section 8 of this Article II, to the Directors who
were not present at the time of the adjournment.
Section 13. ACTION WITHOUT MEETING. Any action required or
----------------------
permitted to be taken by the Board of Directors may be taken without a meeting,
if all members of the board shall individually or collectively consent in
writing to that action. Such action by written consent shall have the same force
and effect as a unanimous vote of the Board of Directors. Such written consents
shall be filed with the minutes of the proceedings of the Board.
<PAGE>
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and
----------------------------------
members of committees may receive such compensation, if any, for their services,
and such reimbursement of expenses, as may be fixed or determined by resolution
of the Board of Directors. This Section 14 shall not be construed to preclude
any Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for those services.
ARTICLE IV
COMMITTEES
----------
Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may,
-----------------------
by resolution adopted by a majority of the authorized number of Directors,
designate one or more committees, each consisting of two or more Directors, to
serve at the pleasure of the Board. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any committee, to the extent provided in
the resolution of the Board, shall have all the authority of the Board, except
with respect to:
(a) the approval of any action which, under the General Corporation
Law of California, also requires shareholders' approval or approval of the
outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the Directors for sewing on the
Board or any committee;
(d) the amendment or repeal of Bylaws or the adoption of new Bylaws;
(e) the amendment or repeal of Bylaws or the adoption of new Bylaws;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the Board of
Directors; or
(g) the appointment of any other committees of the Board of Directors
or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action
---------------------------------
of committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these Bylaws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action without
meeting), with such changes in the context of those Bylaws as are necessary to
substitute the committee and its members for the Board of Directors and its
<PAGE>
members, except that the time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee; special meetings of committees may also be called by resolution
of the Board of Directors; and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
Bylaws.
ARTICLE V
OFFICERS
--------
Section 1. OFFICERS. The officers of the corporation shall be a
--------
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors, a chairman of the Board, one
or more vice presidents, one or more assistant secretaries, one or more chief
financial officers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article V. Any number of offices may be
held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation,
--------------------
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may
--------------------
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the
Bylaws or as the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
-----------------------------------
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board of Directors, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because
--------------------
of
<PAGE>
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these Bylaws for regular appointments to that
office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the Board, if
---------------------
such an officer is elected, shall, if present, preside at meetings of the Board
of Directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by the
Bylaws. If there is no president, the chairman of the Board shall in addition be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article V.
Section 7. PRESIDENT. Subject to such supervisory powers, if any,
---------
as may be given by the Board of Directors to the chairman of the board, if there
be such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the corporation. he shall preside at all meetings of the shareholders and, in
the absence of the chairman of the Board, or if there be none, at all meetings
of the Board of Directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the Bylaws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
---------------
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the Bylaws, and the president, or the chairman of the
Board.
Section 9. SECRETARY. The secretary shall keep or cause to be
---------
kept, at the principal executive office or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
Directors, committees or Directors, and shareholders, with the time and place of
holding, whether regular or special, and, if special, how authorized, the notice
given, the names of those present at the Directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the
<PAGE>
shareholders and of the Board of Directors required by the Bylaws or Bylaw to be
given, and he shall keep the seal of the corporation if one be adopted, in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or by the Bylaws.
Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer
-----------------------
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business transaction
of the corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares. The books
of account shall at all reasonable times be open to inspection by any Director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the corporation as may be ordered by the Board of Directors, shall
render to the president and Directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have other power and perform such other
duties as may be prescribed by the Board of Directors of the Bylaws.
Section 11. APPROVAL OF LOANS TO OFFICERS. */ The Corporation may,
----------------------------- -
upon the approval of the Board of Directors alone, make loans of money or
property to, or guarantee the obligations of, any officer of the Corporation or
its parent or subsidiary, whether or not a director, or adopt an employee
benefit plan or plans authorizing such loans or guaranties provided that (i) the
Board of Directors determines that such a loan or guaranty or plan may
reasonably be expected to benefit the Corporation, (ii) the Corporation has
outstanding shares held of record by 100 or more persons (determined as provided
in Section 605 of the California Corporations Code) on the date of approval by
the Board of Directors, and (iii) the approval of the Board of Directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
---------------------------------------
EMPLOYEES, AND OTHER AGENTS
---------------------------
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of
---------------------------------
this Article, "agent" means any person who is or was a Director, officer,
employee, or other agent of this corporation, or is or was serving at the
request of this corporation as a Director,
- -----------------
*/ This section is effective only if it has been approved by the shareholders
- -
in accordance with Sections 315(b) and 152 of the California Corporations Code.
<PAGE>
officer, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a Director,
officer, employee, or agent of a foreign or domestic corporation which was a
predecessor corporation of this corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative, or investigative; and "expenses" includes, without limitation,
attorneys' fees and any expenses of establishing a right to indemnification
under subdivision (d) or paragraph (4) of subdivision (e) of Section 317 of the
California Corporations Code.
Section 2. INDEMNIFICATION. The corporation is authorized to
---------------
indemnify each of its agents (and shall indemnify each agent who is a Director
of the corporation) against expenses, judgments, fines, settlements and other
amounts, actually and reasonably incurred by such person by reason of such
person's having been made or having threatened to be made a party to any
proceeding in excess of the indemnification otherwise permitted by the
provisions of Section 317 of the California General Corporation Law and to the
fullest extent permissible under the laws of the Sate of California, as those
laws may be amended and supplemented from time to time.
Section 3. ADVANCE OF EXPENSES. Expenses incurred in defending
-------------------
any proceeding may be advanced by this corporation before the final disposition
of the proceeding on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 4. OTHER CONTRACTUAL RIGHTS. The indemnification
------------------------
provided by this Article shall not be deemed exclusive of any rights to which
those seeking indemnification may be entitled under any agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in
another capacity while holding such office, to the extent such additional rights
to indemnification are authorized in the articles of the corporation. The rights
to indemnity hereunder shall continue as to a person who has ceased to be an
agent and shall inure to the benefit of the heirs, executors, and administrators
of the person.
Section 5. INSURANCE. Upon and in the event of a determination by
---------
the Board of Directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
corporation would have the power to indemnify the agent against that liability
under the provisions of this section.
<PAGE>
ARTICLE VII
GENERAL CORPORATE MATTERS
-------------------------
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
-----------------------------------------------------
For purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty (60) days
before any such action, and in that case only shareholders of record on the date
so fixed are entitled to receive the dividends, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date so
fixed, except as otherwise provided in the California General Corporation Law.
If the Board of Directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the Board adopts the applicable resolutions or the
sixtieth (60th) day before the date of that action, whichever is later.
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks,
-----------------------------------------
drafts, or other orders for payment of money, notes, or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The
-------------------------------------------------
Board of Directors, except as otherwise provided in the Bylaws, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and this
authority may be general or confined to specific instances; and unless so
authorized or ratified by the Board of Directors or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
tender it liable for any purpose or for any amount.
Section 4. CERTIFICATES FOR SHARES. A certificate or certificates
-----------------------
for shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares are fully paid, and the Board of Directors
may authorize the issuance of certificates or shares as partly paid provided
that these certificates shall state the amount of the consideration to be paid
for them and the amount paid. All certificates shall be signed in the name of
the corporation by the chairman of the Board or vice chairman of the Board or
the president or vice president and by the chief financial officer or an
assistant treasurer or the secretary of any assistant secretary, certifying the
number of shares and the class or series of shares owned by the
<PAGE>
shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent, or registrar who has signed or show
facsimile signature has been placed on a certificate shall have ceased to be
that officer, transfer agent, or registrar before that certificate is issued, it
may be issued by the corporation with the same effect as if that person were an
officer, transfer agent, or registrar at the date of issuance.
Section 5. LOST CERTIFICATES. Except as provided in this
-----------------
Section 5, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the corporation and cancelled at
the same time. The Board of Directors may, in case any share certificate or
certificate for any other security is lost, stolen, or destroyed, authorize the
issuance of a replacement certificate on such terms and conditions as the Board
may require, including provision for indemnification of the corporation secured
by a bond or other adequate security sufficient to protect the corporation
against any claim that may be made against it, including any expense or
liability, on account of the alleged loss, theft, or destruction of the
certificate or the issuance of the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
----------------------------------------------
chairman of the Board, the president, or any vice president, or any other person
authorized by resolution of the Board of Directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any and
all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to these officers
to vote or represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context
----------------------------
requires otherwise, the general provisions, rules of construction, and
definitions in the California General Corporations Law shall govern the
construction of these Bylaws. Without limiting the generality of this provision,
the singular number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE VIII
AMENDMENTS
----------
Section 1. AMENDMENT BY SHAREHOLDERS. New Bylaws may be adopted
-------------------------
or these Bylaws may be amended or repealed by the vote of holders of a majority
of the outstanding shares entitled to vote; provided, however, that if the
Articles of Incorporation of the corporation set forth the number of authorized
Directors of the corporation, the authorized number of Directors may be changed
only by an amendment of the Articles of Incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
----------------------
<PAGE>
shareholders as provided in Section 1 of this Article X, Bylaws, other than a
Bylaw or an amendment of a Bylaw changing the authorized number of Directors,
may be adopted, amended, or repealed by the Board of Directors.
<PAGE>
EXHIBIT 4.3
GENESYS TELECOMMUNICATIONS LABORATORIES
1100 Grundy Lane, Suite 125
San Bruno, California 94066
---------------------
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
March 29, 1996
---------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
SECTION 1 - Authorization and Sale of Preferred Stock....................... 1
1.1 Authorization.................................................. 1
1.2 Sale of Preferred.............................................. 1
SECTION 2 - Closing Dates; Delivery......................................... 1
2.1 Closing Date................................................... 1
2.2 Delivery....................................................... 1
SECTION 3 - Representations and Warranties of the Company................... 2
3.1 Organization and Standing; Articles and Bylaws................. 2
3.2 Corporate Power................................................ 2
3.3 Subsidiaries................................................... 2
3.4 Capitalization................................................. 2
3.5 Authorization.................................................. 3
3.6 Material Contracts and Other Commitments....................... 3
3.7 Title to Properties and Assets; Liens, etc..................... 4
3.8 Compliance with Other Instruments, None Burdensome, etc........ 4
3.9 Litigation, etc................................................ 4
3.10 Employees...................................................... 4
3.11 Franchises, Licenses, Trademarks, Patent and Other Rights...... 4
3.12 Governmental Consent, etc...................................... 5
3.13 Offering....................................................... 5
3.14 Brokers or Finders; Other Offers............................... 5
SECTION 4 - Representations and Warranties of the Purchasers................ 5
4.1 Experience..................................................... 6
4.2 Investment..................................................... 6
4.3 Rule 144....................................................... 6
4.4 No Public Market............................................... 6
4.5 Access to Data................................................. 6
4.6 Authorization.................................................. 6
4.7 Brokers or Finders............................................. 7
4.8 Investor Counsel............................................... 7
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<C> <S> <C>
4.9 Tax Liability.................................................. 7
4.10 Additional Representations of Foreign Investors................ 7
SECTION 5 - Conditions to Closing of Purchasers............................. 8
5.1 Representations and Warranties Correct......................... 8
5.2 Covenants...................................................... 9
5.3 Opinion of Company's Counsel................................... 9
5.4 Compliance Certificate......................................... 9
5.5 Blue Sky....................................................... 9
5.6 Restated Articles of Incorporation............................. 9
5.7 Legal Matters.................................................. 9
5.8 Registration Rights Agreement.................................. 9
SECTION 6 - Conditions to Closing of Company................................ 9
6.1 Representations................................................ 9
6.2 Blue Sky....................................................... 9
6.3 Restated Articles of Incorporation............................. 10
6.4 Legal Matters.................................................. 10
6.5 Payment of Purchase Price...................................... 10
6.6 Registration Rights Agreement.................................. 10
SECTION 7 - Covenants of the Company and the Purchasers..................... 10
7.1 Financial Information.......................................... 10
7.2 Additional Information......................................... 10
7.3 Confidentiality................................................ 11
7.4 Availability of Common Stock for Conversion.................... 11
7.5 Confidential Information and Invention Assignment Agreement.... 11
7.6 Termination of Covenants....................................... 11
SECTION 8 - Miscellaneous................................................... 11
8.1 Governing Law.................................................. 11
8.2 Survival....................................................... 12
8.3 Successors and Assigns......................................... 12
8.4 Entire Agreement; Amendment.................................... 12
8.5 Notices, etc................................................... 12
8.6 Delays or Omissions............................................ 12
8.7 California Corporate Securities Law............................ 13
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<C> <S> <C>
8.8 Expenses....................................................... 13
8.9 Counterparts................................................... 13
8.10 Severability................................................... 13
8.11 Titles and Subtitles........................................... 13
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
(continued)
EXHIBITS
A. Schedule of Purchasers
B. Amended and Restated Articles of Incorporation
C. Schedule of Exceptions
D. Registration Rights Agreement
E. Form of Legal Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
F. Form of Compliance Certificate
G. Form of Confidential Information and Inventions Assignment Agreement
iv
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of March 29, 1996 among Genesys
Telecommunications Laboratories, a California corporation (the "COMPANY"), and
the persons and entities listed on the Schedule of Purchasers attached hereto as
Exhibit A (the "PURCHASERS").
- ---------
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
-----------------------------------------
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of up
-------------
to 150,000 shares (the "SHARES") of its Series A Preferred Stock ("PREFERRED"),
having the rights, privileges and preferences as set forth in the Company's
Amended and Restated Articles of Incorporation (the "ARTICLES") in the form
attached to this Agreement as Exhibit B.
---------
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, the
-----------------
Company hereby severally issues and sells to each Purchaser and each Purchaser
hereby severally buys from the Company the total number of Shares specified
opposite such Purchaser's name on the Schedule of Purchasers, at a purchase
price of Thirteen Dollars and Thirty Cents ($13.30) per Share. The Company's
agreement with each Purchaser is a separate agreement, and the sales of the
Preferred to each Purchaser is a separate sale.
SECTION 2
CLOSING DATES; DELIVERY
-----------------------
2.1 CLOSING DATE. The first closing of the purchase and sale of the
------------
Preferred hereunder shall be held at the offices of Wilson Sonsini Goodrich &
Rosati, P.C., 650 Page Mill Road, Palo Alto, California 94304 at 2:00 p.m.,
local time, on March 29, 1996 (the "CLOSING") or at such other time and place as
shall be mutually agreed upon by the Company and Purchasers who propose to
purchase a majority of the Shares proposed to be sold at the Closing (the date
of the Closing is hereinafter referred to as the "CLOSING DATE"). One or more
additional closings may occur within thirty (30) days following the Closing
Date, so long as the sale of Shares at such closings is pursuant to the terms of
this Agreement and at the price per share set forth in Section 1.2.
2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser
--------
a certificate or certificates, registered in such Purchaser's name, representing
the number of Shares listed opposite such Purchaser's name on the Schedule of
Purchasers, against
1
<PAGE>
(a) delivery to the Company of payment of the purchase price therefor, by check
payable to the Company or wire transfer per the Company's instructions or (b)
cancellation of indebtedness owed to Purchaser in the amount indicated on the
Schedule of Purchasers.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C, the Company represents and warrants to the Purchasers, as of the
- ---------
Closing Date as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company is a
----------------------------------------------
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is presently qualified to do business as a foreign
corporation in any jurisdiction, in which the failure to be so qualified would
have a material adverse affect on the Company's operations or conditions,
financial or otherwise. The Company has furnished the Purchasers with true,
correct and complete copies of its Articles and Bylaws (the "BYLAWS"), as
presently in effect.
3.2 CORPORATE POWER. The Company has or will have at the Closing Date all
---------------
requisite legal and corporate power and authority to execute and deliver this
Agreement, to sell and issue the Shares hereunder, to issue the common stock
issuable upon conversion of the Preferred and to carry out and perform its
obligations under the terms of this Agreement.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated companies
------------
and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists
--------------
or, upon the filing of the Articles with the California Secretary of State will
consist of 20,000,000 shares of Common Stock (the "COMMON STOCK"), of which
1,689,500 shares are issued and outstanding as of the Closing Date and 150,000
shares of Preferred Stock, all of which have been designated "SERIES A
PREFERRED" and none of which is issued and outstanding prior to the Closing.
The outstanding shares have been duly authorized and validly issued, and are
fully paid and nonassessable. The Company has reserved 150,000 shares of
Preferred for issuance hereunder, 150,000 shares of Common Stock for issuance
upon conversion of the Preferred and 479,250 shares of Common Stock for issuance
by the Board of Directors to employees, consultants, or directors pursuant to
the Company's 1995 Stock Option Plan, of which stock options to purchase 316,500
2
<PAGE>
shares are outstanding as of the Closing Date. Except as set forth above, there
are no options, warrants or other rights to purchase any of the Company's
authorized and unissued capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
-------------
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Preferred (and the Common Stock issuable upon
conversion of the Preferred) and the performance of all of the Company's
obligations hereunder has been taken or will be taken prior to the Closing.
This Agreement, when executed and delivered by the Company, shall constitute a
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies and limitations of
public policy as applied to Section 10 of the Registration Rights Agreement,
attached hereto as Exhibit D (the "REGISTRATION RIGHTS AGREEMENT"). The Shares,
when issued in compliance with the provisions of this Agreement and upon the
filing of the Articles with the office of the California Secretary of State,
will be validly issued, will be fully paid and nonassessable, and will have the
rights, preferences and privileges described in the Articles; the Common Stock
issuable upon conversion of the Shares has been duly and validly reserved and,
when issued in compliance with the provisions of this Agreement and the
Articles, will be validly issued, and will be fully paid and nonassessable; and
the Shares and such Common Stock will be free of any liens or encumbrances,
assuming the Purchasers take the Shares with no notice thereof, other than any
liens or encumbrances created by or imposed upon the Purchasers; provided,
however, that the Shares (and the Common Stock issuable upon conversion thereof)
may be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein. The Shares are not subject to any preemptive rights
or rights of first refusal.
3.6 MATERIAL CONTRACTS AND OTHER COMMITMENTS. The Company does not have
----------------------------------------
any contract, agreement, lease, or other commitment, written or oral, absolute
or contingent, other than (i) contracts for the purchase of supplies and
services that were entered into in the ordinary course of business and that do
not, as of the date hereof, involve more than $25,000 each; (ii) sales contracts
entered into in the ordinary course of business; (iii) license agreements
entered into in the ordinary course of business; and (iv) contracts terminable
at will by the Company on no more than sixty (60) days' notice without cost or
liability to the Company. For purposes of this Section 3.6, employment
contracts and contracts with labor unions and agreements pursuant to which the
Company licenses any of its Proprietary Information (as defined herein) to third
parties shall not be considered to be contracts entered into in the usual and
ordinary course of business.
3
<PAGE>
3.7 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
------------------------------------------
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien or
encumbrance, other than (i) the lien of current taxes not yet due and payable,
and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.8 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
-------------------------------------------------------
is not in violation of any term of its Articles or Bylaws, or in any material
respect of any term or provision of any material mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree, and to the best
of its knowledge is not in violation of any order, statute, rule or regulation
applicable to the Company where such violation would materially and adversely
affect the Company. The execution, delivery and performance of and compliance
with this Agreement, and the issuance of the Preferred and the Common Stock
issuable upon conversion of the Preferred, have not resulted and will not result
in any material violation of, or conflict with, or constitute a material default
under, the Company's Articles or Bylaws or any of its material agreements or
result in the creation of, any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company, and there is no such
violation or default which materially and adversely affects the business of the
Company or any of its properties or assets.
3.9 LITIGATION, ETC. There are no actions, suits, proceedings or
---------------
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
reasonable basis therefor or threat thereof).
3.10 EMPLOYEES. To the best of the Company's knowledge, no employee of the
---------
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company. There is,
to the Company's knowledge and belief, no pending nor threatened actions suits,
proceedings or claims, or to its knowledge any basis therefor or threat thereof
with respect to any contract, agreement, covenant or obligation referred to in
the preceding sentence.
3.11 FRANCHISES, LICENSES, TRADEMARKS, PATENT AND OTHER RIGHTS. The
---------------------------------------------------------
Company has all franchises, permits, licenses and other similar authority
necessary for the conduct of its business, the lack of which could materially
and adversely affect the operations or condition, financial or otherwise, of the
Company, and it is not in default in any material respect under any of such
franchises, permits, liens or other similar authority. To the best of the
Company's knowledge, the Company possesses all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and
4
<PAGE>
copyrights necessary to conduct its business without conflict with or
infringement upon any valid rights of others and the lack of which could
materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and the Company has not received any notice of
infringement upon or conflict with the asserted rights of others. The Company
has a valuable body of trade secrets, including know-how, concepts, computer
programs and other technical data (the "PROPRIETARY INFORMATION") for the
development, manufacture and sale of its products. To the Company's knowledge,
the Company has the right to use the Proprietary Information, free and clear of
any rights, liens, encumbrances or claims of others, except that the possibility
exists that other persons may have independently developed trade secrets or
technical information similar or identical to those of the Company. Reasonable
security measures have been taken by the Company to protect the secrecy,
confidentiality and value of the Proprietary Information referred to in this
Section 3.11.
3.12 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
-------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Preferred (and
the Common Stock issuable upon conversion of the Preferred), or the consummation
of any other transaction contemplated hereby, except (a) filing of the Articles
with the office of the California Secretary of State (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of the Preferred (and the
Common Stock issuable upon conversion of the Preferred) under the California
Corporate Securities Law of 1968, as amended and other applicable Blue Sky laws,
which filings and qualifications, if required, will be accomplished in a timely
manner.
3.13 OFFERING. Subject to the accuracy of the Purchasers' representations
--------
in Section 4 hereof, the offer, sale and issuance of the Preferred to be issued
in conformity with the terms of this Agreement, and the issuance of the Common
Stock to be issued upon conversion of the Preferred, constitute transactions
exempt from the registration requirements of the Securities Act.
3.14 BROKERS OR FINDERS; OTHER OFFERS. The Company has not incurred, and
--------------------------------
will not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of the Shares as follows:
5
<PAGE>
4.1 EXPERIENCE. By reason of his business or financial experience, or
----------
that of his professional advisor, Purchaser has the capacity to protect his own
interests in connection with the purchase of the Shares hereunder and has the
ability to bear the economic risk (including the risk of total loss) of his
investment.
4.2 INVESTMENT. Purchaser is acquiring the Preferred and the underlying
----------
Common Stock for investment for his own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any distribution
thereof. Purchaser understands that the Preferred to be purchased (and the
Common Stock issuable upon conversion thereof) have not been, and will not be,
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of such Purchaser's representations as expressed herein.
4.3 RULE 144. Purchaser acknowledges that the Preferred (and the Common
--------
Stock issuable upon conversion thereof) must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. Purchaser is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
4.4 NO PUBLIC MARKET. Purchaser understands that no public market now
----------------
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
4.5 ACCESS TO DATA. Purchaser has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with its management and the
opportunity to review the Company's facilities. Purchaser has also had an
opportunity to ask questions of officers of the Company, which questions were
answered to his satisfaction. Purchaser understands that such discussions, as
well as any written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a thorough
or exhaustive description.
4.6 AUTHORIZATION. This Agreement when executed and delivered by such
-------------
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing
6
<PAGE>
specific performance, injunctive relief or other equitable remedies and
limitations of public policy as applied in Section 10 of the Registration Rights
Agreement.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
------------------
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 INVESTOR COUNSEL. Bach Purchaser acknowledges that it has had the
----------------
opportunity to review this Agreement, the exhibits and the schedules attached
hereto and the transactions contemplated by this Agreement with its own legal
counsel. Each Purchaser is relying solely on such counsel and not on any
statements or representations of the Company or any of its agents for legal
advice with respect to this investment or the transactions contemplated by this
Agreement.
4.9 TAX LIABILITY. Purchaser has reviewed with its own tax advisors the
-------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser relies solely on such
advisors and not on any statements or representations of the Company or any of
its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
4.10 ADDITIONAL REPRESENTATIONS OF FOREIGN INVESTORS. If the Purchaser
-----------------------------------------------
does not reside in and is not a citizen of the United States, for the purpose of
this Section 4 the Purchaser shall be deemed a "FOREIGN INVESTOR." Such Foreign
Investor hereby represents, warrants and covenants to the Company, in addition
to the other representations, warranties and covenants set forth in this Section
4, the following:
(a) Neither the Foreign Investor nor any person for the account of
whom such Foreign Investor is acting, including the estate of any such person, a
trust of which any such person is a beneficiary, or a corporation, partnership,
trust or other entity organized under the laws of the United States of America,
its territories and possessions and all areas under the jurisdiction of the
United States of America, is a citizen or resident of the United States of
America (a "U.S. PERSON").
(b) Such Foreign Investor will not sell, transfer or otherwise dispose
of the Shares for a period of at least ninety (90) days after the closing, and
such Foreign Investor will not thereafter sell or otherwise transfer the Shares
to a U.S. Person unless the Company has received an unqualified written opinion
of legal counsel, who shall be and whose legal opinion shall be reasonably
satisfactory to the Company, addressed to the Company, to the effect that such
transfer may be effected without any violation of the Securities Act or any
applicable state securities laws.
7
<PAGE>
(c) The Foreign Investor understands and acknowledges that the Company
will not allow any transfer or other disposition of the Shares unless the
proposed transferee shall have executed an instrument containing the
representations set forth in the foregoing paragraphs (a) and (b) of this
Section 4. 10 or the Company shall have received an unqualified written legal
opinion of counsel, who shall be and whose legal opinion shall be reasonably
satisfactory to the Company to the effect that such proposed transfer may be
effected without any violation of the Securities Act or any applicable state
securities law.
(d) The share certificate(s) of a Foreign Investor evidencing the
Shares shall bear the following legend in addition to any other legend required
under this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES ("STATE ACT") AND MAY NOT
BE TRANSFERRED OR OTHERWISE DISPOSED OF FOR A PERIOD OF NINETY (90) DAYS
AFTER THE DATE ON THE FACE HEREOF, AND THEREAFTER MAY NOT BE TRANSFERRED TO
A CITIZEN OR RESIDENT OF THE UNITED STATES OF AMERICA, INCLUDING THE ESTATE
OF ANY SUCH PERSON, A TRUST OF WHICH ANY SUCH PERSON IS A BENEFICIARY, OR A
CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF
THE UNITED STATES OF AMERICA, ITS TERRITORIES AND POSSESSIONS AND ALL AREAS
UNDER THE JURISDICTION OF THE UNITED STATES OF AMERICA, UNLESS THE ISSUER
HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT SUCH
TRANSFER WILL NOT BE IN VIOLATION OF THE ACT OR ANY APPLICABLE STATE ACT.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
-----------------------------------
The Purchasers' obligations to purchase the Shares at the Closing are, at
the option of the Purchasers, subject to the fulfillment of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
8
<PAGE>
5.2 COVENANTS. All covenants, agreements and conditions contained in this
---------
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received from
----------------------------
Wilson Sonsini Goodrich & Rosati, P.C., counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form attached
hereto as Exhibit E.
---------
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
----------------------
Purchasers a certificate of the Company in the form of Exhibit F hereto,
---------
executed by the President of the Company, dated the Closing Date, and
certifying, among other things, to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 of this Agreement.
5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
--------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Preferred and the Common
Stock issuable upon conversion of the Preferred.
5.6 RESTATED ARTICLES OF INCORPORATION. The Articles shall have been
----------------------------------
filed with the California Secretary of State.
5.7 LEGAL MATTERS. All material matters of a legal nature which pertain
-------------
to this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Purchasers.
5.8 REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers shall
-----------------------------
have entered into the Registration Rights Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing Date
is, at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers in
---------------
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
--------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Preferred and the Common
Stock issuable upon conversion of the Preferred.
9
<PAGE>
6.3 RESTATED ARTICLES OF INCORPORATION. The Articles shall have been
----------------------------------
filed with the California Secretary of State.
6.4 LEGAL MATTERS. All material matters of a legal nature which pertain
-------------
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
6.5 PAYMENT OF PURCHASE PRICE. Each Purchaser (i) shall have delivered to
-------------------------
the Company the purchase price for such Purchaser's Shares, or (ii) shall have
cancelled indebtedness owed by the Company to such Purchaser, in either case in
the amount set forth opposite such Purchaser's name on the Schedule of
Purchasers.
6.6 REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers shall
-----------------------------
have entered into the Registration Rights Agreement.
SECTION 7
COVENANTS OF THE COMPANY AND THE PURCHASERS
-------------------------------------------
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. As soon as practicable after the end of each
---------------------
fiscal year, and in any event within 90 days thereafter, the Company will mail
to each Purchaser consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal year, consolidated statements
of income and consolidated statements of changes in financial position of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year (or, at the election
of the Company, setting forth in comparative form the budgeted figures for the
fiscal year then reported), all in reasonable detail and audited by independent
public accountants of national standing selected by the Company.
7.2 ADDITIONAL INFORMATION. As long as a Purchaser holds not less than
----------------------
15,000 shares of Preferred and/or Common Stock issued upon conversion of the
Preferred, as adjusted for recapitalizations, stock splits, stock dividends and
the like ("RECAPITALIZATIONS"), the Company will deliver or provide to such
Purchaser (i) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within 45 days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and consolidated statements of changes in
financial condition of the Company and its subsidiaries for such period and for
the current fiscal year to date, prepared in accordance with generally accepted
accounting principles (other than for accompanying notes), subject to changes
resulting from year-end audit adjustments, all in reasonable detail and signed
by the
10
<PAGE>
principal financial or accounting officer of the Company, (ii) an annual budget
for the Company as soon as it is available and (iii) visitation rights to attend
Board of Directors meetings including advance notice thereof; provided, however,
that the Company shall not be obligated to provide any information that it
considers in good faith to be a trade secret or to contain confidential or
classified information.
7.3 CONFIDENTIALITY. Each Purchaser agrees that any information obtained
---------------
by such Purchaser pursuant to this Section 7 which may be proprietary to the
Company or otherwise confidential will not be disclosed without the prior
written consent of the Company. If a Purchaser requests in writing, the Company
will identify in writing all information obtained by such Purchaser under this
Section 7 which the Company considers confidential and which a Purchaser may not
disclose without the Company's prior written consent. Purchaser further
acknowledges and understands that any information so obtained which may be
considered "inside" non-public information will not be utilized by such
Purchaser in connection with purchases and/or sales of the Company's securities
except in compliance with applicable state and federal anti-fraud statutes. The
provisions of this Section 7.3 shall not be in limitation of any rights which
Purchaser may have with respect to the books and records of the Company, or to
inspect its properties or discuss its affairs, finances and accounts, under the
laws of the jurisdictions in which it is incorporated.
7.4 AVAILABILITY OF COMMON STOCK FOR CONVERSION. The Company will from
-------------------------------------------
time to time, in accordance with the laws of the State of California, increase
the authorized amount of Common Stock if at any time the number of shares of
Common Stock remaining unissued and available for issuance shall be insufficient
to permit conversion of all the then outstanding shares of Preferred.
7.5 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT. The
-----------------------------------------------------------
Company and each person now or hereafter employed in any technical capacity by
it or any subsidiary with access to confidential information will enter into a
Confidential Information and Invention Assignment Agreement in substantially the
form of Exhibit G hereto.
---------
7.6 TERMINATION OF COVENANTS. The covenants of the Company set forth in
------------------------
this Section 7 shall terminate in all respects on the date of the closing of an
initial firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, covering the offer and sale of
the Company's Common Stock.
SECTION 8
MISCELLANEOUS
-------------
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
-------------
the internal laws of the State of California. The parties expressly stipulate
that any litigation
11
<PAGE>
under this Agreement shall be brought in the state courts of the Counties of
Santa Clara, California and in the United States District Court for the Northern
District of California. The parties agree to submit to the jurisdiction and
venue of those courts.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase the Preferred
shall not be assignable without the consent of the Company.
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
---------------------------
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of a majority of the Preferred (or the Common
Stock issued or issuable upon conversion of the Preferred) may, with the
Company's prior written consent, waive, modify or amend on behalf of all
holders, any provisions hereof.
8.5 NOTICES, ETC. All notices and other communications required or
------------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to the Purchaser, at the Purchaser's address as set forth in
Exhibit A and (ii) if to the Company, at the address of its principal corporate
- ---------
offices (attention: Secretary), or at such other address as a party may
designate by ten days' advance written notice to the other party pursuant to the
provisions above.
8.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
-------------------
omission to exercise any right, power or remedy accruing to any holder of any
Shares, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any
12
<PAGE>
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
-----------------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
8.8 EXPENSES. The Company and each Purchaser shall bear its own expenses
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not considered in construing or
interpreting this Agreement.
13
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
GENESYS TELECOMMUNICATIONS LABORATORIES
a California corporation
By: /s/ Gregory Shenkman
-------------------------------------
Gregory Shenkman, President and Chief
Executive Officer
"PURCHASERS"
----------------------------------------
By:
-------------------------------------
Title:
----------------------------------
14
<PAGE>
Exhibit 4.4
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER OR
PLEDGE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO RULE
144 OF THE ACT.
Void after April 26, 2001
GENESYS TELECOMMUNICATIONS LABORATORIES
WARRANT TO PURCHASE 70,047 SHARES OF COMMON STOCK
---------------
THIS CERTIFIES THAT, for value received, Benchmark Capital Partners, L.P.
(the "Holder") is entitled to subscribe for and purchase 70,047 shares (as
adjusted pursuant to Section 3 hereof) of fully paid and nonassessable Common
Stock (the "Shares") of Genesys Telecommunications Laboratories, a California
corporation (the "Company"), at the price of $35.69 per share (the "Exercise
Price") (as adjusted pursuant to Section 3 hereof), subject to the provisions
and upon the terms and conditions hereinafter set forth.
1. Exercise; Payment.
-----------------
(a) Time of Exercise. This Warrant shall become exercisable upon the
----------------
earlier to occur of:
(i) April 26, 1997, or
(ii) the filing of an initial public offering of the
Company's Common Stock pursuant to a registration statement in which the Company
expects to receive aggregate proceeds of not less than $10,000,000 (an "IPO").
<PAGE>
(b) Method of Exercise.
------------------
(i) Cash Exercise. The purchase rights represented by this
-------------
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Exhibit A duly
---------
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check acceptable to the Company, of an
amount equal to the aggregate Exercise Price of the Shares being purchased.
(ii) Net Issue Exercise. In lieu of exercising this Warrant,
------------------
the Holder may elect to receive Shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election, in which
event the Company shall issue to the Holder a number of shares of the Company's
Common Stock computed using the following formula:
<TABLE>
<CAPTION>
X = Y (A-B)
------
A
<S> <C> <C>
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares purchasable under this Warrant.
A = the fair market value of one share of the Company's
Common Stock.
B = the Exercise Price (as adjusted to the date of such
calculation).
</TABLE>
(iii) Fair Market Value. For purposes of this Section
-----------------
1, the fair market value of the Company's Common Stock shall mean:
A. The closing ask price of the Company's Common Stock
quoted in the NASDAQ Over-the-Counter Market Summary or the closing price quoted
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for
-----------------------
the ten trading days prior to the date of determination of fair market value
(provided, however, if this Warrant is exercised as of the closing of the IPO,
the number of trading days shall be the actual number of days traded, if less
than ten);
B. If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, the per share fair market value of the Common Stock
shall be the fair market value price per share as determined in good faith by
the Company's Board of Directors.
2
<PAGE>
(c) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to the Holder within a reasonable time and, unless
this Warrant has been fully exercised or has expired, a new Warrant representing
the shares with respect to which this Warrant shall not have been exercised
shall also be issued to the Holder within such time.
2. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
3. Adjustment of Exercise Price and Number of Shares. Subject to the
-------------------------------------------------
provisions of Section 11 hereof, the number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:
(a) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification or change of the Common Stock (other than a change in par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation as the case may be, shall in
connection with such transaction execute a new Warrant, providing that the
holder of this Warrant shall have the right to exercise such new Warrant, and
procure upon such exercise and payment of the same aggregate Exercise Price, in
lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change, consolidation, sale of
all or substantially all of the Company's assets or merger by a holder of an
equivalent number of shares of Common Stock. Such new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 3. The provisions of this subsection
(a), subject to Section 11 hereof, shall similarly apply to successive
reclassifications, changes, consolidations, mergers, transfers and the sale of
all or substantially all of the Company's assets.
(b) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Common Stock or
shall issue a stock dividend on its outstanding shares of Common Stock the
number of Shares
3
<PAGE>
issuable upon exercise of this Warrant immediately prior to such subdivision or
to the issuance of such stock dividend shall be proportionately increased, and
the Exercise Price shall be proportionately decreased, and in the event that the
Company shall at any time combine the outstanding shares of Common Stock the
number of Shares issuable upon exercise of this Warrant immediately prior to
such combination shall be proportionately decreased, and the Exercise Price
shall be proportionately increased, effective at the close of business on the
date of such subdivision, stock dividend or combination, as the case may be.
4. Notice of Adjustments. Whenever the number of Shares purchasable
---------------------
hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3
hereof, the Company shall provide notice by first class mail to the holder of
this Warrant setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the number of Shares which may be purchased and the Exercise
Price therefor after giving effect to such adjustment.
5. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder. In lieu of such fractional
shares the Company shall make a cash payment therefor based upon the Exercise
Price then in effect.
6. Representations of the Company. The Company represents that all
------------------------------
corporate actions on the part of the Company, its officers, directors and
shareholders necessary for the sale and issuance of the Shares pursuant hereto
and the performance of the Company's obligations hereunder were taken prior to
and are effective as of the effective date of this Warrant.
7. Representations and Warranties by the Holder. The Holder represents
--------------------------------------------
and warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof are
being acquired for its own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "Act"). Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not
been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.
4
<PAGE>
The Holder further understands that the Shares have not been qualified under the
California Securities Law of 1968 (the "California Law") by reason of their
issuance in a transaction exempt from the qualification requirements of the
California Law pursuant to Section 25102(f) thereof, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment intent
expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
8. Restrictive Legend.
------------------
The Shares issuable upon exercise of this Warrant (unless registered
under the Act) shall be stamped or imprinted with a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
ACT. COPIES OF THE INSTRUMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
9. Restrictions Upon Transfer and Removal of Legend.
------------------------------------------------
(a) The Company need not register a transfer of Shares bearing the
restrictive legend set forth in Section 8 hereof, unless the conditions
specified in such legend are satisfied. The Company may also instruct its
transfer agent not to register the
5
<PAGE>
transfer of the Shares, unless one of the conditions specified in the legend
referred to in Section 8 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no opinion
of counsel or "no-action" letter shall be necessary for a transfer without
consideration by any holder (i) to an affiliate of the holder, (ii) if such
holder is a partnership, to a partner or retired partner of such partnership who
retires after the date hereof or to the estate of any such partner or retired
partner, (iii) if such holder is a corporation, to a shareholder of such
corporation, or to any other corporation under common control, direct or
indirect, with such holder, or (iv) by gift, will or intestate succession of any
individual holder to his spouse or siblings, or to the lineal descendants or
ancestors of such holder or his spouse, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if such transferee were the
original holder hereunder.
10. Rights of Shareholders. No holder of this Warrant shall be entitled,
----------------------
as a Warrant holder, to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
11. Expiration of Warrant. This Warrant shall expire and shall no longer
---------------------
be exercisable upon the earlier to occur of:
(a) 5:00 p.m., California local time, on April 26, 2001.
(b) The closing of a merger or consolidation of the Company into a
third party pursuant to which the Company's shareholders immediately prior to
such merger or consolidation own less than fifty percent (50%) of the
outstanding voting securities of the surviving entity;
(c) The closing of a sale of all or substantially all of the assets of
the Company; or
(d) The closing of an IPO.
6
<PAGE>
12. Notices, Etc. All notices and other communications from the Company
------------
to the Holder shall be mailed by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by the Holder.
13. Governing Law, Headings. This Warrant is being delivered in the State
-----------------------
of California and shall be construed and enforced in accordance with and
governed by the laws of such State. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof
Issued this 26th day of April, 1996.
GENESYS TELECOMMUNICATIONS
LABORATORIES
By: /s/ Gregory Shenkman
-----------------------
Gregory Shenkman
Chief Executive Officer and President
7
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: GENESYS TELECOMMUNICATIONS LABORATORIES
1100 Grundy Lane, Suite 125
San Bruno, CA 94066
Attention: President
1. The undersigned hereby elects to purchase ______________________
shares of Common Stock of GENESYS TELECOMMUNICATIONS LABORATORIES pursuant to
the terms of the attached Warrant.
2. Method of Exercise (Please mark the applicable blank):
____ The undersigned elects to exercise the attached Warrant
by means of a cash payment, and tenders herewith payment in full
for the purchase price of the shares being purchased, together
with all applicable transfer taxes, if any.
____ The undersigned elects to exercise the attached Warrant
by means of the net exercise provisions of Section 1 (b)(ii) of
the Warrant.
3. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
------------------------------
(Name)
------------------------------
------------------------------
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in Section 7 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned hereby
delivers an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as Exhibit B.
---------
-------------------------------
(Signature)
Title:
- ----------------------- -------------------------------
(Date)
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : -----------------
SELLER : GENESYS TELECOMMUNICATIONS LABORATORIES
COMPANY : GENESYS TELECOMMUNICATIONS LABORATORIES
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE
STOCK PURCHASE WARRANT ISSUED ON April
26,1996
AMOUNT : SHARES
-----------------
DATE : _________________
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Purchaser is
purchasing these Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, Purchaser
understands that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if its
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(c) Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, Purchaser
understands that the Company is under no obligation to register the Securities.
In addition, Purchaser understands that
<PAGE>
the certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than two years after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than three years, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser agrees, in connection with the Company's initial underwritten
public offering of the Company's securities, (1) not to sell, make short sale
of, loan, grant any options for the purchase of, or otherwise dispose of any
shares of Common Stock of the Company held by the undersigned (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and (2) Purchaser further agrees to execute any
agreement reflecting (1) above as may be requested by the underwriters at the
time of the public offering.
(f) Purchaser further understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 are not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
PURCHASER
By:
------------------------
Title:
---------------------
Date:
----------------------
2.
<PAGE>
EXHIBIT C
---------
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the right represented by the attached Warrant
to purchase ______________________ * shares of Common Stock of GENESYS
TELECOMMUNICATIONS LABORATORIES, to which the attached Warrant relates,
and appoints ________________ Attorney to transfer such right on the books of
GENESYS TELECOMMUNICATIONS LABORATORIES, with full power of substitution in the
premises.
Dated:
-----------------
BENCHMARK CAPITAL PARTNERS, L.P.
By:
--------------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the
Warrant)
-------------------------------------------
(Address)
Signed in the presence of:
- ---------------------------
___________________________
* Insert here the number of shares without making any adjustment for
additional shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant,
may be deliverable upon exercise.
<PAGE>
EXHIBIT 4.5
GENESYS TELECOMMUNICATIONS LABORATORIES
1100 Grundy Lane, Suite 125
San Bruno, California 94066
-----------------------------------------------
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
June 13, 1996
-----------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
SECTION 1 Authorization and Sale of Preferred Stock...................... 1
1.1 Authorization.................................................. 1
1.2 Sale of Series B Preferred..................................... 1
SECTION 2 Closing Dates; Delivery........................................ 1
2.1 Closing Date................................................... 1
2.2 Delivery....................................................... 1
SECTION 3 Representations and Warranties of the Company.................. 2
3.1 Organization and Standing; Articles and Bylaws................. 2
3.2 Corporate Power................................................ 2
3.3 Subsidiaries................................................... 2
3.4 Capitalization................................................. 2
3.5 Authorization.................................................. 3
3.6 Financial Statements........................................... 3
3.7 Material Contracts and Other Commitments....................... 3
3.8 Title to Properties and Assets; Liens, etc..................... 4
3.9 Compliance with Other Instruments, None Burdensome, etc........ 4
3.10 Litigation, etc................................................ 4
3.11 Employees...................................................... 4
3.12 Franchises, Licenses, Trademarks, Patents and Other Rights..... 4
3.13 Governmental Consent, etc...................................... 5
3.14 Offering....................................................... 5
3.15 Brokers or Finders; Other Offers............................... 5
3.16 Shareholders, Directors and Officers; Indebtedness............. 5
3.17 Disclosure..................................................... 5
SECTION 4 Representations and Warranties of the Purchasers............... 6
4.1 Experience..................................................... 6
4.2 Investment..................................................... 6
4.3 Rule 144....................................................... 6
4.4 No Public Market............................................... 6
4.5 Access to Data................................................. 7
4.6 Authorization.................................................. 7
4.7 Brokers or Finders............................................. 7
4.8 Investor Counsel............................................... 7
4.9 Tax Liability.................................................. 7
SECTION 5 Conditions to Closing of Purchasers............................ 7
5.1 Representations and Warranties Correct......................... 7
5.2 Covenants...................................................... 8
5.3 Opinion of Company's Counsel................................... 8
5.4 Compliance Certificate......................................... 8
5.5 Blue Sky....................................................... 8
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
5.6 Amended and Restated Articles of Incorporation................. 8
5.7 Legal Matters.................................................. 8
5.8 Registration Rights Agreement.................................. 8
SECTION 6 Conditions to Closing of Company............................... 8
6.1 Representations................................................ 8
6.2 Blue Sky....................................................... 8
6.3 Amended and Restated Articles of Incorporation................. 9
6.4 Legal Matters.................................................. 9
6.5 Payment of Purchase Price...................................... 9
6.6 Registration Rights Agreement.................................. 9
SECTION 7 Covenants of the Company and the Purchasers.................... 9
7.1 Financial Information.......................................... 9
7.2 Additional Information......................................... 9
7.3 Confidentiality................................................ 10
7.4 Availability of Common Stock for Conversion.................... 10
7.5 Confidential Information and Invention Assignment Agreement.... 10
7.6 Termination of Covenants....................................... 10
SECTION 8 Miscellaneous.................................................. 11
8.1 Governing Law.................................................. 11
8.2 Survival....................................................... 11
8.3 Successors and Assigns......................................... 11
8.4 Entire Agreement; Amendment.................................... 11
8.5 Notices, etc................................................... 11
8.6 Delays or Omissions............................................ 12
8.7 California Corporate Securities Law............................ 12
8.8 Expenses....................................................... 12
8.9 Counterparts................................................... 12
8.10 Severability................................................... 12
8.11 Titles and Subtitles........................................... 12
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
EXHIBITS
<C> <S>
A. Schedule of Purchasers
B. Amended and Restated Articles of Incorporation
C. Schedule of Exceptions
D. Registration Rights Agreement
E. Form of Legal Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
F. Form of Compliance Certificate
G. Form of Confidential Information and Inventions Assignment Agreement
</TABLE>
-iii-
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of June 13, 1996 among Genesys Telecommunications
Laboratories, a California corporation (the "COMPANY"), and the persons and
entities listed on the Schedule of Purchasers attached hereto as Exhibit A (the
---------
"PURCHASERS").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
-----------------------------------------
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of up
-------------
to 400,000 shares (the "SHARES") of its Series B Preferred Stock ("SERIES B
PREFERRED"), having the rights, privileges and preferences as set forth in the
Company's Amended and Restated Articles of Incorporation (the "ARTICLES") in the
form attached to this Agreement as Exhibit B.
---------
1.2 SALE OF SERIES B PREFERRED. Subject to the terms and conditions
--------------------------
hereof, the Company hereby severally issues and sells to each Purchaser and each
Purchaser hereby severally buys from the Company the total number of Shares
specified opposite such Purchaser's name on the Schedule of Purchasers, at a
purchase price of Twenty Two Dollars and Thirteen Cents ($22.13) per Share. The
Company's agreement with each Purchaser is a separate agreement, and the sales
of the Series B Preferred to each Purchaser is a separate sale.
SECTION 2
CLOSING DATES; DELIVERY
-----------------------
2.1 CLOSING DATE. The first closing of the purchase and sale of the
------------
Series B Preferred hereunder shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California 94304 at 2:00
p.m., local time, on June 13, 1996 (the "CLOSING") or at such other time and
place as shall be mutually agreed upon by the Company and Purchasers who propose
to purchase a majority of the Shares proposed to be sold at the Closing (the
date of the Closing is hereinafter referred to as the "CLOSING DATE"). One or
more additional closings may occur within thirty (30) days following the Closing
Date, so long as the sale of Shares at such closings is pursuant to the terms of
this Agreement and at the price per share set forth in Section 1.2.
2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser
--------
a certificate or certificates, registered in such Purchaser's name, representing
the number of Shares listed opposite such Purchaser's name on the Schedule of
Purchasers, against (a) delivery to the Company of payment of the purchase price
therefor, by check payable to the Company or wire transfer per the Company's
instructions or (b) cancellation of indebtedness owed to Purchaser in the amount
<PAGE>
indicated on the Schedule of Purchasers.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C, the Company represents and warrants to the Purchasers, as of the
- ---------
Closing Date as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company is a
----------------------------------------------
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is presently qualified to do business as a foreign
corporation in any jurisdiction, in which the failure to be so qualified would
have a material adverse affect on the Company's operations or conditions,
financial or otherwise. The Company has furnished the Purchasers with true,
correct and complete copies of its Articles and Bylaws (the "BYLAWS"), as
presently in effect.
3.2 CORPORATE POWER. The Company has or will have at the Closing Date all
---------------
requisite legal and corporate power and authority to execute and deliver this
Agreement, to sell and issue the Shares hereunder, to issue the Common Stock
issuable upon conversion of the Series B Preferred and to carry out and perform
its obligations under the terms of this Agreement.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated companies
------------
and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company consists
--------------
or, upon the filing of the Articles with the California Secretary of State will
consist of 20,000,000 shares of Common Stock (the "COMMON STOCK"), of which
1,886,500 shares are issued and outstanding as of the Closing Date and 550,000
shares of Preferred Stock, 150,000 shares of which have been designated "SERIES
A PREFERRED", all of which are issued and outstanding, and 400,000 shares of
which have been designated "SERIES B PREFERRED", none of which is issued and
outstanding prior to the Closing. The outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved 400,000 shares of Series B Preferred for issuance
hereunder, 150,000 shares of Common Stock for issuance upon conversion of the
Series A Preferred, 400,000 shares of Common Stock for issuance upon conversion
of the Series B Preferred and 552,139 shares of Common Stock for issuance by the
Board of Directors to employees, consultants, or directors pursuant to the
Company's 1995 Stock Option Plan, of which stock options to purchase 437,000
shares are outstanding as of the Closing Date. The Company has issued a warrant
to purchase 70,047 shares of Common Stock at a exercise price of $35.69 per
share (subject to
-2-
<PAGE>
adjustment upon occurrence of certain events) which is exercisable upon the
earlier of April 26, 1997 or the filing of the Company's initial public offering
with proceeds of not less than $10,000,000. Except as set forth above, there
are no options, warrants or other rights to purchase any of the Company's
authorized and unissued capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
-------------
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Series B Preferred (and the Common Stock issuable
upon conversion of the Series B Preferred) and the performance of all of the
Company's obligations hereunder has been taken or will be taken prior to the
Closing. This Agreement, when executed and delivered by the Company, shall
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies
and limitations of public policy as applied to Section 10 of the Registration
Rights Agreement, attached hereto as Exhibit D (the "REGISTRATION RIGHTS
AGREEMENT"). The Shares, when issued in compliance with the provisions of this
Agreement and upon the filing of the Articles with the office of the California
Secretary of State, will be validly issued, will be fully paid and
nonassessable, and will have the rights, preferences and privileges described in
the Articles; the Common Stock issuable upon conversion of the Shares has been
duly and validly reserved and, when issued in compliance with the provisions of
this Agreement and the Articles, will be validly issued, and will be fully paid
and nonassessable; and the Shares and such Common Stock will be free of any
liens or encumbrances, assuming the Purchasers take the Shares with no notice
thereof, other than any liens or encumbrances created by or imposed upon the
Purchasers; provided, however, that the Shares (and the Common Stock issuable
upon conversion thereof) may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein. The Shares are not subject
to any preemptive rights or rights of first refusal.
3.6 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser its
--------------------
unaudited financial statements as of and for the years ended June 30, 1995 and
June 30, 1994 (the "FINANCIAL STATEMENTS"). The Financial Statements are
complete and correct in all material respects and accurately set out and
describe the financial condition and operating results of the Company as of the
dates, and during the periods, indicated therein. Since June 30, 1995 there has
not been any change in the assets, liabilities, financial condition or
operations of the Company from that reflected in the Financial Statements,
except changes in the ordinary course of business which have not been, either in
any case or in the aggregate, materially adverse.
3.7 MATERIAL CONTRACTS AND OTHER COMMITMENTS. The Company does not have
----------------------------------------
any contract, agreement, lease, or other commitment, written or oral, absolute
or contingent, other than (i) contracts for the purchase of supplies and
services that were entered into in the ordinary course of business and that do
not, as of the date hereof, involve more than $25,000 each; (ii) sales contracts
entered into in the ordinary course of business; (iii) license agreements
entered into in the ordinary course of business; and (iv) contracts terminable
at will by the Company on no more than sixty (60)
-3-
<PAGE>
days notice without cost or liability to the Company. For purposes of this
Section 3.7, employment contracts and contracts with labor unions and agreements
pursuant to which the Company licenses any of its Proprietary Information (as
defined herein) to third parties shall not be considered to be contracts entered
into in the usual and ordinary course of business.
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
------------------------------------------
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien or
encumbrance, other than (i) the lien of current taxes not yet due and payable,
and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
-------------------------------------------------------
is not in violation of any term of its Articles or Bylaws, or in any material
respect of any term or provision of any material mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree, and to the best
of its knowledge is not in violation of any order, statute, rule or regulation
applicable to the Company where such violation would materially and adversely
affect the Company. The execution, delivery and performance of and compliance
with this Agreement, and the issuance of the Series B Preferred and the Common
Stock issuable upon conversion of the Series B Preferred, have not resulted and
will not result in any material violation of, or conflict with, or constitute a
material default under, the Company's Articles or Bylaws or any of its material
agreements or result in the creation of, any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company; and there is no
such violation or default which materially and adversely affects the business of
the Company or any of its properties or assets.
3.10 LITIGATION, ETC. There are no actions, suits, proceedings or
---------------
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
reasonable basis therefor or threat thereof).
3.11 EMPLOYEES. To the best of the Company's knowledge, no employee of the
---------
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company. There is,
to the Company's knowledge and belief, no pending nor threatened action, suit,
proceeding or claim, or to its knowledge any basis therefor or threat thereof
with respect to any contract, agreement, covenant or obligation referred to in
the preceding sentence. The Company and each employee of the Company and any
subsidiary of the Company employed in any technical capacity or with access to
confidential information of the Company has entered into a Confidential
Information and Invention Assignment Agreement substantially in the form of
Exhibit G hereto.
- ---------
3.12 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS. The
----------------------------------------------------------
Company has all franchises, permits, licenses and other similar authority
necessary for the conduct of its business, the lack of which could materially
and adversely affect the operations or condition, financial or
-4-
<PAGE>
otherwise, of the Company, and it is not in default in any material respect
under any of such franchises, permits, liens or other similar authority. To the
best of the Company's knowledge, the Company possesses all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights and
copyrights necessary to conduct its business without conflict with or
infringement upon any valid rights of others and the lack of which could
materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and the Company has not received any notice of
infringement upon or conflict with the asserted rights of others. The Company
has a valuable body of trade secrets, including know-how, concepts, computer
programs and other technical data (the "PROPRIETARY INFORMATION") for the
development, manufacture and sale of its products. To the Company's knowledge,
the Company has the right to use the Proprietary Information, free and clear of
any rights, liens, encumbrances or claims of others, except that the possibility
exists that other persons may have independently developed trade secrets or
technical information similar or identical to those of the Company. Reasonable
security measures have been taken by the Company to protect the secrecy,
confidentiality and value of the Proprietary Information referred to in this
Section 3.12.
3.13 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
-------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Series B
Preferred (and the Common Stock issuable upon conversion of the Series B
Preferred), or the consummation of any other transaction contemplated hereby,
except (a) filing of the Articles with the office of the California Secretary of
State (b) qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Series
B Preferred (and the Common Stock issuable upon conversion of the Series B
Preferred) under the California Corporate Securities Law of 1968, as amended and
other applicable Blue Sky laws, which filings and qualifications, if required,
will be accomplished in a timely manner.
3.14 OFFERING. Subject to the accuracy of the Purchasers' representations
--------
in Section 4 hereof, the offer, sale and issuance of the Series B Preferred to
be issued in conformity with the terms of this Agreement, and the issuance of
the Common Stock to be issued upon conversion of the Series B Preferred,
constitute transactions exempt from the registration requirements of the
Securities Act.
3.15 BROKERS OR FINDERS; OTHER OFFERS. The Company has not incurred, and
--------------------------------
will not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
3.16 SHAREHOLDERS, DIRECTORS AND OFFICERS; INDEBTEDNESS. The Company is
--------------------------------------------------
not indebted, directly or indirectly, to any of its officers, directors or
shareholders or any of their respective relatives or affiliates. No officer,
director or shareholder of the Company, or any of their relatives or affiliates,
is indebted to the Company. To the knowledge of the Company, none of the
officers or directors or significant employees or advisors of the Company, or
their respective
-5-
<PAGE>
spouses, or relatives, (i) owns directly or indirectly, individually or
collectively, a material interest in any entity which is a competitor, customer
or supplier of or (ii) has any existing contractual relationship with the
Company involving an amount in excess of $50,000.
3.17 DISCLOSURE. Neither this Agreement nor any of the documents furnished
----------
to the Purchasers by the Company in connection with the transactions
contemplated hereby contains or will contain any untrue statement of material
fact, or omits or will omit to state any material fact necessary in order to
make the statements contained herein or therein, in light of the circumstances
under which they are made, not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of the Shares as follows:
4.1 EXPERIENCE. By reason of his business or financial experience, or
----------
that of his professional advisor, Purchaser has the capacity to protect his own
interests in connection with the purchase of the Shares hereunder and has the
ability to bear the economic risk (including the risk of total loss) of his
investment.
4.2 INVESTMENT. Purchaser is acquiring the Series B Preferred and the
----------
underlying Common Stock for investment for his own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. Purchaser understands that the Series B Preferred to be
purchased (and the Common Stock issuable upon conversion thereof) have not been,
and will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.3 RULE 144. Purchaser acknowledges that the Series B Preferred (and the
--------
Common Stock issuable upon conversion thereof) must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. Purchaser is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
-6-
<PAGE>
4.4 NO PUBLIC MARKET. Purchaser understands that no public market now
----------------
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
4.5 ACCESS TO DATA. Purchaser has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with its management and the
opportunity to review the Company's facilities. Purchaser has also had an
opportunity to ask questions of officers of the Company, which questions were
answered to his satisfaction. Purchaser understands that such discussions, as
well as any written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a thorough
or exhaustive description.
4.6 AUTHORIZATION. This Agreement when executed and delivered by such
-------------
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies and limitations of public policy as applied in Section
10 of the Registration Rights Agreement.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
------------------
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 INVESTOR COUNSEL. Each Purchaser acknowledges that it has had the
----------------
opportunity to review this Agreement, the exhibits and the schedules attached
hereto and the transactions contemplated by this Agreement with its own legal
counsel. Each Purchaser is relying solely on such counsel and not on any
statements or representations of the Company or any of its agents for legal
advice with respect to this investment or the transactions contemplated by this
Agreement.
4.9 TAX LIABILITY. Purchaser has reviewed with its own tax advisors the
-------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser relies solely on such
advisors and not on any statements or representations of the Company or any of
its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
-----------------------------------
The Purchasers' obligations to purchase the Shares at the Closing are, at
the option of the Purchasers, subject to the fulfillment of the following
conditions:
-7-
<PAGE>
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
---------
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received from
----------------------------
Wilson Sonsini Goodrich & Rosati, P.C., counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form attached
hereto as Exhibit E.
---------
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
----------------------
Purchasers a certificate of the Company in the form of Exhibit F hereto,
---------
executed by the President of the Company, dated the Closing Date, and
certifying, among other things, to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 of this Agreement.
5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
--------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series B Preferred and the
Common Stock issuable upon conversion of the Series B Preferred.
5.6 AMENDED AND RESTATED ARTICLES OF INCORPORATION. The Articles shall
----------------------------------------------
have been filed with the California Secretary of State.
5.7 LEGAL MATTERS. All material matters of a legal nature which pertain
-------------
to this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Purchasers.
5.8 REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers shall
-----------------------------
have entered into the Registration Rights Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing Date
is, at the option of the Company, subject to the fulfillment as of the Closing
Date of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers in
---------------
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
-8-
<PAGE>
6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
--------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series B Preferred and the
Common Stock issuable upon conversion of the Series B Preferred.
6.3 AMENDED AND RESTATED ARTICLES OF INCORPORATION. The Articles shall
----------------------------------------------
have been filed with the California Secretary of State.
6.4 LEGAL MATTERS. All material matters of a legal nature which pertain
-------------
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
6.5 PAYMENT OF PURCHASE PRICE. Each Purchaser (i) shall have delivered to
-------------------------
the Company the purchase price for such Purchaser's Shares, or (ii) shall have
canceled indebtedness owed by the Company to such Purchaser, in either case in
the amount set forth opposite such Purchaser's name on the Schedule of
Purchasers.
6.6 REGISTRATION RIGHTS AGREEMENT. The Company and the Purchasers shall
-----------------------------
have entered into the Registration Rights Agreement.
SECTION 7
COVENANTS OF THE COMPANY AND THE PURCHASERS
-------------------------------------------
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. As soon as practicable after the end of each
---------------------
fiscal year, and in any event within 90 days thereafter, the Company will
deliver to each Purchaser consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal year, consolidated statements
of income and consolidated statements of changes in financial position of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year (or, at the election
of the Company, setting forth in comparative form the budgeted figures for the
fiscal year then reported), all in reasonable detail and audited by independent
public accountants of national standing selected by the Company.
7.2 ADDITIONAL INFORMATION. As long as a Purchaser holds not less than
----------------------
15,000 shares of Series B Preferred and/or Common Stock issued upon conversion
of the Series B Preferred, as adjusted for recapitalizations, stock splits,
stock dividends and the like, the Company will deliver or provide to such
Purchaser (i) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within 45 days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of
-9-
<PAGE>
each such quarterly period, and consolidated statements of income and
consolidated statements of changes in financial condition of the Company and its
subsidiaries for such period and for the current fiscal year to date, prepared
in accordance with generally accepted accounting principles (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments, all in reasonable detail and signed by the principal financial or
accounting officer of the Company, (ii) an annual budget for the Company as soon
as it is available and (iii) visitation rights to attend Board of Directors
meetings including advance notice thereof; provided, however, that the Company
shall not be obligated to provide any information that it considers in good
faith to be a trade secret or to contain confidential or classified information;
and provided further, the Company may, at the discretion of the Board of
Directors, exclude any non-Board member from executive sessions of its Board of
Directors.
7.3 CONFIDENTIALITY. Each Purchaser agrees that any information obtained
---------------
by such Purchaser pursuant to this Section 7 which may be proprietary to the
Company or otherwise confidential will not be disclosed without the prior
written consent of the Company. If a Purchaser requests in writing, the Company
will identify in writing all information obtained by such Purchaser under this
Section 7 which the Company considers confidential and which a Purchaser may not
disclose without the Company's prior written consent. Purchaser further
acknowledges and understands that any information so obtained which may be
considered "inside" non-public information will not be utilized by such
Purchaser in connection with purchases and/or sales of the Company's securities
except in compliance with applicable state and federal anti-fraud statutes. The
provisions of this Section 7.3 shall not be in limitation of any rights which
Purchaser may have with respect to the books and records of the Company, or to
inspect its properties or discuss its affairs, finances and accounts, under the
laws of the jurisdictions in which it is incorporated.
7.4 AVAILABILITY OF COMMON STOCK FOR CONVERSION. The Company will from
-------------------------------------------
time to time, in accordance with the laws of the State of California, increase
the authorized amount of Common Stock if at any time the number of shares of
Common Stock remaining unissued and available for issuance shall be insufficient
to permit conversion of all the then outstanding shares of Series B Preferred.
7.5 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT. The
-----------------------------------------------------------
Company and each person now or hereafter employed in any technical capacity by
it or any subsidiary with access to confidential information will enter into a
Confidential Information and Invention Assignment Agreement in substantially the
form of Exhibit G hereto, and the Company shall use its best efforts to cause
---------
any consultant retained by it that has access to confidential information to
enter into a form of Consulting Agreement with substantially similar
confidentiality and non-solicitation provisions.
7.6 TERMINATION OF COVENANTS. The covenants of the Company set forth in
------------------------
this Section 7 shall terminate in all respects on the date of the closing of an
initial firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, covering the offer and sale of
the Company's Common Stock.
-10-
<PAGE>
SECTION 8
MISCELLANEOUS
-------------
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
-------------
the internal laws of the State of California. The parties expressly stipulate
that any litigation under this Agreement shall be brought in the state courts of
the Counties of Santa Clara, California and in the United States District Court
for the Northern District of California. The parties agree to submit to the
jurisdiction and venue of those courts.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
--------
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase the Series B
Preferred shall not be assignable without the consent of the Company.
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
---------------------------
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of at least sixty (60) percent of the Series B
Preferred (or the Common Stock issued or issuable upon conversion of the Series
B Preferred) may, with the Company's prior written consent, waive, modify or
amend on behalf of all holders, any provisions hereof.
8.5 NOTICES, ETC. All notices and other communications required or
------------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to the Purchaser, at the Purchaser's address as set forth in
Exhibit A and (ii) if to the Company, at the address of its principal corporate
- ---------
offices (attention: Secretary), or at such other address as a party may
designate by ten days' advance written notice to the other party
-11-
<PAGE>
pursuant to the provisions above.
8.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
-------------------
omission to exercise any right, power or remedy accruing to any holder of any
Shares, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
-----------------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
8.8 EXPENSES. The Company and each Purchaser shall bear its own expenses
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
-12-
<PAGE>
"COMPANY"
GENESYS TELECOMMUNICATIONS LABORATORIES
a California corporation
By: /s/ Gregory Shenkman
-----------------------------------------
Gregory Shenkman, President and
Chief Executive Officer
"PURCHASERS"
By:
-----------------------------------------
Title:
--------------------------------------
-13-
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
TOTAL NUMBER TOTAL
OF SERIES B PURCHASE
NAME AND ADDRESS PREFERRED SHARES PRICE
<S> <C> <C>
Benchmark Capital Partners, L.P. 159,514 $3,530,044.82
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Benchmark Founders' Fund, L.P. 21,236 $ 469,952.68
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
WPG Enterprise Fund II, L.P. 74,017 $1,637,996.21
c/o Weiss Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Weiss Peck & Greer Venture Associates III, L.P. 61,546 $1,362,012.98
c/o Weiss Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Total: 316,313 $7,000,006.69
</TABLE>
<PAGE>
EXHIBIT 4.6
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
MCI TELECOMMUNICATIONS CORPORATION
AND
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
FEBRUARY 26, 1997
MCI CONFIDENTIAL
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 -- DEFINITIONS; PURCHASE AND SALE............................................ 1
1.1 Definitions............................................................... 1
-----------
(A) "Affiliate"........................................................ 1
(B) "Business Intellectual Property Rights"............................ 1
(C) "CERCLA"........................................................... 2
(D) "Closing"........................................................... 2
(E) "Closing Date"..................................................... 2
(F) "Code"............................................................. 2
(G) "Commercial Documents".............................................. 2
(H) "Company Financial Statements"..................................... 2
(I) "Company Interim Financial Statements"............................. 2
(J) "Environmental Laws"............................................... 2
(K) "ERISA"............................................................ 2
(L) "Fully Diluted Basis".............................................. 2
(M) "GAAP"............................................................. 2
(N) "Hazardous Material"............................................... 2
(O) "IRS".............................................................. 2
(P) "Leased Improvements".............................................. 2
(Q) "Leased Property".................................................. 2
(R) "Material Adverse Effect".......................................... 3
(S) "Pension Plans".................................................... 3
(T) "Person"........................................................... 3
(U) "Plans"............................................................ 3
(V) "Purchase Price"................................................... 3
(W) "Securities Act"................................................... 3
(X) "Stock"............................................................ 3
(Y) "Tax".............................................................. 3
(Z) "Taxing Authority"................................................. 3
(AA) "Tax Return"...................................................... 3
(BB) "Warrant"......................................................... 3
1.2 Interpretive Rules........................................................ 3
------------------
1.3 Purchase and Sale......................................................... 4
-----------------
ARTICLE 2 -- PURCHASE PRICE............................................................ 4
2.1 Purchase Price............................................................ 4
--------------
2.2 Payment of Purchase Price................................................. 4
-------------------------
ARTICLE 3 -- CLOSING................................................................... 4
</TABLE>
i
-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 4 -- ADDITIONAL AGREEMENTS...................................................... 4
4.1 Registration Rights Agreement............................................... 4
-----------------------------
4.2 Commercial Documents........................................................ 4
--------------------
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 4
5.1 Corporate Organization...................................................... 5
----------------------
5.2 Valid and Binding Agreement................................................. 5
---------------------------
5.3 No Violation................................................................ 6
------------
5.4 Consents and Approvals...................................................... 6
----------------------
5.5 Capitalization.............................................................. 6
--------------
5.6 Subsidiaries and Affiliates................................................. 7
---------------------------
5.7 Financial Statements........................................................ 7
--------------------
5.8 Absence of Undisclosed Liabilities.......................................... 7
----------------------------------
5.9 Interim Operations and Absence of Certain Changes........................... 8
-------------------------------------------------
5.10 Taxes...................................................................... 9
-----
5.11 Employee Benefit Plans..................................................... 10
----------------------
5.12 Compliance with Law........................................................ 12
-------------------
5.13 Litigation; Claims......................................................... 12
------------------
5.14 Contracts and Commitments.................................................. 12
-------------------------
5.15 Intellectual Property Rights............................................... 12
----------------------------
5.16 Liens...................................................................... 14
-----
5.17 Insurance.................................................................. 14
---------
5.18 Property................................................................... 14
--------
5.19 Environmental Matters...................................................... 15
---------------------
5.20 Governmental Authorizations................................................ 15
---------------------------
5.21 Employee Relations......................................................... 16
------------------
5.22 Employees.................................................................. 16
---------
5.23 Broker's or Finder's Fees.................................................. 16
-------------------------
5.24 Disclosure................................................................. 17
----------
5.25 Certain Transactions....................................................... 17
--------------------
5.26 Offering................................................................... 17
--------
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF THE BUYER................................. 17
6.1 Corporate Organization...................................................... 17
----------------------
6.2 Valid and Binding Agreements................................................ 17
----------------------------
6.3 No Violation................................................................ 18
------------
6.4 Consents and Approvals...................................................... 18
----------------------
6.5 Broker's or Finder's Fees................................................... 18
-------------------------
6.6 Investment Representations.................................................. 18
--------------------------
ARTICLE 7 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER............................ 19
7.1 Representations and Warranties.............................................. 19
------------------------------
7.2 Covenants, Agreements and Conditions........................................ 19
-----------------------------------
</TABLE>
ii
--
<PAGE>
<TABLE>
<S> <C>
7.3 Proceedings................................................................. 19
-----------
7.4 Corporate Proceedings....................................................... 19
---------------------
7.5 Governmental Approvals...................................................... 20
----------------------
7.6 Amendment to Articles of Incorporation...................................... 20
--------------------------------------
7.7 Insurance................................................................... 20
---------
7.8 Deliveries.................................................................. 20
----------
7.9 Opinion of Counsel.......................................................... 20
------------------
ARTICLE 8 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.......................... 20
8.1 Representations and Warranties.............................................. 21
------------------------------
8.2 Covenants, Agreements and Conditions........................................ 21
------------------------------------
8.3 Proceedings................................................................. 21
-----------
8.4 Corporate Proceedings....................................................... 21
---------------------
8.5 Governmental Approvals...................................................... 21
----------------------
8.6 Deliveries.................................................................. 21
----------
ARTICLE 9 -- AFFIRMATIVE COVENANTS AND AGREEMENTS OF THE COMPANY......................... 21
9.1 Financial Reporting......................................................... 21
-------------------
9.2 Reservation of Conversion Shares............................................ 22
--------------------------------
9.3 Confidential Information and Invention Assignment Agreement................. 22
-----------------------------------------------------------
9.4 Repurchase.................................................................. 22
----------
ARTICLE 10 -- OTHER MATTERS.............................................................. 22
10.1 Indemnification............................................................ 22
---------------
10.2 Indemnification Procedures................................................. 24
--------------------------
10.3 Confidentiality............................................................ 25
---------------
10.4 Further Assurances......................................................... 26
------------------
ARTICLE 11 -- MISCELLANEOUS.............................................................. 26
11.1 Survival of Representations, Warranties and Agreements..................... 26
------------------------------------------------------
11.2 Service of Process......................................................... 26
------------------
11.3 Notices.................................................................... 26
-------
11.4 Governing Law.............................................................. 27
-------------
11.5 Modification; Waiver....................................................... 27
--------------------
11.6 Entire Agreement........................................................... 27
----------------
11.7 Assignment; Successors and Assigns......................................... 27
----------------------------------
11.8 Public Announcements....................................................... 27
--------------------
11.9 Severability............................................................... 28
------------
11.10 No Third Party Beneficiary................................................ 28
--------------------------
11.11 Expenses.................................................................. 28
--------
11.12 Execution in Counterpart.................................................. 28
------------------------
</TABLE>
iii
---
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated February
26, 1997, by and between MCI Telecommunications Corporation, a Delaware
corporation (the "Buyer"), and Genesys Telecommunications Laboratories, Inc., a
California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of the Commercial Documents (as
hereinafter defined) and the issuance of the Warrant (as hereinafter defined),
the Company desires to sell to the Buyer, and the Buyer desires to purchase from
the Company, the Stock (as hereinafter defined) upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are to be made and performed by
the respective parties, it is hereby agreed as follows:
ARTICLE 1 -- DEFINITIONS; PURCHASE AND SALE
2.1 Definitions. The following terms when used in this Agreement have the
-----------
meanings set forth below:
(A) "Affiliate" means any Person now or hereafter controlling,
controlled by or under common control with another Person.
(B) "Business Intellectual Property Rights" means any and all
inventions, Marks (including trademarks, service marks, certification
marks, collective marks, and collective membership marks whether word,
logo, or other forms of marks, all of the foregoing collectively referred
to as "Marks"), trade names, copyrights, applications therefor, patents
thereon, patent applications therefor, continuations, divisions and
continuations in part, registrations thereof and licenses thereof, royalty
rights, any and all goodwill associated with the business or represented by
the assets of the Company, trade secrets, secret processes and procedures,
engineering, production, assembly design and installation encompassed in
any and all embodiments including, but not limited to technical drawings
and specifications, working notes and memos, market studies, consultants'
reports, technical and laboratory data, competitive samples, engineering
prototypes, and confidential information, know-how, and all similar
property of any nature, tangible or intangible.
MCI CONFIDENTIAL
<PAGE>
(C) "CERCLA" has the meaning set forth in Section 5.19(A).
(D) "Closing" has the meaning set forth in Article III.
(E) "Closing Date" has the meaning set forth in Article III.
(F) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(G) "Commercial Documents" means, collectively, the Amendment to
Master Software License Agreement, the Amendment to Maintenance Agreement
and the Master Consulting Agreement to be entered into between the Buyer
and the Company on the Closing Date.
(H) "Company Financial Statements" has the meaning set forth in
Section 5.7.
(I) "Company Interim Financial Statements" has the meaning set forth
in Section 5.7.
(J) "Environmental Laws" has the meaning set forth in Section
5.19(C).
(K) "ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
(L) "Fully Diluted Basis" means, at any date as of which the number
of shares thereof of any Person is to be determined, (a) all shares of
capital stock of such Person outstanding at such date, and (b) the maximum
number of shares of capital stock of such Person issuable pursuant to
warrants, options or other rights to purchase or acquire (whether or not
such warrants, options or other rights are then exercisable), or pursuant
to securities convertible into or exchangeable (whether or not such
securities are then convertible or exchangeable) for, shares of capital
stock of such Person, outstanding on such date (including any warrants
being issued on such date).
(M) "GAAP" means generally accepted accounting principles of the
United States applied in a manner consistent with past practice of the
Company.
(N) "Hazardous Material" has the meaning set forth in Section
5.19(A).
(O) "IRS" means the United States Internal Revenue Service.
(P) "Leased Improvements" has the meaning set forth in Section
5.18(A).
(Q) "Leased Property" has the meaning set forth in Section 5.18(A).
MCI CONFIDENTIAL
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(R) "Material Adverse Effect" means, with respect to any Person, any
event, fact, condition, occurrence or effect which is materially adverse to
the following, taken as a whole: the business, properties, assets,
liabilities, capitalization, stockholders equity, financial condition,
operations, licenses or other franchises or results of operations of such
Person.
(S) "Pension Plans" has the meaning set forth in Section 5.11(B)(1).
(T) "Person" means and includes an individual, a partnership, a joint
venture, a corporation or trust, an unincorporated organization, a group or
a government or other department or agency thereof.
(U) "Plans" has the meaning set forth in Section 5.11(A).
(V) "Purchase Price" has the meaning set forth in Section 2.1.
(W) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(X) "Stock" means the 674,496 shares of Series C Preferred Stock of
the Company, no par value, to be purchased by the Buyer at the Closing,
which shares shall represent three percent (3.0%) of the equity of the
Company on a Fully Diluted Basis as of the Closing Date (after giving
effect to the sale of the Stock and the issuance of the Warrant).
(Y) "Tax" has the meaning set forth in Section 5.10(C).
(Z) "Taxing Authority" has the meaning set forth in Section 5.10(A).
(AA) "Tax Return" has the meaning set forth in Section 5.10(D).
(AB) "Warrant" shall mean that certain Warrant dated as of the
Closing Date to purchase 449,664 shares of Series C Preferred Stock of the
Company which shares shall represent two percent (2.0%) of the equity of
the Company on a Fully Diluted Basis as of the Closing Date (after giving
effect to the sale of the Stock and the issuance of the Warrant), in the
form attached as Exhibit A hereto.
---------
3.1 Interpretive Rules. For purposes of this Agreement, except as
------------------
otherwise expressly provided herein or unless the context otherwise requires:
(i) defined terms include the plural as well as the singular and the use of any
gender shall be deemed to include the other gender; (ii) references to
"Articles," "Sections" and other subdivisions and to "Schedules" and "Exhibits"
without reference to a document, are to designated Articles, Sections and other
subdivisions of, and to Schedules and Exhibits to, this Agreement; (iii) the use
of the term "including" means "including but not limited to"; and (iv) the words
"herein," "hereof," "hereunder" and other
MCI CONFIDENTIAL
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words of similar import refer to this Agreement as a whole and not to any
particular provision.
4.1 Purchase and Sale. Upon the terms and subject to all of the
-----------------
conditions set forth herein, on the Closing Date, the Company agrees to (i) sell
to the Buyer and the Buyer agrees to purchase from the Company, free and clear
of all liens, pledges, security interests, claims, options, charges, rights of
first refusal or encumbrances whatsoever, the Stock and (ii) issue to the Buyer,
free and clear of all liens, pledges, security interests, claims, options,
charges, rights of first refusal or encumbrances whatsoever, the Warrant.
ARTICLE 5 -- PURCHASE PRICE
6.1 Purchase Price. The aggregate purchase price for the Stock (the
--------------
"Purchase Price") shall be Seven Million Five Hundred Thousand Three Hundred
Ninety-five Dollars and Fifty Cents ($7,500,395.50). The exercise price of the
Warrant shall be as set forth therein.
7.1 Payment of Purchase Price. At the Closing, the Buyer shall pay the
-------------------------
Company the Purchase Price by wire transfer, in immediately available funds, to
an account of the Company, which account shall be designated by the Company at
least three (3) business days prior to the date of the required payment.
ARTICLE 8 -- CLOSING
The closing of the transactions contemplated hereby (the "Closing") shall
take place at the offices of Buyer, 1133 19th Street, N.W., Washington, D.C.
20036 at 10:00 a.m. local time, on February 26, 1997, or at such other time or
date as may be agreed upon by the parties hereto (the "Closing Date").
ARTICLE 9 -- ADDITIONAL AGREEMENTS
10.1 Registration Rights Agreement. At the Closing, the Company and Buyer
-----------------------------
will enter into the Registration Rights Agreement in the form attached as
Exhibit B, pursuant to which the Company shall grant certain registration rights
- ---------
for the Stock and the shares of stock covered by the Warrant to Buyer.
11.1 Commercial Documents. At the Closing, the Company and Buyer will
--------------------
enter into the Commercial Documents.
ARTICLE 12 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants, subject to the Schedule of
Exceptions attached hereto as Exhibit C, to the Buyer as follows, and the Buyer
---------
in agreeing to consummate
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the transactions contemplated by this Agreement has relied upon such
representations and warranties, subject to such Schedule of Exceptions, that:
13.1 Corporate Organization.
----------------------
(A) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has the
requisite power and authority (corporate and other) to own, lease and
operate its properties and to carry on its business as now being conducted.
(B) The Company is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each of the jurisdictions
listed on Schedule 5.1. The Company is not qualified or licensed to do
------------
business as a foreign corporation in any other jurisdiction and there are
no other jurisdictions in which the failure to be qualified or licensed as
a foreign corporation would have a Material Adverse Effect on the Company.
(C) The copies of the articles of incorporation and all amendments
thereto of the Company, as certified by the Secretary of State of
California, and the by-laws, as amended to date, of the Company, as
certified by its secretary, which have heretofore been delivered to the
Buyer, are true, complete and correct copies of the articles of
incorporation and by-laws of the Company, as amended and in effect on the
date hereof, and will be true, complete and correct as of the Closing Date.
(D) The minute books and records of the Company, copies of which have
been furnished to the Buyer prior to the date hereof, are the original
minute books and records of the Company, contain all proceedings of the
stockholders, the Board of Directors and any committees thereof with
respect to the Company, and are true, correct and complete in all material
respects. There have been no changes, alterations or additions to the
minute books and records which have not been furnished to the Buyer prior
to the date hereof.
14.1 Valid and Binding Agreement. The Company has all requisite corporate
---------------------------
power and authority to enter into this Agreement. All necessary action on the
part of the Company has been taken to authorize the execution and delivery of
this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby (which includes, without
limitation, the issuance, sale, and delivery of the Stock, the Warrant and the
common stock issuable upon conversion of the Series C Preferred Stock). This
Agreement has been duly and validly executed and delivered by the Company, and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
MCI CONFIDENTIAL
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15.1 No Violation. Neither the execution and delivery of this Agreement
------------
nor the consummation of the transactions contemplated hereby nor compliance by
the Company with any of the provisions hereof will (i) violate or conflict with
any provision of the articles of incorporation or by-laws of the Company, or to
the Company's knowledge, any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Company, or (ii)
(a) violate, or (b) conflict with, or (c) result in a breach of any provision
of, or (d) constitute a default (or any event which, with or without due notice
or lapse of time, or both, would constitute a default) under, or (e) result in
the termination of, or (f) accelerate the performance required by, or (g) result
in the creation of any lien, security interest, charge or other encumbrance upon
the Stock, the Warrant or any of the properties or assets of the Company ( (a)
through (g) are collectively, "Defaults") under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation of which the Company is
currently a party or by which the Company or any of its assets are bound where
such Default would have a Material Adverse Effect.
16.1 Consents and Approvals. No permit, consent, approval or
----------------------
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or third party is required to be made or obtained by the
Company in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
17.1 Capitalization.
--------------
(A) The authorized capital stock of the Company consists solely of
(i) 120,000,000 shares of common stock, of which 12,744,086 shares are
issued and outstanding; (ii) 900,000 shares of Series A Preferred Stock, of
which 900,000 shares are issued and outstanding; (iii) 1,897,878 shares of
Series B Preferred Stock, of which 1,897,878 shares are issued and
outstanding; and (iv) 1,348,992 shares of Series C Preferred Stock of which
854,363 shares are issued and outstanding (including the Stock). The
issued and outstanding capital stock is duly authorized, validly issued,
fully paid and nonassessable, and none of the issued and outstanding shares
of capital stock were issued in violation of the preemptive rights of any
present or former stockholder of the Company.
(B) Schedule 5.5 contains a true, complete and correct listing of all
------------
of the holders of issued and outstanding shares of capital stock of the
Company and the number and type of shares held by each of them.
(C) Except as set forth in Section 5.5(A) and (B), (i) there are no
shares of capital stock or other equity securities (as the term "equity
security" is defined in the Securities Exchange Act of 1934, as amended) of
the Company outstanding, (ii) there are no outstanding subscriptions,
options, warrants or rights to purchase or acquire any
MCI CONFIDENTIAL
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<PAGE>
equity securities of the Company, (iii) no equity securities of the Company
are reserved for issuance for any purpose, (iv) there are no contracts,
commitments, agreements, understandings, arrangements or restrictions to
which the Company is a party or by which the Company is bound relating to
any shares of the capital stock or other equity securities of the Company
(including the Stock), whether or not outstanding, (v) and there is no
other instrument, certificate, document or other right, whether or not
represented by a certificate or other document or instrument, convertible
(with or without consideration) into the capital stock of the Company.
(D) There are no repurchase rights except as set forth in Section 9.4
hereof.
18.1 Subsidiaries and Affiliates. The Company owns no capital stock or
---------------------------
other equity securities of any other corporation and has no other type of
interest (whether ownership or other) in any other corporation, partnership,
joint venture or other business organization or entity. The interests of the
Company in any Person are owned by the Company free and clear of all liens,
options, claims or encumbrances (including without limitation, rights of first
refusal or similar rights) with respect to the ownership thereof. The Company
is not subject to any obligation or requirement to provide funds for, or to make
any investment (in the form of a loan, capital contribution or otherwise) to or
in, any Person.
19.1 Financial Statements. The audited consolidated financial statements
--------------------
of the Company for each of the two (2) years ended June 30, 1994 and 1995,
attached as Schedule 5.7 hereto (the "Company Financial Statements") (i) present
------------
fairly the financial position, results of operations, shareholders' equity and
cash flows of the Company in accordance with GAAP, as of the statement dates and
for the periods indicated, and (ii) have been prepared in accordance with the
Company's customary procedures for the preparation of financial statements
consistently applied throughout and among the periods indicated. The unaudited
interim consolidated financial statements of the Company for the year ended June
30, 1996 attached as Schedule 5.7A hereto (the "Company 1996 Financial
-------------
Statements") and the unaudited condensed consolidated financial statements for
the six (6) months ended December 31, 1996, attached as Schedule 5.7B hereto
-------------
(the "Company Interim Financial Statements") (x) present fairly the financial
position, results of operations, shareholder's equity and cash flows of the
Company, as of the statement date and for the period indicated, and (y) have
been prepared in accordance with the Company's customary procedures for the
preparation of annual and interim financial statements, respectively,
consistently applied throughout and among the periods indicated and are
consistent with the Company Financial Statements subject to year-end audit and
other normal or recurring year-end adjustments (made in accordance with GAAP, in
the ordinary course of business and consistent with prior year-end accounting
principles and adjustments), except that the Company Interim Financial
Statements do not contain any footnotes required by GAAP, are presented in a
condensed format and do not include a statement of shareholders' equity or a
statement of cash flows.
20.1 Absence of Undisclosed Liabilities. The Company has no material
----------------------------------
liability or obligation (absolute, accrued, contingent or otherwise), including
any guaranty with respect to
MCI CONFIDENTIAL
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<PAGE>
any obligation, except (a) such liabilities or obligations as are fully
reflected, reserved against or disclosed in the Company Financial Statements,
the Company 1996 Financial Statements or the Company Interim Financial
Statements and (b) such liabilities or obligations as have been incurred in the
ordinary course of business, consistent with past practice, since June 30, 1995.
21.1 Interim Operations and Absence of Certain Changes.
-------------------------------------------------
Since December 31, 1996, the Company has conducted its business in the
ordinary course and consistent with past practice, and the Company has not:
(A) incurred any indebtedness or other liabilities (whether absolute,
accrued, contingent or otherwise) or guaranteed any such indebtedness,
except in the usual and ordinary course of its business, consistent with
past practice;
(B) suffered any damage, destruction or loss of tangible assets,
whether or not covered by insurance, in excess of $50,000;
(C) suffered any change in its financial condition, assets,
liabilities or business or suffered any other event or condition of any
character which individually or in the aggregate had or has a Material
Adverse Effect on the Company or materially diminishes the value of the
assets of the Company;
(D) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) except in each
case in the ordinary course of business;
(E) canceled any debts or waived any claims or rights of substantial
value, except in each case in the ordinary course of business;
(F) pledged or permitted the imposition of any lien on or sold,
assigned, transferred or otherwise disposed of any of its tangible assets,
except the sale of inventory in the ordinary course of business;
(G) sold, assigned, encumbered, licensed, pledged, abandoned or
otherwise transferred any patents, applications for patents, Marks, trade
names, copyrights, licenses or other intangible assets other than in the
ordinary course of its business;
(H) made any change in any method of accounting or accounting
principle or practice;
(I) written up or down the value of the inventory or determined as
collectible any notes or accounts receivable that were previously
considered to be uncollectible, except for write-ups or write-downs and
other determinations in accordance with GAAP and in the ordinary course of
business and consistent with past practice;
(J) declared, paid or set aside for payment any dividend or other
distribution on any shares of its capital stock;
MCI CONFIDENTIAL
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<PAGE>
(K) made any loans which in the aggregate exceed $10,000 to any
employee or made any loans to any stockholder, officer, director or
Affiliate;
(L) made capital expenditures or commitments for same in excess of
$100,000 in the aggregate;
(M) agreed, whether in writing or otherwise, to take any action
described in this Section 5.9.
22.1 Taxes.
-----
(A) The Company has duly and timely filed with each appropriate
federal, state, local and foreign governmental entity or other authority
(individually or collectively, "Taxing Authority") all Tax Returns required
to be filed. All such Tax Returns were true, correct and complete in all
material respects. The Company has timely paid all material Taxes which
have become due and payable (whether or not shown on any Tax Return). The
Company is not currently, and has not been in the past, delinquent in the
payment of any Tax, governmental charge or deposit for which any such
failure would have a Material Adverse Effect. Adequate reserves and
accruals in accordance with generally accepted accounting principles have
been established by the Company to provide for the payment of all Taxes
which are not yet due and payable with respect to the Company for taxable
periods or portions thereof ending on or before the Closing Date. There
are no liens for Taxes upon the Company or its assets except liens for
current Taxes not yet due. There are no liens on any property of the
Company that arose in connection with the failure (or alleged failure) to
pay any Taxes. No audit, examination, investigation, proceeding, action or
claim with respect to the Company's Taxes is pending, proposed or
threatened, and there is no basis for the assessment or collection of
additional Taxes against the Company. To the Company's knowledge, there
has never been an examination or notice of a potential examination of the
Tax Returns of the Company by any Taxing Authority. No extension is in
effect with respect to the filing of any Tax Return, the payment of any
Taxes, or any limitation period regarding the assessment or collection of
any Taxes.
(B) All material Taxes that are required to have been withheld or
collected by the Company have been duly withheld or collected and, to the
extent required, have been paid to the proper governmental authorities or
properly deposited as required by applicable laws.
(C) As used in this Agreement, "Tax" means any of the Taxes and
"Taxes" means, with respect to the Company, all income taxes (including any
tax on or based upon net income, or gross income, or income as specially
defined, or earnings, or profits, or selected items of income, earnings or
profits) and all gross receipts, capital gains, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, workers
compensation, excise, severance, stamp, occupation, premium, property or
windfall profit taxes, environmental (including taxes under Code Section
59A, social security or similar taxes), unemployment, disability,
registration, value-added, alternative or add-on minimum taxes, custom
duties or other taxes, fees,
MCI CONFIDENTIAL
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<PAGE>
assessments or charges of any kind whatsoever, together with any interest,
penalties, additions to tax or additional amounts imposed by any Taxing
Authority whether disputed or not.
(D) As used in this Agreement, "Tax Return" means any return, report,
information return or other document (including any related or supporting
information) filed or required to be filed with any Taxing Authority or
other authority in connection with the determination, assessment or
collection of any Tax paid or payable by the Company or the administration
of any laws, regulations or administrative requirements relating to any
such Tax.
(E) No claim which could have a Material Adverse Effect has ever been
made by any Taxing Authority in a jurisdiction where the Company does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
23.1 Employee Benefit Plans.
----------------------
(A) Except as set forth on the Schedule of Exceptions, the Company is
not a party to any employee agreement, understanding, plan, policy,
procedure, pattern or practice, or other arrangement, whether written or
oral, which provides compensation or fringe benefits to its employees, and
the Company is in material compliance with all its obligations under all
annuity, bonus, cafeteria, stock option, stock purchase, profit sharing,
savings, pension, retirement, incentive, group insurance, disability,
employee welfare, prepaid legal, nonqualified deferred compensation
(including without limitation, excess benefit plans, top-hat plans,
deferred bonuses, rabbi trusts, secular trusts, nonqualified annuity
contracts, insurance arrangements, nonqualified stock options, phantom
stock plans, or golden parachute payments) and other similar fringe benefit
plans, and all other employee benefit funds or programs (within the meaning
of Section 3(3) of ERISA), covering employees, former employees or
directors of the Company (the "Plans"). Except as required by applicable
law, there are no negotiations, demands, commitments or proposals that are
pending or that have been made that concern matters now covered, or that
would be covered by the type of agreements described on the Schedule of
Exceptions or in this Section 5.11(A).
(B) With respect to the Plans which are subject to ERISA:
(1) The Plans are in material compliance with the applicable
provisions of ERISA and each of the employee pension benefit plans,
within the meaning of Section 3(2) of ERISA (the "Pension Plans"),
which are intended to be qualified under Section 401(a) of the Code
have received a favorable determination letter from the IRS or a
request for such determination has been timely filed with the IRS (and
to the knowledge of the Company, nothing has occurred to cause the IRS
to revoke such determination and the IRS has not indicated any
disapproval
MCI CONFIDENTIAL
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<PAGE>
of any request for such a determination);
(2) Each Plan has been materially operated in accordance with
its terms and all required filings that are due prior to the date
hereof, including without limitation, the Forms 5500, for all Plans
have been timely made;
(3) No prohibited transactions, as defined by Section 406 of
ERISA or Section 4975 of the Code, have occurred with respect to any
of the Plans which would have a Material Adverse Effect;
(4) The Company has not engaged in any transaction in connection
with which the Company could be subjected to a criminal or civil
penalty under ERISA;
(5) None of the Plans, nor any trust which serves as a funding
medium for any of such Plans, nor any issue relating thereto is
currently under examination by or pending before the IRS, the
Department of Labor, the PBGC or any court, other than applications
for determinations pending before the IRS;
(6) None of the Pension Plans is a defined benefit plan within
the meaning of Section 414(j) of the Code;
(7) None of the Plans is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA, nor a plan maintained by more than
one employer (hereinafter referred to as an "multiple employer plan"),
nor a single employer plan under a multiple controlled group within
the meaning of Section 4063 of ERISA, and neither the Company nor any
entity required to be aggregated with the Company under Section
414(b), (c), (m), or (o) of the Code has incurred any withdrawal
liability with respect to any single plan, multiemployer or multiple
employer plan;
(8) No benefit claims (except those submitted in the ordinary
course of administration of such Plan) are currently pending against
any Plan;
(9) No Plan provides for retiree medical or retiree life
insurance benefits for former employees of the Company, except as
required pursuant to the Consolidated Omnibus Reconciliation Act of
1985, as amended, and there is no liability for taxes with respect to
disqualified benefits under Section 4976 of the Code; and
(10) No Pension Plan has been terminated by the Company, and
there is no liability for taxes with respect to a reversion of
qualified plan assets under Section 4980 of the Code.
(C) There have been no failures to comply with the continuation
coverage
MCI CONFIDENTIAL
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provisions required by Sections 601-608 of ERISA and Section 4980B of the
Code under any Plan which would have a Material Adverse Effect.
(D) All excess contributions, if any (together with any income
allocable thereto), have been distributed (or, if forfeitable, forfeited)
before the close of the first two and one half (2 1/2) months of the
following plan year; and there is no liability for excise tax under Section
4979 of the Code with respect to such excess contributions, if any, for any
Plan.
(E) There is no liability for taxes with respect to: (i) an
accumulated funding deficiency under Section 4971 of the Code and/or (ii) a
nondeductible contribution under Section 4792 of the Code.
24.1 Compliance with Law. The Company is in compliance with all
-------------------
applicable laws (including duties imposed by common law), rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities
(federal, state, local and foreign) and all requirements imposed under building,
zoning, occupational safety and health, pension, environmental control, toxic
waste, fair employment, equal opportunity or similar laws, rules, regulations
and ordinances, in each case the noncompliance with which would be likely to
have a Material Adverse Effect on the Company.
25.1 Litigation; Claims. There are no (a) claims, actions, suits,
------------------
proceedings or investigations pending or (to the knowledge of the Company)
threatened by or against the Company in relation to the Company or its business,
or (b) judgments, decrees, arbitration awards, agreements or orders binding upon
the Company in relation to the Company or its business. No material claims,
including without limitation, product liability claims, have been asserted
against the Company in relation to the Company or its business since the
Company's inception, and, to the knowledge of the Company, there is no
reasonable basis for any material action, proceeding or investigation involving
the Company in relation to the Company or its business.
26.1 Contracts and Commitments. The Company does not have any contract,
-------------------------
agreement, lease, or other commitment, written or oral, absolute or contingent,
other than (i) contracts for the purchase of supplies and services that were
entered into in the ordinary course of business and that do not, as of the date
hereof, involve more than $75,000 each; (ii) sales contracts entered into in the
ordinary course of business; (iii) license agreements entered into in the
ordinary course of business; and (iv) contracts terminable at will by the
Company on no more than sixty (60) days notice without cost or liability to the
Company.
27.1 Intellectual Property Rights.
----------------------------
(A) Schedule 5.15 sets forth an accurate and complete description of
-------------
(i) all patents, trademarks and copyrights of the Company which are
registered or issued or for which registration or issuance is pending with
any governmental authority specifying as to each such item, as applicable
the jurisdiction(s) by or in which such patent, trademark
MCI CONFIDENTIAL
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<PAGE>
or copyright has been issued or registered or in which an application for
such issuance or registration has been filed, including the registration or
application number; (ii) except as set forth in Section 5.14 (iii), all
franchises, licenses, sublicenses, contracts and agreements pursuant to
which any Person other than the Company is authorized to use any Business
Intellectual Property Right owned by the Company; and (iii) the franchises,
licenses, sublicenses, contracts and agreements pursuant to which the
Company is authorized to use any such Business Intellectual Property Right
not owned by the Company, including with respect to (ii) or (iii), the
identity of all parties thereto, a description of the nature and subject
matter thereof, the royalty provided and the term thereof.
(B) Except as set forth on the Schedule of Exceptions, the Company
owns or has the right to use pursuant to franchise, license, sublicense,
contract, agreement, or permission, all of the Business Intellectual
Property Rights necessary for the conduct of its business (as currently
conducted). All applicable fees, royalties and other amounts due and
payable by by the Company to any Person or to the Company by any Person in
respect of such Business Intellectual Property Rights have been paid. The
Company has taken all reasonably necessary and desirable action to maintain
and protect each Business Intellectual Property Right that it owns or has
the right to use.
(C) Except for third party licenses listed on the Schedule of
Exceptions, the Company is the sole and exclusive owner of its Business
Intellectual Property Rights including, but not limited to, those listed or
described on the Schedule of Exceptions, or has the right to the use
thereof for the material covered thereby in connection with the services or
products in respect to which they have been or are now being used.
(D) Except as set forth on the Schedule of Exceptions, the Company
(i) is not the subject of any pending litigation or, to the Company's
knowledge, any claim regarding infringement of or misappropriation or
misuse of any Business Intellectual Property Right of the Company or other
tangible right of any other Person, (ii) has no knowledge of any such
infringement, whether or not claimed by any other Person, which
infringement might have a Material Adverse Effect, (iii) has no knowledge
of any infringement by any other Person of any of the Business Intellectual
Property Rights of the Company, and (iv) has no knowledge of any facts or
circumstances which would reasonably be anticipated to result in any such
litigation or claim or which would reasonably lead the Company to conclude
that the continued operation and conduct of any aspect of its business
would result in any such litigation or claim. To the knowledge of the
Company, except as set forth on the Schedule of Exceptions, there is no
other Person that is operating under or otherwise using any name
confusingly similar with any trade names, trademarks, service names,
service marks or logos included in the Company's Business Intellectual
Property Rights. To the best of the Company's knowledge, no Business
Intellectual Property licensed by the Company from a third party is subject
to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by the Company. Except as set forth on the
Schedule of Exceptions, no Business Intellectual Property Right of the
Company is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use thereof by the Company. Except as
MCI CONFIDENTIAL
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set forth on the Schedule of Exceptions, the Company has not entered into
any written agreement to indemnify any other Person against any charge of
infringement by any Business Intellectual Property Rights.
(E) Except as set forth on the Schedule of Exceptions, to the best of
the Company's knowledge after reasonable inquiry, no material trade secrets
included in the Company's Business Intellectual Property Rights have been
disclosed by the Company to any Person other than employees, agents and
representatives of the Company and its Affiliates or the Buyer. The
Company has taken such reasonable measures as is appropriate to protect all
of its trade secrets.
(F) Except for obligations that arise under the common law of the
appropriate jurisdiction, to the best of the Company's knowledge, neither
the Company, nor any of its employees, has, other than confidentiality and
other agreements assigning inventions made prior to their employment with
the Company, any written agreements or arrangements with former employers
of such employees relating to trade secrets of such employers, the
assignment of inventions of such employers, or such employee's engagement
in activities competitive with such employers. Except for obligations that
arise under the common law of the appropriate jurisdiction, to the best of
the Company's knowledge, the activities of such employees on behalf of the
Company do not violate any agreements or arrangements known to the Company
which any such employees have with former employers.
28.1 Liens. None of the properties or assets, whether real, personal or
-----
mixed, or tangible or intangible, owned or leased by the Company is subject to
any mortgage, lien, encumbrance or other security interest or restrictions on or
conditions to transfer or assignment, except for (a) liens for taxes and
assessments or governmental charges or levies not at the time due; (b) liens in
respect of pledges or deposits under workmen's compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers' and materialmen's
and similar liens, if the obligations secured by such liens are not then
delinquent or are being contested in good faith by appropriate proceedings; and
(c) liens incidental to the conduct of the business.
29.1 Insurance. Schedule 5.17 contains a list of all insurance policies
--------- -------------
and fidelity bonds relating to the assets of the Company, including summary
descriptions and the termination dates thereof. The Company has not had
coverage denied or limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance, during the last two (2) years.
The Company is not in material default with respect to any provision contained
in any insurance policy and has not failed to give any notice or present any
claim thereunder in timely fashion.
30.1 Property.
--------
(A) Schedule 5.18 identifies all of the real property that the
-------------
Company leases (as lessee), has agreed to lease or has an obligation to
lease in connection with the Business. Such leased real property, the loss
of which would have a Material Adverse Effect, is hereinafter referred to
as the "Leased Property," and the improvements and fixtures
MCI CONFIDENTIAL
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thereon are hereinafter referred to as the "Leased Improvements." The
Company does not own any real property.
(B) There are no adverse or other parties in possession of the Leased
Property, the Leased Improvements or any portion or portions thereof, and
the leasehold interest in the Leased Property and the Leased Improvements
is free and clear of any and all leases, licensees, occupants or tenants.
To the knowledge of the Company, there are no pending or threatened
condemnation, eminent domain or similar proceedings, or litigation or other
proceedings affecting the Leased Property, the Leased Improvements or any
portion or portions thereof. To the knowledge of the Company, there are no
pending requests, applications or proceedings to alter or restrict any
zoning or other use restrictions applicable to the Leased Property or the
Leased Improvements that would interfere with the conduct of its business,
which interference would have a Material Adverse Effect. The Leased
Property have access, in accordance with past practice, to and from a
public right of way or road dedicated for public use and no notice has been
received by the Company relating to the termination or impairment of such
access (including applicable parking requirements).
31.1 Environmental Matters.
---------------------
(A) As used in this Agreement "Hazardous Material" shall mean: (i)
any "hazardous substance" as now defined pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
42 U.S.C. (S) 9601(14), or any substance listed or identified by any
characteristic in any regulation adopted pursuant to any statute referred
to or incorporated into such definition, all as in effect on the date
hereof; (ii) any petroleum, including crude oil and any fraction thereof;
(iii) natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas usable for fuel; (iv) any "hazardous chemical" as defined pursuant to
29 C.F.R. Part 1910; and (v) any asbestos, polychlorinated biphenyl, or
isomer of dioxin.
(B) To the Company's knowledge, the Company has not used, generated,
manufactured, stored, disposed of, on, or about any of the real property
leased or used by any the Company any Hazardous Materials in violation of
any Environmental Laws. The Company has not received any notice of, or to
the knowledge of the Company is subject to, any actual or potential
liability, fixed or contingent, under any Environmental Laws.
(C) To the Company's knowledge, neither the Company nor any of its
predecessors in interest has any liability, matured or not matured,
absolute or contingent, assessed or unassessed, imposed or based upon any
provision under any foreign, federal, state or local law, rule, or
regulation or common law, or under any code, order, decree, judgment or
injunction applicable to the Company or its predecessors in interest, nor
has the Company received any notice, or request for information issued,
promulgated, approved or entered thereunder, or under the common law, or
any tort, nuisance or
MCI CONFIDENTIAL
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absolute liability theory, relating to public health or safety, worker
health or safety, or pollution, damage to or protection of the environment
including without limitation, laws relating to emissions, discharges,
releases or threatened releases of Hazardous Material into the environment
(including without limitation, ambient air, surface water, groundwater,
land surface or subsurface), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, generation, disposal,
transport or handling of any Hazardous Material (collectively referred to
as "Environmental Laws").
32.1 Governmental Authorizations. The Company possesses all licenses,
---------------------------
franchises, permits, certificates, orders, approvals, exemptions, registrations
or other authorizations (collectively, the "Permits") from governmental,
regulatory or administrative agencies or authorities required for the ownership
of its properties and assets and operation of its business in the manner
presently conducted (including those required pursuant to laws or regulations
relating to the protection of the environment), each of which is in full force
and effect, the absence of which would have a Material Adverse Effect. No
registrations, filings, applications, notices, transfers, consents, approvals,
orders, qualifications, waivers or other actions of any kind are required by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to enable the Company to continue the
possession and operation of its properties and assets and the business of the
Company as presently conducted in all material respects.
33.1 Employee Relations. The Company has not at any time during the past
------------------
five years had, nor is there now threatened, any labor disputes or any strike,
picket, work stoppage, work slowdowns or other job action due to labor
disagreements. The Company is (a) in material compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, including the terms and provisions of any
collective bargaining agreement or other contract with a labor union
representing any employees of the Company and is not engaged in any unfair labor
practice; (b) there is no unfair labor practice charge or complaint against the
Company, or (to the knowledge of the Company) threatened before the National
Labor Relations Board or any foreign authority; (c) no question concerning
representation has been raised to the Company or is (to the knowledge of the
Company) threatened respecting the employees of the Company; (d) no grievance
that might have a Material Adverse Effect on the Company, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and, to the Company's knowledge, no claims therefor exist; and (e) no
collective bargaining agreement that is binding on the Company restricts it from
relocating, closing or contracting any of its operations.
34.1 Employees. To the knowledge of the Company, no employee of the
---------
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or to the Company's knowledge any
other party because of the nature of the business conducted or to be conducted
by the Company. There is no pending nor, to the Company's knowledge, threatened
action, suit, proceeding or claim, or to its knowledge any basis therefor or
threat thereof with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence.
MCI CONFIDENTIAL
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The Company and each employee of the Company and any subsidiary of the Company
employed in any technical capacity or with access to confidential information
of the Company has entered into a Confidential Information and Invention
Assignment Agreement substantially in the form of Exhibit D hereto.
---------
35.1 Broker's or Finder's Fees. No agent, broker, investment banker,
-------------------------
Person or firm acting on behalf of the Company or under the authority of the
Company is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from any of the parties hereto
in connection with any of the transactions contemplated hereby.
36.1 Disclosure. No representation or warranty by the Company to the
----------
Buyer contained in this Agreement, and no statement contained in the Schedules
hereto or any certificate furnished to the Buyer pursuant to the provisions
hereof, taken as a whole, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein not misleading.
37.1 Certain Transactions. None of the directors or officers of the
--------------------
Company is currently a party to any material transaction with the Company (other
than for services as employees, officers and directors), including without
limitation, any material contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, any such
Person, or to or from any corporation, partnership, trust or other entity in
which any such Person owns in excess of five percent (5%) of the outstanding
equity interest.
38.1 Offering. Subject to the accuracy of the Buyer's representations in
--------
Article VI hereof, the offer, sale and issuance of the Stock and Warrant to be
issued in accordance with the terms of this Agreement, and the issuance of the
common stock to be issued upon conversion of the Stock and shares issuable
pursuant to the Warrant, constitute transactions exempt from the registration
requirements of the Securities Act.
ARTICLE 39 -- REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company, and the Company in
agreeing to consummate the transactions contemplated by this Agreement have
relied upon such representations and warranties, that:
40.1 Corporate Organization. The Buyer is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority (corporate and other) to own, lease
and operate its properties and to carry on its business as now being conducted.
MCI CONFIDENTIAL
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41.1 Valid and Binding Agreements. The Buyer has all requisite corporate
----------------------------
power and authority to enter into this Agreement. All necessary action on the
part of the Buyer has been taken to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transaction contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Buyer, and will constitute the valid and binding
agreement of the Buyer, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights generally and to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
42.1 No Violation. Neither the execution and delivery of this Agreement
------------
nor the consummation of the transactions contemplated hereby or thereby nor
compliance by the Buyer with any of the provisions hereof or thereof will (i)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Buyer or any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Buyer, or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or other encumbrance upon the stock or any of
the properties or assets of the Buyer under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument of the Buyer.
43.1 Consents and Approvals. No permit, consent, approval or
----------------------
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or third party is required to be made or obtained by the
Buyer in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby or
thereby.
44.1 Broker's or Finder's Fees. No agent, broker, investment banker,
-------------------------
Person or firm acting on behalf of the Buyer, or under the authority of the
Buyer, is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from the Buyer in connection
with any of the transactions contemplated hereby.
45.1 Investment Representations.
--------------------------
(A) By reason of its business and financial experience, Buyer has the
capacity to protect its own interests in connection with the purchase of
the Stock and Warrant hereunder and has the ability to bear the economic
risk of this investment.
(B) Buyer is acquiring the Stock and the Warrant and the common stock
underlying the Stock and Warrant for investment for its own account, not as
a nominee or agent, and not with the view to, or for resale in connection
with, any distribution
MCI CONFIDENTIAL
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<PAGE>
thereof. Buyer understands that the Stock and Warrant to be purchased (and
the common stock issuable upon conversion of the Stock and Warrant) have
not been, and will not be, registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities
Act, the availability of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of Buyer's
representations as expressed herein.
(C) Buyer acknowledges that the Stock and Warrant (and the common
stock issuable upon conversion of the Stock and Warrant) must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. Buyer is aware of
the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less
than two years after a party has purchased and paid for the security to be
sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations.
(D) Buyer understands that no public market now exists for any of the
securities issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Company's
securities.
(E) Buyer has had an opportunity to discuss business, management and
financial affairs of the Company with its management.
ARTICLE 46 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
All obligations of the Buyer that are to be discharged under this Agreement
at the Closing are subject to the Company's fulfillment, at the Closing or
effective as of the Closing Date, of each of the following conditions (unless
expressly waived in writing by the Buyer at any time at or prior to the Closing)
and the Company shall use its reasonable efforts to cause each of such
conditions to be satisfied:
47.1 Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of the Company set forth in Article V of this
Agreement shall be true and correct in all respects as though such
representations and warranties had been made by the Company on and as of the
Closing Date and the Buyer shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of the
Company to such effect.
48.1 Covenants, Agreements and Conditions. The Company shall have
------------------------------------
performed and complied in all respects with all covenants, agreements and
conditions contained in this Agreement required to be performed by the Company
on or prior to the Closing Date, and the
MCI CONFIDENTIAL
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Buyer shall have received at the Closing a certificate, dated the Closing Date,
signed by the President or a Vice President of the Company to such effect.
49.1 Proceedings. No action or proceeding shall be pending or threatened
-----------
to restrain or prevent the consummation of the transactions contemplated hereby.
50.1 Corporate Proceedings. All corporate and other proceedings to be
---------------------
taken and all consents to be obtained in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Buyer and its counsel,
both of whom shall have received all such originals or certified or other copies
of such documents as either may reasonably request.
51.1 Governmental Approvals. There shall have been received all necessary
----------------------
governmental consents or authorizations required in connection with the
transactions contemplated hereby including all necessary Blue Sky law permits
and qualification.
52.1 Amendment to Articles of Incorporation. The Company shall have filed
--------------------------------------
its Amended and Restated Articles of Incorporation in the form attached hereto
as Exhibit E.
---------
53.1 Insurance. The Company shall have maintained in full force and
---------
effect the insurance coverage described on Schedule 5.17 hereto or policies
-------------
providing substantially equivalent coverage.
54.1 Deliveries. The Company shall have delivered to the Buyer the
----------
following items:
(A) certificates representing the shares of Stock, duly endorsed or
accompanied by stock powers duly executed in blank (with signatures
guaranteed by any national bank or trust company) and otherwise in form
acceptable for transfer on the books of the Company, with all requisite
stock transfer tax stamps attached;
(B) the executed Warrant;
(C) the executed Commercial Documents and Registration Rights
Agreement;
(D) a certificate dated as of or about the Closing Date, as to the
good standing of the Company from the Secretary of State of California;
(E) a certificate of the Secretary or Assistant Secretary of the
Company, certifying as to the Articles of Incorporation, By-laws,
resolutions of the Board of Directors, and incumbency and signatures of
officers of the Company; and
(F) all other previously undelivered items required to be delivered
by the Company to the Buyer at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith unless waived in
writing by the Buyer.
MCI CONFIDENTIAL
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55.1 Opinion of Counsel. The Buyer shall have received a written opinion
------------------
dated as of the Closing Date from Brobeck Phleger & Harrison LLP, counsel to the
Company, in the form attached hereto as Exhibit F.
---------
ARTICLE 56 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
All obligations of the Company that are to be discharged under this
Agreement at the Closing are subject to Buyer's fulfillment at the Closing or
effective as of the Closing Date of each of the following conditions (unless
expressly waived in writing by the Company at any time at or prior to the
Closing) and the Buyer shall use its reasonable efforts to cause each of such
conditions to be satisfied:
57.1 Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of the Buyer set forth in Article VI of this
Agreement shall be true and correct in all respects as though such
representations and warranties had been made on and as of the Closing Date, and
the Company shall have received at the Closing a certificate, dated the Closing
Date, signed by the President or a Vice President of the Buyer to such effect.
58.1 Covenants, Agreements and Conditions. The Buyer shall have performed
------------------------------------
and complied in all respects with all covenants, agreements and conditions
contained in this Agreement required to be performed by it on or prior to the
Closing Date, and the Company shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of the Buyer
to such effect.
59.1 Proceedings. No action or proceeding shall be pending or threatened
-----------
to restrain or prevent the consummation of the transactions contemplated hereby.
60.1 Corporate Proceedings. All corporate and other proceedings to be
---------------------
taken and all consents to be obtained in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and its counsel,
Brobeck Phleger & Harrison LLP, each of whom shall have received all such
originals or certified or other copies of such documents as either may
reasonably request.
61.1 Governmental Approvals. There shall have been received all necessary
----------------------
governmental consents or authorizations required in connection with the
transactions contemplated hereby including all necessary Blue Sky law permits
and qualities.
62.1 Deliveries. The Buyer shall have delivered to the Company the
----------
following items:
(A) the payment as required by Section 2.2;
(B) the Commercial Documents executed by it; and
MCI CONFIDENTIAL
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(C) all other previously undelivered items required to be delivered
by the Buyer at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith unless waived in writing by the
Company and the Stockholders.
ARTICLE 63 -- AFFIRMATIVE COVENANTS AND AGREEMENTS OF THE COMPANY
64.1 Financial Reporting. The Company hereby covenants and agrees with
-------------------
the Buyer that from and after the Closing, so long as any of the Series C
Preferred Stock is outstanding, the Company will deliver to the Buyer (i) within
forty-five (45) days after the end of each quarter, quarterly unaudited
financial statements; (ii) within one hundred twenty (120) days after the end of
each fiscal year, audited financial statements for such period; and (iii)
within ninety (90) days after the end of the fiscal year, an annual financial
plan for the Company. The Company also agrees to provide Buyer the opportunity
for its representative who is approved by the Company to attend Board of
Directors meetings including the receipt of advance notice thereof; provided,
however, that the Company shall not be obligated to provide any information that
it considers in good faith to be a trade secret or to contain confidential or
classified information and provided further that the Company may at the
discretion of the Board of Directors exclude any non-board member from its
executive sessions of its Board of Directors.
65.1 Reservation of Conversion Shares. The Company shall at all times
--------------------------------
reserve and keep available out of its authorized but unissued shares of common
stock, for the purposes of effecting the conversion of the Stock and the
issuance of shares issuable pursuant to the Warrant and otherwise complying with
the terms of this Agreement, such number of its duly authorized shares of common
stock as shall be sufficient to effect the conversion of the Stock and the
issuance of shares issuable pursuant to the Warrant, as from time to time
outstanding. If at any time the number of authorized but unissued shares of
common stock shall not be sufficient to effect the conversion of the Stock and
the issuance of shares issuable pursuant to the Warrant, the Company will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of common stock as shall be sufficient for such
purposes.
66.1 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each person now or hereafter employed in any technical capacity by
it or any subsidiary with access to confidential information will enter into a
Confidential Information and Invention Assignment Agreement in substantially the
form of Exhibit E hereto, and the Company shall use its best efforts to cause
---------
any consultant retained by it that has access to confidential information to
enter into a form of Consulting Agreement with substantially similar
confidentiality and non-solicitation provisions.
67.1 Repurchase. Upon and only at the written request of Buyer, so long
----------
as any of the Series C Preferred Stock is outstanding, in the event of (a) a
material breach of any of the Company's representations, warranties or covenants
contained herein, or (b) a termination of any of the Commercial Documents as a
result of the Company's material breach of any of its
MCI CONFIDENTIAL
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representations, warranties or covenants contained in such documents, the
Company shall repurchase the Stock for the liquidation value thereof as
specified in the Company's articles of incorporation.
ARTICLE 68 -- OTHER MATTERS
69.1 Indemnification.
---------------
(A) Subject to the limitations hereinafter set forth in this Section
10.1, the Company shall protect, defend, hold harmless and indemnify the
Buyer, its officers, directors, employees and agents, and their respective
successors and assigns from, against and in respect of any and all losses,
liabilities, deficiencies, penalties, fines, costs, damages and expenses
whatsoever (including without limitation, reasonable professional fees and
costs of investigation, litigation, settlement, and judgment and interest)
(collectively, "Losses") that is suffered or incurred by any of them
arising from or by reason of any of the following:
(1) Any breach of any representation, warranty, covenant or
agreement made by the Company in this Agreement or contained in any
certificate executed by the Company and delivered to the Buyer in
connection with this Agreement;
(2) Any claims of any broker, investment banker, Person or firm
acting on behalf of the Company for a broker's or finder's fee or any
other commission or similar fee arising in connection with the
transactions contemplated hereby;
(3) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without
limitation, interest, penalties, reasonable legal fees and accounting
fees) incident to the foregoing and the enforcement of the provisions
of this Section 10.1.
(B) Subject to the limitations hereinafter set forth in this Section
10.1, the Buyer shall protect, defend, hold harmless and indemnify the
Company, its officers, directors, employees and agents, and its respective
successors and assigns, from, against and in respect of any and all Losses
that is suffered or incurred by any of them arising from or by reason of
any of the following:
(1) Any breach of any representation, warranty, covenant or
agreement made by the Buyer in this Agreement or contained in any
certificate executed by the Buyer and delivered to the Company in
connection with this Agreement;
(2) Any claims of any broker, investment banker, Person or firm
acting on behalf of the Buyer for a broker's or finder's fee or any
other commission or similar fee arising in connection with the
transactions contemplated hereby; and
(3) Any and all actions, suits, proceedings, claims, demands,
assessments,
MCI CONFIDENTIAL
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judgments, costs and expenses (including without limitation, interest,
penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 10.1.
(C) Each of the Buyer and the Company shall be liable to the other
for any Losses arising under this Agreement or caused by any breach of a
representation or warranty made by such party as to which the Buyer or
Company is otherwise entitled to indemnity under this Agreement only up to
the amount of the Purchase Price.
(D) For purposes of this Section 10.1, any assertion of fact and/or
law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date
that such assertion is made, immediately invoke that party's obligation to
protect, defend, hold harmless and indemnify the other party to this
Agreement pursuant to this Section 10.1.
70.1 Indemnification Procedures. All claims for indemnification under
--------------------------
this Agreement shall be asserted and resolved as follows:
(A) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party
claim ("Third Party Claim") asserted against the Indemnified Party which
could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party a written notice ("Claim Notice")
describing in reasonable detail the nature of the Third Party Claim, a copy
of all papers served with respect to such claim (if any), an estimate of
the amount of damages attributable to the Third Party Claim, if reasonably
possible, and the basis of the Indemnified Party's request for
indemnification under this Agreement.
(B) Within thirty (30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified
Party (i) whether the Indemnifying Party disputes its potential liability
to the Indemnified Party under this Article X with respect to such Third
Party Claim and (ii) whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
(C) If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Article X and that
the Indemnifying Party elects to assume the defense of the Third Party
Claim, then the Indemnifying Party shall have the right to defend, at its
sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 10.2. The
Indemnifying Party shall have full control of such defense and proceedings
including any compromise or settlement thereof; provided that any
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non-monetary aspect of any settlement shall require the consent of the
Buyer, which consent shall not be unreasonably withheld or delayed. The
Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party (but only if the Indemnified Party consents, which
consent shall not be unreasonably withheld), to file, during the Election
Period, any motion, answer or other pleadings which the Indemnified Party
shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party. If requested by the Indemnifying Party, the
Indemnified Party shall, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim which the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 10.2 and, except as permitted above, shall bear
its own costs and expenses with respect to such participation.
(D) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to this Section 10.2, or if the Indemnifying
Party elects to defend the Indemnified Party pursuant to this Section 10.2
but fails to diligently prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings. The Indemnified Party shall have full control of such defense
and proceedings; provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld or delayed, any compromise or settlement of such
Third Party Claim. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 10.2, and the Indemnifying Party shall bear its
own costs and expenses with respect to such participation.
(E) In the event an Indemnified Party should have a claim against an
Indemnifying Party hereunder which does not involve a Third Party Claim,
the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature
of the claim, an estimate of the amount of damages attributable to such
claim and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the
Indemnified Party within sixty (60) days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes such claim, the claim specified
by the Indemnified Party in the Indemnity Notice shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party
has timely disputed such claim, as provided above, such dispute shall be
resolved by litigation in an appropriate court of competent jurisdiction.
(F) Payments of all amounts owing by the Indemnifying Party pursuant
to Sections 10.2(C) and (D) shall be made within thirty (30) days after the
latest of (i) the
MCI CONFIDENTIAL
25
<PAGE>
settlement of the Third Party Claim, (ii) the expiration of the period for
appeal of a final adjudication of such Third Party Claim or (iii) the
expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by the Indemnifying Party
pursuant to Section 10.2(E) shall be made within thirty (30) days after the
later of (i) the expiration of the sixty-day Indemnity Notice period or
(ii) the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this
Agreement.
(G) The failure to provide notice as provided in this Section 10.2
shall not excuse any party from its continuing obligations hereunder;
however, any claim shall be reduced by the damages resulting from such
party's delay or failure to provide notice as provided in this Section
10.2.
71.1 Confidentiality. Notwithstanding the termination of this Agreement,
---------------
each party hereto and its respective accountants, attorneys, employees and other
agents, will keep confidential all information, oral and written, obtained from
any other party hereto or its Affiliates and refrain from using in any manner
all information set forth above in accordance with that certain Nondisclosure
Agreement between the Company and the Buyer dated October 29, 1996.
72.1 Further Assurances. Each party hereto shall cooperate with the
------------------
others, and execute and deliver, or cause to be executed and delivered, all such
other instruments, including instruments of conveyance, assignment and transfer,
and take all such other actions as may be reasonably requested by the other
parties hereto from time to time, consistent with the terms of this Agreement,
to effectuate the purposes and provisions of this Agreement.
ARTICLE 73 -- MISCELLANEOUS
74.1 Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations and warranties of the Buyer and the Company contained in
Articles V and VI herein and in any certificate executed and delivered by either
the Buyer or the Company in connection with this Agreement shall survive the
Closing Date and shall terminate and expire one (1) year from the Closing Date.
All agreements of the parties contemplating performance after the Closing Date
shall survive the Closing Date for a period equal to ninety (90) days after the
expiration of the applicable statute of limitations for any claim relating
thereto.
75.1 Service of Process. Service of process on the Company or the Buyer
------------------
for any claim, legal action or proceeding under this Agreement may be made in
the manner set forth in Section 11.3.
76.1 Notices. All notices, requests, consents and other communications
-------
hereunder shall be deemed given if delivered personally (including by courier),
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses or to other
such addresses as may be furnished in writing by one party to the others:
MCI CONFIDENTIAL
26
<PAGE>
(A) if to the Company:
Genesys Telecommunications Laboratories, Inc.
1155 Market Street, 11th Floor
San Francisco, California 94103
Attention: Gregory Shenkman and Richard C. DeGolia
with a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Edward M. Leonard, Esq.
(B) If to the Buyer:
MCI Telecommunications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: President, networkMCI Services
with a copy to:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: General Counsel
77.1 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of California, without regard to such
jurisdiction's conflicts of law principles. The parties agree that venue or any
suit, action, proceeding or litigation arising out of or in relation to this
Agreement shall be in any federal or state court in the State of California
having subject matter jurisdiction.
78.1 Modification; Waiver. This Agreement shall not be altered or
--------------------
otherwise amended except pursuant to an instrument in writing signed by the
Buyer and the Company. Any party may waive any misrepresentation by any other
party, or any breach of warranty by, or failure to perform any covenant,
obligation or agreement of, any other party, provided that mere inaction or
--------
failure to exercise any right, remedy or option under this Agreement, or
delaying in exercising the same, will not operate as nor shall be construed as a
waiver, and no waiver will be effective
MCI CONFIDENTIAL
27
<PAGE>
unless set forth in writing and only to the extent specifically stated therein.
79.1 Entire Agreement. This Agreement, the Schedules and Exhibits hereto,
----------------
and any other agreements or certificates delivered pursuant hereto constitute
the entire agreement of the parties hereto with respect to the matters
contemplated hereby and supersede all previous written or oral negotiations,
commitments, representations and agreements (provided however that the
Nondisclosure Agreement between the parties dated October 29, 1996 shall remain
in full force and effect).
80.1 Assignment; Successors and Assigns. This Agreement may not be
----------------------------------
assigned by either Party without the prior written consent of the other Party,
except that Buyer may assign this Agreement to its subsidiaries or affiliates.
All covenants, representations, warranties and agreements of the parties
contained herein shall be binding upon and inure to the benefit of their
respective successors and permitted assigns.
81.1 Public Announcements. No public announcement of the transactions
--------------------
contemplated hereby or of the terms hereof shall be made by the parties to this
Agreement without the written consent, such consent not to be unreasonably
withheld or delayed, of the Buyer and the Company, except to the extent required
by law. The parties expressly agree that a public announcement shall be deemed
to include a description of the transactions contemplated hereby contained in
any registration statement filed by the Company with the Securities and Exchange
Commission.
82.1 Severability. The provisions of this Agreement are severable, and in
------------
the event that any one or more provisions are deemed illegal or unenforceable,
the remaining provisions shall remain in full force and effect, provided that no
such severability shall be effective if it materially changes the economic
benefits of this Agreement to either party.
83.1 No Third Party Beneficiary. This Agreement is intended and agreed to
--------------------------
be solely for the benefit of the parties hereto and their stockholders, and no
other party shall accrue any benefit, claim or right of any kind whatsoever
pursuant to, under, by or through this Agreement.
84.1 Expenses. Except as otherwise expressly provided herein, each party
--------
to this Agreement will pay its own expenses in connection with the negotiation
of this Agreement, the performance of its obligations hereunder, and the
consummation of the transactions contemplated herein.
85.1 Execution in Counterpart. This Agreement may be executed in one or
------------------------
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
MCI CONFIDENTIAL
28
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Securities
Purchase Agreement as of the date first written above.
MCI TELECOMMUNICATIONS CORPORATION
By: /s/ John W. Gerdelman
---------------------------------
Name: John W. Gerdelman
Title: Executive Vice President
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
By: /s/ Richard C. DeGolia
----------------------------------
Name: Richard C. DeGolia
Title: Vice President
CONFIDENTIAL
<PAGE>
EXHIBIT 4.7
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THIS WARRANT AND
SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT THEREFOR OR AN APPLICABLE
EXEMPTION FROM REGISTRATION.
VOID AFTER FEBRUARY 26, 2004
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
Warrant for the Purchase of 449,664 Shares
of Series C Preferred Stock
FOR VALUE RECEIVED and subject to the terms and conditions contained
herein, Genesys Telecommunications Laboratories, Inc. hereby certifies that MCI
Telecommunications Corporation or its assigns, are entitled to purchase from the
Company (as defined below) at any time or from time to time during the Exercise
Period (as defined below) any or all of the Warrant Shares (as defined below)
for the Exercise Price (as defined below). The Exercise Price shall not be
subject to adjustment, except as set forth in paragraph 3 hereof.
1. Definitions.
-----------
As used in this Warrant, the following terms have the respective meanings
set forth below:
"AFFILIATE" of a Person shall mean any Person who, directly or
indirectly, controls, is controlled by or is under common control with such
other Person.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in New York
City.
"CLOSING DATE" shall mean the date upon which this Warrant is
originally issued.
"COMMON STOCK" is a collective reference to the common stock and any
capital stock into which such common stock is or may thereafter be changed
and any class of capital stock of the Company (regardless of how
denominated) which is not preferred as to dividends or assets over any
other class and which is not subject to redemption, and shall also include
shares of common stock of any successor or acquiring corporation referred
to in paragraph 3(d) received by or distributed to the holders of such
capital stock in the circumstances contemplated by paragraph 3(d).
* Confidential Treatment Requested. Confidential portion has been filed
separately with the Securities and Exchange Commission.
<PAGE>
"COMPANY" shall mean Genesys Telecommunications Laboratories, Inc., a
California corporation, or any successor corporation by merger or
consolidation or otherwise.
"CURRENT MARKET PRICE" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the daily market prices
for the ten (10) previous consecutive Business Days (or the actual number
of days traded if the stock has been publicly traded for less than ten (10)
Business Days). The daily market price for each such Business Day shall be
(i) the last sale price on such day on the principal stock exchange on
which such Common Stock is then listed or admitted to trading, (ii) if no
sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on
any such exchange or, if there is no such bid and asked prices on such day,
on the next preceding date when such bid and asked prices occurred, (iii)
if the Common Stock is not then listed or admitted to trading on any stock
exchange, the average of the last reported closing bid and asked prices on
such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automatic Quotation System or any similar
firm then engaged in such business, or (iv) if there is no such firm, as
furnished by any member of the National Association of Securities Dealers
selected by the Company.
"EARNED DATE" shall mean either (i) with respect to the number of
Warrant Shares set forth below, the date on which the Company receives from
MCI, its subsidiaries or their respective successors or assigns a payment
such that the sum of that payment and all previous payments from and after
the Closing Date to the Company by all such parties for products and/or
services purchased for their own use or for sale to their customers or
affiliates shall equal the following:
<TABLE>
<CAPTION>
Number of Warrant Shares Payment
------------------------ -------
Threshold
- ---------
<S> <C>
[*] [*]
[*] [*]
[*] [*]
</TABLE>
or (ii) with respect to all Warrant Shares, the date of a consolidation,
merger, sale or conveyance of the Company, as set forth in paragraph 3(d)
hereof, which occurs on or prior to the fourth anniversary of the Closing
Date.
"EXERCISE DATE" shall mean the date on which the Holder exercises this
Warrant, in whole or in part.
"EXERCISE PERIOD" shall mean the period commencing on the Earned Date
and ending at 5:00 p.m., San Francisco time, on the Termination Date.
"EXERCISE PRICE" shall mean a price for each Warrant Share equal to
(i) one hundred twenty percent (120%) of the Purchase Price Per Share of
Series C Preferred Stock, if the Company has not completed an initial
public offering of its Common Stock on or prior to December 31, 1997 or
(ii) if the Company has completed an initial public offering of its Common
Stock, one hundred ten percent (110%) of the Current Market
2
* Confidential Treatment Requested
<PAGE>
Price on December 31, 1997; subject to adjustment thereafter pursuant only
to the provisions of paragraph 3 of this Warrant.
"FULLY DILUTED OUTSTANDING" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable pursuant to options, warrants or other
rights to purchase or acquire, or securities convertible into, shares of
Common Stock, outstanding on such date (including any Warrant Shares
issuable pursuant to this Warrant).
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"HOLDER" shall mean MCI or any transferee of this Warrant.
"MCI" shall mean MCI Telecommunications Corporation, a Delaware
corporation, and any successor corporation by merger or consolidation or
otherwise.
"OUTSTANDING" shall mean, when used with reference to Common Stock, at
any time as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any majority-owned subsidiary of the Company,
and shall include all shares issuable in respect of outstanding scrip or
any certificates representing fractional interests in shares of Common
Stock.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
"PURCHASE PRICE PER SHARE" shall mean $11.12.
"SERIES C PREFERRED STOCK" shall mean the Series C Preferred Stock of
the Company and any Common Stock into which the Series C Preferred Stock is
converted.
"TERMINATION DATE" shall mean the later of (i) four (4) years
following the Closing Date or (ii) three (3) years following the Earned
Date.
"WARRANT SHARES" shall mean any of the shares of Series C Preferred
Stock (or any Common Stock into which the Series C Preferred Stock is
converted) issuable upon exercise of this Warrant. The number of Warrant
Shares shall initially be 449,664 shares of Series C Preferred Stock,
subject to adjustment thereafter pursuant only to the provisions of
paragraph 3 of this Warrant; provided that the total number of shares of
Series C Preferred Stock issuable pursuant hereto shall not in any event be
less than two percent (2.0%) of the Fully Diluted Outstanding capital stock
as of the date hereof (after giving effect to the issuance of this Warrant
and related transactions).
3
<PAGE>
2. Exercise of Warrant. (a) This Warrant may be exercised, in whole at any
-------------------
time or in part from time to time, during the Exercise Period, by the Holder by
the surrender of this Warrant (with the subscription duly executed) at the
address set forth in paragraph 11(a) hereof, together with proper payment of the
Exercise Price. Payment for the Warrant Shares to be purchased shall be made by
certified, official bank check or other check acceptable to the Company payable
to the order of the Company.
(b) In lieu of exercising the Warrant pursuant to paragraph 2(a), the
Holder may elect to receive Warrant Shares equal to the value of the Warrant (or
the portion thereof being canceled) by surrender of the Warrant at the principal
office of the Company together with notice of such election, in which event the
Company shall issue to the Holder a number of shares of the Company's Series C
Preferred Stock computed using the following formula:
<TABLE>
<CAPTION>
X = Y (A-B)
-------
A
<S> <C> <C>
Where X = the number of shares to be issued to the Holder.
Y = the number of shares purchasable under this Warrant.
A = the fair market value of one share of the Company's Series
C Preferred Stock.
B = the Exercise Price (as adjusted to the date of such
calculation).
</TABLE>
(c) If this Warrant is exercised in part, this Warrant must be exercised
for a whole number of shares of the Series C Preferred Stock, and the Holder is
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised. Upon such surrender of
this Warrant, the Company will promptly issue a certificate or certificates in
the name of the Holder for the number of shares of the Series C Preferred Stock
to which the Holder shall be entitled. The Company shall not be required to
issue a fractional share of stock upon any exercise of this Warrant.
3. Certain Adjustments. The Exercise Price and the kind and number of shares
-------------------
of Series C Preferred Stock issuable upon exercise of this Warrant shall be
subject to adjustment as set forth below in this paragraph 3. The Company shall
give the registered Holder notice of any event described below which requires an
adjustment pursuant to this paragraph 3 in accordance with the provisions of
paragraph 4.
(a) Adjustment of Exercise Price. From and after the Closing Date (and
----------------------------
subject to such further adjustments, from time to time, pursuant to the
other provisions of this paragraph 3) the Exercise Price shall be subject
to adjustment as follows:
(b) Stock Dividends, Subdivisions and Combinations. If at any time the
----------------------------------------------
Company shall:
4
<PAGE>
(i) fix a record date for the purpose of determining the holders of
its Series C Preferred Stock entitled to receive a dividend payable in, or other
distribution of, Series C Preferred Stock;
(ii) subdivide its outstanding shares of Series C Preferred Stock
into a larger number of shares of Series C Preferred Stock;
(iii) combine its outstanding shares of Series C Preferred Stock into
a smaller number of shares of Series C Preferred Stock; or
(iv) issue any shares of its capital stock or other securities by
reclassification of the Series C Preferred Stock (other than pursuant to
paragraph 3(d) below);
then the Exercise Price shall be proportionately decreased in the case of
such a dividend or distribution of shares of Series C Preferred Stock or
such a subdivision, or proportionately increased in the case of such a
combination, or the kind of capital stock or other securities of the
Company which may be purchased shall be adjusted in the case of such a
reclassification of the Series C Preferred Stock, each on the record date
for such dividend or distribution or effective date of such subdivision,
combination or reclassification, as the case may be, such that the Holder
shall be entitled to receive, upon exercise of this Warrant, the aggregate
number and kind of shares of Series C Preferred Stock which, if the Warrant
had been fully exercised immediately prior to such date, it would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification.
(c) Certain Other Dividends and Distributions. If at any time the Company
-----------------------------------------
shall fix a record date for the purpose of determining the holders of its
Series C Preferred Stock entitled to receive any dividend or other
distribution (including any such distribution made in connection with a
consolidation or merger, but excluding any distribution referred to in
subparagraph (b) above) of:
(i) any evidences of indebtedness, any shares of its capital stock
(excluding Series C Preferred Stock) or any other securities or
property of any nature whatsoever; or
(ii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its capital stock or any
other of its securities or its property of any nature whatsoever
(other than normal cash dividends or cash distributions permitted
under applicable law);
then the Exercise Price shall be adjusted to equal the Exercise Price in
effect prior to such distribution or dividend multiplied by a fraction, (1)
the numerator of which shall be (A) the fair market value per share of the
Series C Preferred Stock on such record date minus (B) the amount allocable
to one share of Series C Preferred Stock of the fair market value (as
determined in good faith by the Board of Directors of the Company and,
unless waived by the Holder, supported by an opinion from an investment
banking firm of nationally recognized standing approved by the Holder,
which approval shall not be unreasonably withheld) of any and all such
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so
5
<PAGE>
distributable, and (2) the denominator of which shall be such fair market
value per share of Series C Preferred Stock. Such adjustments shall be
made whenever such a record date is fixed. A reclassification of the
Series C Preferred Stock (other than a change in par value, or from par
value to no par value or from no par value to par value) into shares of
Common Stock or shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Series C Preferred Stock
of such shares of such other class of stock within the meaning of this
subparagraph (c) and, if the outstanding shares of Series C Preferred Stock
shall be changed into a larger or smaller number of shares of Series C
Preferred Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding
shares of Series C Preferred Stock within the meaning of subparagraph (b).
(d) Consolidation or Merger. In the case of any consolidation of the
-----------------------
Company with or merger of the Company into another corporation or in case
of any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, as the case may be, shall execute with
the Holder an agreement that the Holder shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to such
action to purchase upon exercise of the Warrant the kind and amount of
shares and other securities and property that it would have owned or have
been entitled to receive after the happening of such consolidation, merger,
sale or conveyance had such Warrant been exercised immediately prior to
such action. Such agreement shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for
in this paragraph 3. The provisions of this subparagraph (d) shall
similarly apply to successive consolidations, mergers, sales or
conveyances.
(e) Adjustment of Number of Warrant Shares. Upon each adjustment as the
--------------------------------------
case may be, pursuant to subparagraph (a), (b), (c) or (d) of this
paragraph 3, this Warrant shall be deemed to evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Series C
Preferred Stock obtained by multiplying the number of shares of Series C
Preferred Stock covered by the Warrant immediately prior to such adjustment
by the Exercise Price in effect prior to such adjustment and dividing the
product so obtained by the Exercise Price in effect after such adjustment.
(g) When Adjustments to be Made. No adjustment in the Exercise Price shall
---------------------------
be required by this paragraph 3 if such adjustment either by itself or with
other adjustments not previously made would require an increase or decrease
of less than 1% in such price. Any adjustment representing a change of
less than such minimum amount which is postponed shall be carried forward
and made as soon as such adjustment, together with other adjustments
required by this paragraph 3 and not previously made, would result in a
minimum adjustment. Notwithstanding the foregoing, any adjustment carried
forward shall be made no later than ten (10) Business Days prior to the
Termination Date. All calculations under this subparagraph (g) shall be
made to the nearest cent. For the purpose of any adjustment, any specified
event shall be deemed to have occurred at the close of business on the date
of its occurrence.
(h) Fractional Interests. In computing adjustments under this paragraph 3,
--------------------
fractional interests in Series C Preferred Stock shall be taken into
account to the nearest whole share.
6
<PAGE>
(i) When Adjustments Not Required. If the Company shall fix a record date
-----------------------------
for the purpose of determining the holders of its Series C Preferred Stock
entitled to receive a dividend or distribution and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its plan
or deliver such dividend or distribution, then thereafter no adjustment
shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and
annulled.
(j) Certain Limitations. Subject to the provisions of paragraph 6, there
-------------------
shall be no adjustment of the Exercise Price hereunder to the extent that
such adjustment would cause the Exercise Price to be less than the par
value per share of the Series C Preferred Stock, which par value shall not
at any time while this Warrant is outstanding exceed $.01.
4. Notices of Adjustments. Whenever the Exercise Price or the number of
----------------------
Warrant Shares shall be adjusted pursuant to paragraph 3, the Company shall
forthwith deliver to the Holder a certificate prepared by the Company, setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights), specifying the number of
Warrant Shares then issuable hereunder, the Exercise Price after giving effect
to such adjustment and (if such adjustment was made pursuant to paragraph 3(c))
describing the number and kind of any other shares of stock for which the
Warrant is exercisable. In the event that the Holder shall disagree with any
such adjustment or with the terms of any new agreement to be entered into
pursuant to paragraph 3(d), it shall notify the Company thereof and any
disagreement shall be resolved by an investment banking firm of nationally
recognized standing mutually agreeable to the Company and the Holder, or if the
Company and the Holder are unable to agree upon an investment banking firm, an
investment banking firm selected by an investment banking firm chosen by the
Company and an investment banking firm chosen by the Holder.
5. Reservation of Warrant Shares. The Company agrees that, from and after the
-----------------------------
Earned Date and through to the expiration of this Warrant, the Company will at
all times have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares of the Series
C Preferred Stock and other securities and properties as from time to time shall
be receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer and free and clear of all preemptive rights.
6. Fully Paid Stock; Taxes. The shares of Series C Preferred Stock
-----------------------
represented by each and every certificate for Warrant Shares delivered on the
exercise of this Warrant shall, at the time of such delivery, be validly issued
and outstanding, fully paid and nonassessable, and not subject to preemptive
rights, and the Company will take all such actions as may be necessary to assure
that the par value or stated value, if any, per share of the Series C Preferred
Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all federal and state stamp, original issue or similar taxes which may be
payable in respect of the issuance of any Warrant Shares or certificate
therefor.
7. Transferability. This Warrant is fully transferable and assignable by the
---------------
Holder, provided, however, that any such transfer or assignment may only be
effected in accordance with
7
<PAGE>
applicable securities laws or pursuant to exemptions therefrom. The Company may
treat the registered holder of this Warrant as it appears on the Company's books
at any time as the Holder for all purposes.
8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
---------------------
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity or bond reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
9. Holder Not Shareholder. This Warrant does not confer upon the Holder any
----------------------
right to vote or to consent to or receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a shareholder, prior to the exercise hereof.
10. Surrender. The Holder may at any time surrender all or a portion of this
---------
Warrant for cancellation by transmitting the same to the Company at its address
set forth elsewhere herein accompanied by a written notice setting forth the
Holder's intention to surrender the Warrant (or such portion) for cancellation
and upon such transmittal by the Holder, this Warrant (or such portion) shall
become null and void and of no further force and effect.
11. Notices. Any notice, demand, request, consent, approval, declaration,
-------
delivery or other communication hereunder to be made pursuant to the provisions
of this Warrant shall be sufficiently given or made if in writing and either
delivered in person with receipt acknowledged or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) to the Company at:
1155 Market Street, 11th Floor
San Francisco, California 94103
Attention: Gregory Shenkman
Richard C. DeGolia
and a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Edward M. Leonard, Esq.
or
(b) to the Holder at:
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: John W. Gerdelman
8
<PAGE>
and a copy to:
MCI Law and Public Policy
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: General Counsel
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail. Failure or delay in
delivering copies of any notice, demand, request, approval, declaration,
delivery or other communication to the person designated above to receive a copy
shall in no way adversely affect the effectiveness of such notice, demand,
request, approval, declaration, delivery or other communication.
12. Certain Agreements. MCI and the Company have entered into a Securities
------------------
Purchase Agreement, a Registration Rights Agreement and certain Commercial
Documents (as defined in the Securities Purchase Agreement), each dated as of
the Closing Date, which include certain provisions with respect to this Warrant
and the Warrant Shares.
13. Miscellaneous.
-------------
(a) Remedies. The Company agrees that monetary damages would not be
--------
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
Accordingly, it is agreed that the Holder shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches
of the terms of this Warrant and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United
States or any state thereof. Such remedies shall be cumulative and non-
exclusive and shall be in addition to any other rights and remedies the
parties may have hereunder.
(b) No Inconsistent Agreements. The Company will not on or after the date
--------------------------
of this Warrant enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holder in this Warrant
or otherwise conflicts with the provisions hereof. The rights granted to
the Holder hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's
securities under any such agreements.
(c) Successors and Assigns. Subject to the provisions of paragraph 7
----------------------
hereof, this Warrant shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, including without limitation
and without the need for an express assignment, subsequent Holders of
Warrant Shares.
(d) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or
9
<PAGE>
unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(e) Amendments and Waivers. The provisions of this Warrant, including the
----------------------
provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of the Holder.
(f) Entire Agreement. Subject to paragraph 12 hereto, the provisions of
----------------
this Warrant are intended by the parties as a final expression of their
agreement and are intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, agreements, warranties
or undertakings, other than those set forth or referred to herein.
(g) Headings. The headings of this Warrant have been inserted as a matter
--------
of convenience and shall not affect the construction hereof.
(h) Applicable Law. This Warrant shall be governed by and construed in
--------------
accordance with the laws of the State of California. Each party hereto
agrees to submit to the non-exclusive jurisdiction of the courts of the
State of California in any action or proceeding arising out of or relating
to this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name by its President or a Vice President thereunto duly authorized.
DATED: February 26, 1997
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
By: /s/ Gregory Shenkman
-----------------------------------------
Name: Gregory Shenkman
Title: President and Chief Executive Officer
ACCEPTED BY:
MCI TELECOMMUNICATIONS
CORPORATION
By: /s/ John W. Gerdelman
------------------------------
Name: John W. Gerdelman
Title: Executive Vice President
11
<PAGE>
SUBSCRIPTION
The undersigned, _______________________, pursuant to the provisions
of the foregoing Warrant, hereby agrees to subscribe for and purchase
___________ shares of the Series C Preferred Common Stock of GENESYS
TELECOMMUNICATIONS LABORATORIES, INC., covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated: ____________________, _____ __________________________
(Signature)
__________________________
(Address)
__________________________
ASSIGNMENT
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby and does irrevocably constitute and appoint ________________,
attorney, to transfer said Warrant on the books of GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
Dated: ____________________, ______ __________________________
(Signature)
__________________________
(Address)
__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby assigns and transfers
unto ___________________ the right to purchase _______ shares of the Series C
Preferred Stock of GENESYS TELECOMMUNICATIONS LABORATORIES, INC. by the
foregoing Warrant and the rights evidenced thereby, and does irrevocably
constitute and appoint ________________, attorney, to transfer said Warrant on
the books of GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
Dated: ____________________, _____ __________________________
(Signature)
__________________________
(Address)
__________________________
12
<PAGE>
EXHIBIT 4.8
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
SERIES C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This Agreement is made as of February 26, 1997 among Genesys
Telecommunications Laboratories, Inc., a California corporation (the "Company"),
and Intel Corporation, a California corporation (the "Purchaser").
SECTION 1 Authorization and Sale of Preferred Stock and Warrants
------------------------------------------------------
1.1 Sale and Issuance of Series C Preferred Stock and Series C
----------------------------------------------------------
Warrants.
- --------
(a) The Company shall adopt and file with the Secretary of State of
California on or before the Closing (as defined below) the Amended and Restated
Articles of Incorporation in the form attached hereto as Exhibit A (the
"Articles"):
(b) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to Purchaser for an aggregate purchase price of $2,000,121.04 at the
Closing the following: (i) 179,867 shares of the Company's Series C Preferred
Stock at $11.12 per share and (ii) a warrant for the purchase of 44,965 shares
of the Company's Series C Preferred Stock.
(c) The shares of the Company's Series C Preferred Stock to be sold
hereunder are sometimes referred to herein as the "Shares". The warrants to be
sold hereunder are referred to herein collectively as the "Warrants" and
individually as a "Warrant". The shares of the Company's Series C Preferred
Stock underlying the Warrants are referred to herein as the "Warrant Shares".
(d) Simultaneously with this Closing, the Company is expected to sell
and issue to MCI Telecommunications Corporation the following: (i) 674,496
shares of the Company's Series C Preferred Stock at $11.12 per share and (ii) a
warrant for the purchase of 449,664 shares of the Company's Series C Preferred
Stock (the "MCI Transaction").
SECTION 2 Closing Dates; Delivery
-----------------------
2.1 Closing Date. The closing of the purchase and sale of the Shares
------------
and Warrants hereunder shall be held at the offices of Brobeck, Phleger &
Harrison, 2 Embarcadero Place, 2200 Geng Road, Palo Alto, California 94303 at
10:00 A.M., local time, on February 26, 1997 (the "Closing") or at such other
time and place as shall be mutually agreed upon by the Company and Purchaser who
propose to purchase a
<PAGE>
majority of the Shares proposed to be sold at the Closing (the date of the
Closing is hereinafter referred to as the "Closing Date"). At the Closing, the
Company shall deliver to Purchaser (i) a certificate representing the Shares and
(ii) a Warrant in the form attached hereto as Exhibit B, which Purchaser is
purchasing against delivery to the Company by Purchaser of the purchase price
therefor, by check, wire or cancellation of indebtedness.
SECTION 3 Representations and Warranties of the Company
---------------------------------------------
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C, the Company represents and warrants to Purchaser, as of the Closing
Date as follows:
3.1 Organization and Standing; Articles and Bylaws. The Company is a
----------------------------------------------
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is presently qualified to do business as a foreign
corporation in any jurisdiction, in which the failure to be so qualified would
have a material adverse effect on the Company's operations or conditions,
financial or otherwise. The Company has furnished the Purchaser with true,
correct and complete copies of its Articles and Bylaws (the "Bylaws"), as
presently in effect.
3.2 Corporate Power. The Company has or will have at the Closing
---------------
Date all requisite legal and corporate power and authority to execute and
deliver this Agreement, to sell and issue the Shares and Warrants hereunder, to
issue the Common Stock issuable upon conversion of the Series C Preferred and to
carry out and perform its obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
------------
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company
--------------
consists or, upon the filing of the Articles with the California Secretary of
State will consist, of 120,000,000 shares of Common Stock (the "Common Stock"),
of which shares 12,744,086 are issued and outstanding as of the Closing Date
(including 675,000 shares of Common Stock issued to Bruncor Inc. pursuant to
that certain Stock Exchange Agreement) and 4,146,870 shares of Preferred Stock,
900,000 shares of which have been designated "Series A Preferred", all of which
are issued and outstanding, and 1,897,878 shares of which have been designated
"Series B Preferred", all of which are issued and outstanding and 1,348,992
shares of which have been designated "Series C Preferred," none of which is
issued and outstanding prior to Closing. The outstanding shares have
2
<PAGE>
been duly authorized and validly issued, and are fully paid and nonassessable.
The Company has reserved 900,000 shares of Common Stock for issuance upon
conversion of the Series A Preferred, 1,897,878 shares of Common Stock for
issuance upon conversion of the Series B Preferred, 1,348,992 shares of Common
Stock for issuance upon conversion of the Series C Preferred (including shares
of Series C Preferred issuable upon exercise of the Warrants), and 6,292,834
shares of Common Stock for issuance by the Board of Directors to employees,
consultants, or directors pursuant to the Company's 1995 Stock Option Plan, of
which stock options to purchase 5,171,940 shares are outstanding as of the
Closing Date. The Company also has outstanding a warrant to purchase 420,282
shares of Common Stock at a exercise price of $5.9483 per share (subject to
adjustment upon occurrence of certain events) which is exercisable upon the
earlier of April 26, 1997 or the filing of the Company's initial public offering
with proceeds of not less than $10,000,000. In addition, concurrently with this
Closing, the Company expects to close the MCI Transaction. Except as set forth
above, there are no options, warrants or other rights to purchase any of the
Company's authorized and unissued capital stock.
3.5 Authorization. All corporate action on the part of the Company,
-------------
its directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the authorization,
sale, issuance and delivery of the Shares and Warrants (and the Common Stock
issuable upon conversion of the Shares and Warrant Shares) and the performance
of all of the Company's obligations hereunder has been taken or will be taken
prior to the Closing. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies and limitations of public policy. The Shares, when issued in
compliance with the provisions of this Agreement and upon the filing of the
Articles with the office of the California Secretary of State, will be validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences and privileges described in the Articles; the Common Stock issuable
upon conversion of the Shares and Warrant Shares has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement
and the Articles, will be validly issued, and will be fully paid and
nonassessable; and the Shares, the Warrant Shares and such Common Stock will be
free of any liens or encumbrances, assuming the Purchaser take the Shares and
Warrant Shares with no notice thereof, other than any liens or encumbrances
created by or imposed upon the Purchaser; provided, however, that the Shares and
Warrant Shares (and the Common Stock issuable upon conversion thereof) may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares are not subject to any preemptive rights or
rights of first refusal.
3.6 Financial Statements. The Company has delivered to Purchaser its
--------------------
unaudited financial statements as of and for the years ended June 30, 1996 and
the six
3
<PAGE>
month period ended December 31, 1996 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and
accurately set out and describe the financial condition and operating results of
the Company as of the dates, and during the periods, indicated therein. Since
December 31, 1996 there has not been any change in the assets, liabilities,
financial condition or operations of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business which
have not been, either individually or in the aggregate, materially adverse.
3.7 Material Contracts and Other Commitments. The Company does not
----------------------------------------
have any contract, agreement, lease, or other commitment, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not, as of the date hereof, involve more than $25,000 each; (ii) sales
contracts entered into in the ordinary course of business; (iii) license
agreements entered into in the ordinary course of business; and (iv) contracts
terminable at will by the Company on no more than sixty (60) days notice without
cost or liability to the Company. For purposes of this Section 3.7, employment
contracts and contracts with labor unions and agreements pursuant to which the
Company licenses any of its Proprietary Information (as defined herein) to third
parties shall not be considered to be contracts entered into in the usual and
ordinary course of business.
3.8 Title to Properties and Assets; Liens, etc. The Company has good
------------------------------------------
and marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien or
encumbrance, other than (i) the lien of current taxes not yet due and payable,
and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.9 Compliance with Other Instruments, None Burdensome, etc. The
-------------------------------------------------------
Company is not in violation of any term of its Articles or Bylaws, or in any
material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and to the best of its knowledge is not in violation of any order, statute, rule
or regulation applicable to the Company where such violation would materially
and adversely affect the Company. The execution, delivery and performance of
and compliance with this Agreement, and the issuance of the Shares and Warrants
and the Common Stock issuable upon conversion of the Shares and Warrants, have
not resulted and will not result in any material violation of, or conflict with,
or constitute a material default under, the Company's Articles or Bylaws or any
of its material agreements or result in the creation of, any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company;
and there is no such violation or default which materially and adversely affects
the business of the Company or any of its properties or assets.
4
<PAGE>
3.10 Litigation, etc. There are no actions, suits, proceedings or
---------------
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
reasonable basis therefor or threat thereof).
3.11 Employees. To the best of the Company's knowledge, no employee
---------
of the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company. There is,
to the Company's knowledge, no pending nor threatened action, suit, proceeding
or claim, or to its knowledge any basis therefor or threat thereof with respect
to any contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company and each employee of the Company and any subsidiary of
the Company employed in any technical capacity or with access to confidential
information of the Company has entered into a Confidential Information and
Invention Assignment Agreement substantially in the form of Exhibit D hereto.
3.12 Franchises, Licenses, Trademarks, Patents and Other Rights. The
----------------------------------------------------------
Company has all franchises, permits, licenses and other similar authority
necessary for the conduct of its business, the lack of which could materially
and adversely affect the operations or condition, financial or otherwise, of the
Company, and it is not in default in any material respect under any of such
franchises, permits, liens or other similar authority. To the best of the
Company's knowledge, the Company possesses all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and copyrights
necessary to conduct its business without conflict with or infringement upon any
valid rights of others and the lack of which could materially and adversely
affect the operations or condition, financial or otherwise, of the Company, and
the Company has not received any notice of infringement upon or conflict with
the asserted rights of others. The Company has a body of trade secrets,
including know-how, concepts, computer programs and other technical data (the
"Proprietary Information") for the development, manufacture and sale of its
products. To the Company's knowledge, the Company has the right to use the
Proprietary Information, free and clear of any rights, liens, encumbrances or
claims of others, except that the possibility exists that other persons may have
independently developed trade secrets or technical information similar or
identical to those of the Company. Reasonable security measures have been taken
by the Company to protect the secrecy, confidentiality and value of the
Proprietary Information referred to in this Section 3.12.
3.13 Governmental Consent, etc. No consent, approval or
-------------------------
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares and Warrants (and the Common Stock issuable upon conversion of the Shares
and Warrant Shares), or the consummation
5
<PAGE>
of any other transaction contemplated hereby, except (a) filing of the Articles
with the office of the California Secretary of State (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of Shares and Warrants (and
the Common Stock issuable upon conversion of the Shares and Warrant Shares)
under the California Corporate Securities Law of 1968, as amended and other
applicable Blue Sky laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
3.14 Offering. Subject to the accuracy of the Purchaser's
--------
representations in Section 4 hereof, the offer, sale and issuance of the Shares
and Warrants to be issued in conformity with the terms of this Agreement, and
the issuance of the Common Stock to be issued upon conversion of the Shares and
Warrant Shares, constitute transactions exempt from the registration
requirements of the Securities Act.
3.15 Brokers or Finders; Other Offers. The Company has not incurred,
--------------------------------
and will not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
3.16 Shareholders, Directors and Officers; Indebtedness. The Company
--------------------------------------------------
is not indebted, directly or indirectly, to any of its officers, directors or
shareholders or any of their respective relatives or affiliates. No officer,
director or shareholder of the Company, or any of their relatives or affiliates,
is indebted to the Company for an amount individually or in the aggregate in
excess of $50,000. To the knowledge of the Company, none of the officers or
directors or significant employees or advisors of the Company, or their
respective spouses, or relatives, (i) owns directly or indirectly, individually
or collectively, a material interest in any entity which is a competitor,
customer or supplier of the Company or (ii) has any existing contractual
relationship with the Company involving an amount in excess of $50,000.
3.17 Disclosure. Neither this Agreement nor any of the documents
----------
furnished to the Purchaser by the Company in connection with the transactions
contemplated hereby contains or will contain any untrue statement of material
fact, or omits or will omit to state any material fact necessary in order to
make the statements contained herein or therein, in light of the circumstances
under which they are made, not misleading.
SECTION 4 Representations and Warranties of the Purchaser
-----------------------------------------------
Purchaser hereby represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 Experience. By reason of its business or financial experience,
----------
or that of its professional advisor, Purchaser has the capacity to protect its
own interests in
6
<PAGE>
connection with the purchase of the Shares and Warrants hereunder and has the
ability to bear the economic risk (including the risk of total loss) of his
investment.
4.2 Investment. Purchaser is acquiring the Shares and Warrants and
----------
the Common Stock underlying the Shares and Warrant Shares for investment for its
own account, not as a nominee or agent, and not with the view to, or for resale
in connection with, any distribution thereof. Purchaser understands that the
Shares and Warrants to be purchased (and the Common Stock issuable upon
conversion of the Shares and Warrant Shares) have not been, and will not be,
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of Purchaser's representations as expressed herein.
4.3 Rule 144. Purchaser acknowledges that the Shares and Warrants
--------
(and the Common Stock issuable upon conversion of the Shares and Warrant Shares)
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available. Purchaser is
aware of the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.
4.4 No Public Market. Purchaser understands that no public market
----------------
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Company's
securities.
4.5 Access to Data. Purchaser has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with its management and the
opportunity to review the Company's facilities. Purchaser has also had an
opportunity to ask questions of officers of the Company, which questions were
answered to his satisfaction. Purchaser understands that such discussions, as
well as any written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a thorough
or exhaustive description.
4.6 Authorization. This Agreement when executed and delivered by
-------------
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies and limitations of public policy.
7
<PAGE>
4.7 Brokers or Finders. The Company has not, and will not, incur,
------------------
directly or indirectly, as a result of any action taken by Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 Investor Counsel. Purchaser acknowledges that it has had the
----------------
opportunity to review this Agreement, the exhibits and the schedules attached
hereto and the transactions contemplated by this Agreement with its own legal
counsel. Purchaser is relying solely on such counsel and not on any statements
or representations of the Company or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement.
4.9 Tax Liability. Purchaser has reviewed with its own tax advisors
-------------
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by this Agreement. Purchaser relies solely on
such advisors and not on any statements or representations of the Company or any
of its agents. Purchaser understands that it (and not the Company) shall be
responsible for its own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
SECTION 5 Conditions to Closing of Purchaser
----------------------------------
The Purchaser's obligations to purchase the Shares and Warrants at the
Closing are, at the option of the Purchaser, subject to the fulfillment of the
following conditions:
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 Compliance Certificate. The Company shall have delivered to the
----------------------
Purchaser a certificate of the Company reasonably satisfactory to Purchaser,
executed by the President of the Company, dated the Closing Date, and
certifying, among other things, to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 of this Agreement.
5.4 Blue Sky. The Company shall have obtained all necessary Blue Sky
--------
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares and
Warrants and the Common Stock issuable upon conversion of the Shares and Warrant
Shares.
8
<PAGE>
5.5 Amended and Restated Articles of Incorporation. The Articles
----------------------------------------------
shall have been filed with the California Secretary of State.
5.6 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Purchaser.
5.7 Registration Rights Agreement. The Company and the Purchaser
-----------------------------
shall have entered into the Registration Rights Agreement attached hereto as
Exhibit E (the "Registration Rights Agreement").
SECTION 6 Conditions to Closing of Company
--------------------------------
The Company's obligation to sell and issue the Shares and Warrants at
the Closing Date is, at the option of the Company, subject to the fulfillment as
of the Closing Date of the following conditions:
6.1 Representations. The representations made by the Purchaser in
---------------
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Blue Sky. The Company shall have obtained all necessary Blue Sky
--------
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares and
Warrants and the Common Stock issuable upon conversion of the Shares and Warrant
Shares.
6.3 Amended and Restated Articles of Incorporation. The Articles
----------------------------------------------
shall have been filed with the California Secretary of State.
6.4 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
6.5 Payment of Purchase Price. Purchaser (i) shall have delivered to
-------------------------
the Company the purchase price for Purchaser's Shares and Warrants, or (ii)
shall have canceled indebtedness owed by the Company to Purchaser, in either
case in the amount set forth above.
6.6 Registration Rights Agreement. The Company and the Purchaser
-----------------------------
shall have entered into the Registration Rights Agreement.
SECTION 7 Covenants of the Company and the Purchaser
------------------------------------------
The Company hereby covenants and agrees as follows:
9
<PAGE>
7.1 Financial Information. As soon as practicable after the end of
---------------------
each fiscal year, and in any event within 90 days thereafter, the Company will
deliver to Purchaser consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal year, consolidated statements
of income and consolidated statements of changes in financial position of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year (or, at the election
of the Company, setting forth in comparative form the budgeted figures for the
fiscal year then reported), all in reasonable detail and audited by independent
public accountants of national standing selected by the Company.
7.2 Additional Information. As long as Purchaser holds shares of
----------------------
Series C Preferred and/or Common Stock issued upon conversion of the Series C
Preferred, as adjusted for recapitalizations, stock splits, stock dividends and
the like, the Company will deliver or provide to Purchaser (i) as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company and in any event within 45 days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of each such quarterly period, and consolidated statements of
income and consolidated statements of changes in financial condition of the
Company and its subsidiaries for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles
(other than for accompanying notes), subject to changes resulting from year-end
audit adjustments, all in reasonable detail and signed by the principal
financial or accounting officer of the Company, (ii) an annual budget for the
Company as soon as it is available, (iii) copies of all publicly filed documents
as filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended, and (iv) the opportunity for a representative
of Purchaser who is approved by the Company to attend Board of Directors
meetings including the receipt of advance notice thereof; provided, however,
that the Company shall not be obligated to provide any information that it
considers in good faith to be a trade secret or to contain confidential or
classified information; and provided further, the Company may, at the discretion
of the Board of Directors, exclude any non-Board member from executive sessions
of its Board of Directors. The rights provided for in this subsection 7.2(iv)
are terminable by either party in the event such party makes a determination
that the strategic rationale for the relationship no longer exists.
7.3 Confidentiality. Purchaser agrees that any information obtained
---------------
by Purchaser pursuant to this Section 7 which may be proprietary to the Company
or otherwise confidential will not be disclosed without the prior written
consent of the Company. If Purchaser requests in writing, the Company will
identify in writing all information obtained by Purchaser under this Section 7
which the Company considers confidential and which Purchaser may not disclose
without the Company's prior written consent. Purchaser further acknowledges and
understands that any information so obtained which may be considered "inside"
non-public information will not be utilized by
10
<PAGE>
Purchaser in connection with purchases and/or sales of the Company's securities
except in compliance with applicable state and federal anti-fraud statutes. The
provisions of this Section 7.3 shall not be in limitation of any rights which
Purchaser may have with respect to the books and records of the Company, or to
inspect its properties or discuss its affairs, finances and accounts, under the
laws of the jurisdictions in which it is incorporated.
Purchaser and the Company further agrees that the terms and conditions
of Purchaser's equity investment in the Company shall be deemed confidential
information and shall not be disclosed to any third party; provided, however,
that if any party determines, in its sole discretion, that it is required do so
under applicable law, including, without limitation, any disclosure with respect
to any governmental filing, including filings with the Securities and Exchange
Commission, then such disclosure or filing may be made; provided, further, that
the disclosing party shall consult with the other party regarding such
disclosure or filing and seek confidential treatment for such portions of the
disclosure or filing as may be reasonably requested by the other party. This
paragraph shall not apply to disclosures made by either party to its (1)
existing and potential customers that enter into a non-disclosure agreement
regarding the subject of this agreement and (2) potential investors.
7.4 Availability of Common Stock for Conversion. The Company will
-------------------------------------------
from time to time, in accordance with the laws of the State of California,
increase the authorized amount of Common Stock if at any time the number of
shares of Common Stock remaining unissued and available for issuance shall be
insufficient to permit conversion of all the then outstanding shares of the
Shares and Warrant Shares.
7.5 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each person now or hereafter employed in any technical capacity by
it or any subsidiary with access to confidential information will enter into a
Confidential Information and Invention Assignment Agreement in substantially the
form of Exhibit D hereto, and the Company shall use its best efforts to cause
any consultant retained by it that has access to confidential information to
enter into a form of Consulting Agreement with substantially similar
confidentiality and non-solicitation provisions.
7.6 Use of Proceeds. The Company agrees to direct approximately
---------------
fifty percent (50%) of the net proceeds of the investment by Purchaser (the
"Dedicated Funds") to fund development of an Intel technology-based Internet
Call Center Application. This project will be undertaken on a best efforts
basis (but in no event shall best efforts be deemed to require expenditures in
excess of the Dedicated Funds) by the Company; provided that the Company may
cancel this project and direct residual funds to other projects in the event
unforeseen technical obstacles or business challenges arise.
11
<PAGE>
7.7 Termination of Covenants. The covenants of the Company set forth
------------------------
in this Section 7 shall terminate in all respects on the date of the closing of
an initial firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, covering the offer and sale of
the Company's Common Stock.
SECTION 8 Miscellaneous
-------------
8.1 Governing Law. This Agreement shall be governed in all respects
-------------
by the internal laws of the State of California. The parties expressly
stipulate that any litigation under this Agreement shall be brought in the state
courts of the Counties of Santa Clara, California and in the United States
District Court for the Northern District of California. The parties agree to
submit to the jurisdiction and venue of those courts.
8.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby.
8.3 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of Purchaser to purchase the Shares and
Warrants shall not be assignable without the consent of the Company.
8.4 Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of at least sixty (60) percent of the Shares (or
the Common Stock issued or issuable upon conversion of the Shares) may, with the
Company's prior written consent, waive, modify or amend on behalf of all
holders, any provisions hereof.
8.5 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if
12
<PAGE>
delivered by facsimile transmission with copy by first class mail, postage
prepaid, and shall be addressed (i) if to the Purchaser, at the Purchaser's
address as set forth on the signature page and (ii) if to the Company, at the
address of its principal corporate offices (attention: Secretary), or at such
other address as a party may designate by ten days' advance written notice to
the other party pursuant to the provisions above.
8.6 Delays or Omissions. Except as expressly provided herein, no
-------------------
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
8.7 California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.8 Expenses. The Company and Purchaser shall bear its own expenses
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
8.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10 Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision;
13
<PAGE>
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
8.11 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
[intentionally blank]
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Series C Preferred Stock
and Warrant Purchase Agreement as of the date first above written.
"COMPANY"
GENESYS TELECOMMUNICATIONS
LABORATORIES
a California corporation
By: /s/ Gregory Shenkman
-------------------------------------
Print: Gregory Shenkman
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
1155 Market Street, 11th Floor
San Francisco, CA 94103
"PURCHASER"
INTEL CORPORATION
By: /s/ Arvind Sodhani
-------------------------------------
Print: Arvind Sodhani
-------------------------------------
Title: Treasurer
-------------------------------------
2625 Walsh Avenue
Santa Clara, CA 95052
15
<PAGE>
EXHIBIT A
---------
FORM OF ARTICLES OF INCORPORATION
16
<PAGE>
EXHIBIT B
---------
FORM OF WARRANT
17
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS
18
<PAGE>
EXHIBIT D
---------
FORM OF CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
19
<PAGE>
EXHIBIT E
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
20
<PAGE>
EXHIBIT 4.9
WC-2
WARRANT TO PURCHASE
SHARES OF SERIES C PREFERRED STOCK
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
THIS CERTIFIES THAT, for value received, Intel Corporation (the
"Investor") is entitled to purchase, on the terms hereof, 44,965 shares of
Series C Preferred Stock of Genesys Telecommunications Laboratories, Inc., a
California corporation (the "Company"), with the designations, powers,
preferences, rights, qualifications, limitations and restrictions set forth in
the Amended and Restated Articles of Incorporation attached as Exhibit A to the
Series C Preferred Stock and Warrant Purchase Agreement dated February ___, 1997
(the "Agreement"), at a price per share set forth in Section 1.2 below, subject
to adjustment as provided herein.
This Warrant is issued pursuant to the provisions of the Agreement and
shall be subject to, and the Investor shall be bound by, all the terms,
conditions and provisions of the Agreement. Additionally, the following terms
shall apply to this Warrant:
1. Exercise of Warrant.
-------------------
The terms and conditions upon which this Warrant may be exercised, and
the Series C Preferred Stock covered hereby (the "Warrant Stock") may be
purchased, are as follows:
1.1 Vesting. This Warrant may only be exercised for that number of
-------
shares of Series C Preferred Stock which have vested pursuant to the vesting
schedule below, but in no case may this Warrant be exercised later than the
close of business on
* Confidential Treatment Requested. Confidential portion has been filed
separately with the Securities and Exchange Commission.
<PAGE>
February 26, 2000 (the "Termination Date"), after which time this Warrant shall
terminate and shall be void and of no further force or effect.
<TABLE>
<CAPTION>
Number of Shares of Milestone
Series C Preferred Stock Vesting Event
- ------------------------ -------------
<S> <C>
* *
* *
* *
* *
</TABLE>
1.2 Purchase Price. The per share purchase price for the shares of
--------------
Series C Preferred Stock to be issued upon exercise of this Warrant shall be
equal to 110% of the fair market value of such shares on the date that such
shares vest pursuant to the vesting schedule set forth in Section 1.1 above,
subject to adjustment as provided herein.
1.3 Method of Exercise.
------------------
a. The exercise of the purchase rights evidenced by this
Warrant shall be effected by (a) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached hereto, to the Company
at its principal offices and (b) the delivery of the purchase price by check or
bank draft payable to the Company's order or by wire transfer to the Company's
account for the number of shares for which the purchase rights hereunder are
being exercised or any other form of consideration approved by the Company's
Board of Directors.
b. Net Issue Exercise. In lieu of exercising this Warrant, the
------------------
Investor may elect to receive shares equal to the value of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with notice of such election in which event the
Company shall issue to the Investor a number of shares of Series C Preferred
Stock computed using the following formula:
2.
* Confidential Treatment Requested
<PAGE>
X = Y(A - B)
--------
A
Where: X = The number of shares to be issued to the Investor.
Y = The number of Shares purchasable under this Warrant at
the time of such exercise.
A = The fair market value of one share of Series C
Preferred Stock at the time of such exercise.
B = The Warrant Price (as adjusted to the date of such
calculation).
For purposes of this Paragraph 3(b), fair market value of the Preferred Stock
shall be determined by the Company's Board of Directors, acting in good faith
upon a review of all factors it deems appropriate. The foregoing shall be
subject to any applicable adjustments made pursuant to Section 2 hereof.
1.4 Issuance of Shares. Upon the exercise of the purchase rights
------------------
evidenced by this Warrant, a certificate or certificates for the purchased
shares shall be issued to the Investor as soon as practicable.
2. Certain Adjustments.
-------------------
2.1 Conversion of Series C Preferred Stock. Should all of the
--------------------------------------
Company's outstanding Series C Preferred Stock be, at any time prior to the
expiration of this Warrant, converted into shares of the Company's Common Stock
in accordance with the Company's Articles of Incorporation, as amended and/or
restated and effective immediately prior to the conversion of all of the
Company's Series C Preferred Stock (the "Articles"), then this Warrant shall
immediately become exercisable for that number of shares of the Company's Common
Stock equal to the number of shares of Common Stock which would have been
received if this Warrant had been exercised in full and the Series C Preferred
Stock received thereupon had been simultaneously converted into Common Stock
immediately prior to such event. The per share purchase price shall be
immediately adjusted to equal the quotient obtained by dividing (x) the
aggregate purchase price of the number of shares of Series C Preferred Stock for
which this Warrant was exercisable immediately prior to such conversion by (y)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after such conversion.
2.2 Common Stock Dividends. If at any time following the conversion
----------------------
of all the outstanding Series C Preferred Stock and prior to the expiration of
this Warrant, there shall be an event with respect to the Common Stock of a type
referred to
3.
<PAGE>
in Section 2.4 or 2.5, then the provisions of such Sections with respect to
Series C Preferred Stock shall apply mutatis mutandis to the Common Stock
------- --------
issuable upon the exercise of this Warrant and the Purchase Price thereof.
2.3 Mergers, Consolidations or Sale of Assets. If at any time there
-----------------------------------------
shall be a capital reorganization (other than a combination or subdivision of
Warrant Stock otherwise provided for herein), or a merger or consolidation of
the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the Investor shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified in this
Warrant and upon payment of the purchase price, the number of shares of stock or
other securities or property of the Company or the successor corporation
resulting from such reorganization, merger, consolidation or sale, to which a
holder of the Series C Preferred Stock (or Common Stock issuable upon conversion
thereof) deliverable upon exercise of this Warrant would have been entitled
under the provisions of the agreement in such reorganization, merger,
consolidation or sale if this Warrant had been exercised immediately before that
reorganization, merger, consolidation or sale. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Investor after the reorganization, merger,
consolidation or sale to the end that the provisions of this Warrant (including
adjustment of the purchase price then in effect and the number of shares of
Warrant Stock) shall be applicable after that event, as near as reasonably may
be, in relation to any shares or other property deliverable after that event
upon exercise of this Warrant.
2.4 Splits and Subdivisions. In the event the Company should at any
-----------------------
time or from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Series C Preferred Stock or the
determination of the holders of Series C Preferred Stock entitled to receive a
dividend or other distribution payable in additional shares of Series C
Preferred Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Series C
Preferred Stock (hereinafter referred to as the "Series C Equivalents") without
payment of any consideration by such holder for the additional shares of Series
C Preferred Stock or Series C Equivalents (including the additional shares of
Series C Preferred Stock issuable upon conversion or exercise thereof), then, as
of such record date (or the date of such distribution, split or subdivision if
no record date is fixed), the purchase price shall be appropriately decreased
and the number of shares of Warrant Stock shall be appropriately increased in
proportion to such increase of outstanding shares.
2.5 Combination of Shares. If the number of shares of Series C
---------------------
Preferred Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Series C Preferred Stock, the purchase
price
4.
<PAGE>
shall be appropriately increased and the number of shares of Warrant Stock shall
be appropriately decreased in proportion to such decrease in outstanding shares.
2.6 Adjustments for Other Distributions. In the event the Company
-----------------------------------
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 2.4, then, in each
such case for the purpose of this subsection 2.6, upon exercise of this Warrant
the holder hereof shall be entitled to a proportionate share of any such
distribution as though such holder was the holder of the number of shares of
Series C Preferred Stock of the Company into which this Warrant may be exercised
as of the record date fixed for the determination of the holders of Series C
Preferred Stock of the Company entitled to receive such distribution.
2.7 Certificate as to Adjustments. In the case of each adjustment or
-----------------------------
readjustment of the purchase price pursuant to this Section 2, the Company will
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based
to be delivered to the holder of this Warrant. The Company will, upon the
written request at any time of the holder of this Warrant, furnish or cause to
be furnished to such holder a certificate setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Warrant Stock and the amount, if any,
of other property at the time receivable upon the exercise of the Warrant.
2.8 Notices of Record Date, etc. In the event of:
---------------------------
(a) Any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right; or
(b) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or
5.
<PAGE>
(c) Any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, the Company will mail to the holder of this Warrant at least
twenty (20) days prior to the earliest date specified therein, a notice
specifying:
(i) The date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right; and
(ii) The date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding-up is
expected to become effective and the record date for determining stockholders
entitled to vote thereon.
3. Fractional Shares. No fractional shares shall be issued in
-----------------
connection with any exercise of this Warrant. In lieu of the issuance of such
fractional share, the Company shall make a cash payment equal to the then fair
market value of such fractional share as determined in good faith by the
Company's Board of Directors.
4. Reservation of Series C Preferred Stock and Common Stock. The
--------------------------------------------------------
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Preferred Stock and Common Stock, solely for the purpose of
effecting the exercise of this Warrant such number of its shares of Series C
Preferred Stock (and Common Stock upon conversion of the Series C Preferred
Stock) as shall from time to time be sufficient to effect the exercise of this
Warrant; and if at any time the number of authorized but unissued shares of
Series C Preferred Stock or Common Stock shall not be sufficient to effect the
exercise of the entire Warrant and the conversion of the Series C Preferred
Stock thereafter, in addition to such other remedies as shall be available to
the holder of this Warrant, the Company will use its reasonable best efforts to
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Series C Preferred Stock or
Common Stock to such number of shares as shall be sufficient for such purposes.
5. Privilege of Stock Ownership. Prior to the exercise of this
----------------------------
Warrant, the Investor shall not be entitled, by virtue of holding this Warrant,
to any rights of a stockholder of the Company. Nothing in this Section 5,
however, shall limit the right of the Investor to participate in distributions
described in Section 2 hereof if the Investor later exercises this Warrant.
6. Limitation of Liability. Except as otherwise provided herein, in
-----------------------
the absence of affirmative action by the holder hereof to purchase the Warrant
Stock, no mere enumeration herein of the rights or privileges of the holder
hereof shall give rise to any liability of such holder for the purchase price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
6.
<PAGE>
7. Transfers and Exchanges.
-----------------------
7.1 Except to the extent otherwise provided in the Agreement and
subject to compliance with applicable federal and state securities laws, this
Warrant and all rights hereunder are transferable in whole or in part by the
Investor to any person or entity reasonably acceptable to the Company, which
acceptance shall not be unreasonably withheld. The Investor will provide
written notice of such transfer to the Company, and if no written objection is
received by the Investor within ten (10) days after the date of notice, then
such transfer shall be deemed accepted by the Company. The transfer shall be
recorded on the books of the Company upon the surrender of this Warrant,
properly endorsed, to the Company at its principal offices and the payment to
the Company of all transfer taxes and other governmental charges imposed on such
transfer. In the event of a partial transfer, the Company shall issue to the
several holders one or more appropriate new warrants.
7.2 In the event of a partial exercise of this Warrant, the Company
shall issue an appropriate new warrant to the Investor.
7.3 All new warrants issued in connection with transfers, exchanges
or partial exercises shall be identical in form and provision to this Warrant
except as to the number of shares.
8. Successors and Assigns. The terms and provisions of this Warrant
----------------------
shall be binding upon the Company and the Investor and their respective
successors and assigns, subject at all times to the restrictions set forth in
the Agreement.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
-------------------------------------------------
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
10. Amendment. This Warrant together with other warrants of like
---------
form and terms (collectively, the "Warrants") issued in connection with the
Agreement may be amended with the consent of the Company by the written consent
of holders of Warrants exercisable for a majority of the securities issuable
upon exercise of the then outstanding Warrants.
7.
<PAGE>
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day
----------------------------------
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised, except as to the purchase
price, on the next succeeding day not a legal holiday.
Dated: February 26, 1997 GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
By: /s/ Gregory Shenkman
-----------------------------------------
Name: Gregory Shenkman
-----------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------
[SIGNATURE PAGE TO WARRANT]
<PAGE>
SUBSCRIPTION
Genesys Telecommunications Laboratories, Inc.
1155 Market Street, 11th Floor
San Francisco, CA 94103
Ladies and Gentlemen:
The undersigned, Intel Corporation, hereby elects to purchase, pursuant to the
provisions of the Warrant dated February ___, 1997, held by the undersigned,
____________ shares of the Series C Preferred Stock of Genesys
Telecommunications Laboratories, Inc., a California corporation.
The undersigned hereby represents and warrants that the undersigned is acquiring
such stock for its own account and not for resale or with a view to distribute
of any part thereof or of any of the Common Stock issuable upon conversion
thereof, and accepts such shares subject to the restrictions of the Series C
Preferred Stock and Warrant Purchase Agreement dated February ___, 1997.
Dated: _____________ Intel Corporation
By:
-----------------------------------------
Print:
-----------------------------------------
Title:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
9.
<PAGE>
EXHIBIT 4.10
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
STOCK EXCHANGE AGREEMENT
FEBRUARY 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Purchase and Sale of Stock.................................. 1
1.1 Sale and Exchange of Common Stock..................... 1
1.2 Closing............................................... 1
2. Representations and Warranties of the Company............... 1
2.1 Organization, Good Standing and Qualification......... 1
2.2 Capitalization and Voting Rights...................... 1
2.3 Authorization......................................... 2
2.4 Valid Issuance of Common Stock........................ 2
2.5 Stock Options......................................... 2
2.6 Permits............................................... 3
2.7 Compliance with Other Instruments..................... 3
2.8 Financial Statements.................................. 3
2.9 Tax Returns, Payments and Elections................... 3
2.10 Patents and Trademarks............................... 4
2.11 Material Contracts and Other Commitments............. 4
2.12 MCI Communications Corporation....................... 4
3. Representations and Warranties of the Investor.............. 4
3.1 Authorization......................................... 4
3.2 Purchase Entirely for Own Account..................... 4
3.3 Disclosure of Information............................. 5
3.4 Investment Experience................................. 5
3.5 Accredited Investor................................... 5
3.6 Legends............................................... 5
3.7 Title to Stock........................................ 5
3.8 Foreign Investor...................................... 6
3.9 Resales Subject to U.S. Securities Law................ 6
3.10 Offshore Execution................................... 6
4. Additional Agreements....................................... 6
4.1 Investor's Call Option................................ 6
4.2 Investor's Put Option................................. 7
4.3 Unanimous Shareholders Agreement...................... 7
4.4 Revival of Agreements................................. 8
4.5 Participation Right................................... 8
4.6 Further Limitations on Disposition.................... 9
5. California Commissioner of Corporations...................... 9
5.1 Corporate Securities Law............................... 9
</TABLE>
i.
<PAGE>
<TABLE>
<S> <C>
6. Conditions of Investor's Obligations at Closing............ 9
6.1 Representations and Warranties....................... 10
6.2 Performance.......................................... 10
6.3 Qualifications....................................... 10
6.4 Joint Venture Agreement.............................. 10
6.5 Co-Sale Agreement.................................... 10
6.6 Agreement with MCI Communications Corporation........ 10
7. Conditions of the Company's Obligations at Closing......... 10
7.1 Representations and Warranties....................... 10
7.2 Payment of Purchase Price............................ 10
7.3 Qualifications....................................... 10
7.4 Joint Venture Agreement.............................. 11
8. Miscellaneous.............................................. 11
8.1 Termination of Warranties............................ 11
8.2 Successors and Assigns............................... 11
8.3 Governing Law........................................ 11
8.4 Counterparts......................................... 11
8.5 Titles and Subtitles................................. 11
8.6 Notices.............................................. 11
8.7 Expenses............................................. 11
8.8 Amendments and Waivers............................... 12
8.9 Severability......................................... 12
8.10 Entire Agreement..................................... 12
EXHIBIT A - Unanimous Shareholders Agreement
EXHIBIT B - Joint Venture Agreement
EXHIBIT C - Co-Sale Agreement
</TABLE>
ii.
<PAGE>
STOCK EXCHANGE AGREEMENT
------------------------
THIS STOCK EXCHANGE AGREEMENT is made as of the 26 day of February
1997, by and among Genesys Telecommunications Laboratories, Inc., a California
corporation (the "Company"), and Bruncor Inc., a New Brunswick business
corporation (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Exchange of Common Stock. Subject to the terms and
--------------------------------
conditions of this Agreement, the Company agrees to sell to Investor and
Investor agrees to purchase 675,000 shares of Common Stock of the Company (as
adjusted for stock splits, stock dividends, recapitalizations or similar events)
(the "Company Shares") in exchange for all outstanding common shares of Genesys
Laboratories Canada Inc. ("GenCan") presently owned by Investor, which consists
of 49 common shares (the "Exchanged Shares").
1.2 Closing. The purchase and sale of the Common Stock shall take
-------
place simultaneously at the offices of Brobeck, Phleger & Harrison, Two
Embarcadero Place, 2200 Geng Road, Palo Alto, California, and the offices of
Clark, Drummie & Company, 40 Wellington Row, Saint John, New Brunswick, Canada,
at 10:00 a.m. California time (2:00 p.m. New Brunswick time) on February ___,
1997 or at such other time and place as the Company and the Investor mutually
agree upon orally or in writing (which time and places are designated as the
"Closing"). At the Closing the Company shall deliver to the Investor a
certificate representing the Company Shares against payment of the purchase
price by a certificate representing the Exchanged Shares.
2. Representations and Warranties of the Company. Except as set
---------------------------------------------
forth on the Schedule of Exceptions attached hereto, the Company hereby
represents and warrants to the Investor that:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist immediately prior to the Closing, of:
1.
<PAGE>
(i) Preferred Stock. 4,146,870 shares of Preferred Stock, of which
---------------
(A) 900,000 shares have been designated Series A Preferred Stock (the "Series A
Preferred Stock"), of which 900,000 shares are outstanding, (B) 1,897,878 shares
have been designated Series B Preferred Stock (the "Series B Preferred Stock"),
of which 1,897,878 shares are outstanding, and (C) 1,348,992 shares have been
designated Series C Preferred Stock (the "Series C Preferred Stock"), all of
which shares are expected to be either issued or subject to warrants outstanding
on or about the date hereof.
(ii) Common Stock. 120,000,000 shares of Common Stock (the
------------
"Common Stock"), of which 12,069,086 are outstanding.
(iii) Options and Warrants. (A) 5,171,940 shares of Common Stock
--------------------
subject to options granted under the Company's 1995 Stock Option Plan (with a
total of 834,272 shares available for future grants), (B) 420,282 shares of
Common Stock subject to outstanding warrants, and (C) warrants to purchase
Series C Preferred Stock as described in Section 2.2(i) above.
2.3 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder, and the authorization, issuance, sale and delivery of the
Common Stock being sold hereunder has been taken or will be taken prior to the
Closing, and this Agreement constitutes a valid and legally binding obligation
of the Company, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
of general application affecting enforcement of creditors' rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
2.4 Valid Issuance of Common Stock. The Common Stock that is being
------------------------------
purchased by the Investor hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
this Agreement and under applicable state and federal securities laws.
2.5 Stock Options. Except as set forth in the Schedule of
-------------
Exceptions, options outstanding under the Company's 1995 Stock Option Plan are
subject to the following vesting schedule: four-year vesting, with 25% vesting
after one year of completion of service and the remaining 75% in 36 equal
monthly installments thereafter. The number of stock options to be granted over
the next twelve months is not currently expected to represent greater than 15%
of the total capitalization of the Company.
2.
<PAGE>
2.6 Permits. The Company has all franchises, permits, licenses, and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company.
2.7 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default in any material respect of any provision of its Articles of
Incorporation or Bylaws, or in any material respect of any material instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound, or, to the best of its knowledge, of any provision of any federal or
state statute, rule or regulation applicable to the Company. The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.8 Financial Statements. The Company has delivered to the Investor
--------------------
its audited financial statements (balance sheets and profit and loss statements)
for the fiscal years ending June 30, 1994 and 1995 as well as the unaudited
financial statements for the fiscal year ending June 30, 1996 and the 6-month
period ending December 31, 1996 (the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
with each other, except that the Financial Statements may not contain all
footnotes required by generally accepted accounting principles. Except as set
forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 1996 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
2.9 Tax Returns, Payments and Elections. The Company has filed all
-----------------------------------
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith that are listed in
the Schedule of Exceptions. Since the date of the Financial Statements, the
Company has made adequate provisions on its books of account for all taxes,
assessments and governmental charges with respect to its business, properties
and operations for such period. The Company has withheld or collected from each
payment made to each of its employees,
3.
<PAGE>
the amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositaries.
2.10 Patents and Trademarks. To the best of its knowledge (but
----------------------
without having conducted any special investigation or patent search), the
Company has sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
and processes necessary for its business as now conducted without any conflict
with or infringement of the rights of others. The Company has not received any
communications alleging, nor does the Company have any reason to believe that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
2.11 Material Contracts and Other Commitments. The Company does not
----------------------------------------
have any contract, agreement, lease, or other commitment, written or oral,
absolute or contingent, other than (i) contracts entered into in the ordinary
course of business, including without limitations, sales contracts and license
agreements; and (ii) contracts terminable at will by the Company on no more than
sixty (60) days notice without cost or liability to the Company.
2.12 MCI Communications Corporation. The Company is currently
-------------------------------
negotiating the sale of not less than 674,475 shares of Series C Preferred Stock
of the Company at a per share price of $11.12 to MCI Communications Corporation
("MCI"). Based upon current negotiations, upon issuance of such stock and
absent the occurrence of any events that would result in an adjustment in the
conversion price of such stock (as determined by the Company's Articles of
Incorporation), each share of such series of Preferred Stock is expected to be
convertible into one share of Common Stock of the Company.
2.13 Litigation; Claims. There are no (a) claims, actions, suits,
-------------------
proceedings or investigations pending or (to the knowledge of the Company)
threatened by or against the Company in relation to the Company or its business,
or (b) judgments, decrees, arbitration awards, agreements or orders binding upon
the Company in relation to the Company or its business. No material claims,
including without limitation, product liability claims, have been asserted
against the Company in relation to the Company or its business during the past
ten (10) years, and, to the knowledge of the Company, there is no reasonable
basis for any material action, proceeding or investigation involving the Company
in relation to the Company or its business.
3. Representations and Warranties of the Investor. Except as set
----------------------------------------------
forth on the Schedule of Exceptions attached hereto, Investor hereby represents
and warrants that:
4.
<PAGE>
3.1 Authorization. Such Investor has full power and authority to
-------------
enter into this Agreement, and this Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Company Shares to be received by such Investor (the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the distribution of any part
thereof, and that such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, such Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Company Shares. Such Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Company Shares and the
business, properties, prospects and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investor to
rely thereon.
3.4 Investment Experience. Such Investor is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Company
Shares.
3.5 Accredited Investor. Such Investor is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 Legends. It is understood that the certificates evidencing the
-------
Securities will bear a legend substantially similar to the legend as set forth
in the Registration Rights Agreement, dated as of even date herewith, by and
among the Company and certain other parties named therein (the "Rights
Agreement").
3.7 Title to Stock. The Investor has good title to the Exchanged
--------------
Shares to be transferred by such Investor to the Company under this Agreement,
free and clear of any lien, pledge, security interest or other encumbrance
(other than restrictions on transfer arising under applicable securities laws)
and, upon delivery of the Company
5.
<PAGE>
Shares at the Closing as provided for in this Agreement, and assuming the
Company receives the Exchanged Shares in good faith and without notice of any
adverse claim, the Company will receive good title thereto, free and clear of
any lien, pledge, security interest or encumbrance (other than restrictions on
transfer arising under applicable securities laws.)
3.8 Foreign Investor. The Investor certifies that it is not a U.S.
----------------
person and that it is not acquiring the Securities for the account or benefit of
any U.S. person, as those terms are defined in Regulation S under the Act.
3.9 Resales Subject to U.S. Securities Law. The Investor
--------------------------------------
acknowledges that the Securities have not been registered under the Act, and
agrees to resell the Securities only in accordance with the provisions of
Regulation S under the Act, pursuant to registration under the Act, or pursuant
to an available exemption from such registration.
3.10 Offshore Execution. The document effecting this purchase and
------------------
transfer will be executed by the Investor outside the United States.
4. Additional Agreements.
---------------------
4.1 Investor's Call Option.
----------------------
(a) Subject to the provisions set forth below and compliance with
applicable federal and state securities laws of the United States and other
applicable laws, Investor shall have the right, at its election, for a period of
six months commencing January 1, 1999, to exchange all, but not less than all,
of the Company Shares received by Investor as specified in Section 1.1 above
into common shares in the capital of GenCan carrying 49% of the Actual Voting
Power of GenCan. "Actual Voting Power" shall mean the total number of votes
that may be cast in the election of directors of GenCan at any meeting of
stockholders of GenCan if all shares of Common Stock and other securities of
GenCan entitled to vote generally in the election of Directors were present and
voted at such meeting. This right will terminate at the IPO Filing or upon the
execution of an agreement for the acquisition of the Company (which shall
include a merger or a purchase of substantially all of the assets of the
Company). "IPO Filing" shall mean the initial filing of a Registration
Statement under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission for the sale of equity securities of the Company.
(b) The option set forth in Section 4.1(a) (the "Call Option") shall
be exercisable by delivering written notice to the Company (the "Call Notice")
together with a certificate or certificates representing the Company Shares
received by Investor pursuant to Section 1.1 above (the "Certificate") to the
Company.
6.
<PAGE>
(c) Within 30 days of receipt of the Call Notice and the Certificate,
the Company will deliver to Investor a certificate representing common shares in
the capital of GenCan carrying 49% of the Actual Voting Power of GenCan.
4.2 Investor's Put Option.
---------------------
(a) Subject to the provisions set forth below and compliance with
applicable federal and state securities laws of the United States and other
applicable laws, in the event the Company:
(i) consummates the sale of substantially all of the assets of
the Company to a party other than Bruncor (the "Sale of Assets") and
(ii) the Board of Directors of the Company does not within 180
days either:
(A) adopt a plan to liquidate the Company within a
reasonable time period; or
(B) adopt a plan to invest the proceeds from the Sale of
Assets in a business activity that contemplates
engaging in the business opportunities set forth in
Sections 1.1 and 1.2 of that certain Joint Venture
Agreement to be entered into by the parties on or prior
to the Closing Date,
then the Investor shall have the right, at its election, during the period of 30
days thereafter to require the Company to purchase all, but not less than all,
of the Company Shares received by Investor as specified in Section 1.1 above for
such amount as the holder of such shares of Common Stock would have been
entitled to receive under the Company's Articles of Incorporation if Board of
Directors of the Company had elected to liquidate the Company. This right will
terminate at the IPO Filing or upon the execution of an agreement for the
acquisition of the Company (which shall include a merger or a purchase of
substantially all of the assets of the Company in which the foregoing right does
not apply or has expired).
(b) The option set forth in Section 4.2(a) (the "Put Option") shall be
exercisable by delivering written notice to the Company (the "Put Notice")
together with the Certificate endorsed to the Company.
(c) After receipt of the Put Notice, the Company will promptly deliver
to Investor the payment set forth above; provided that to the extent the Sale of
Assets proceeds is subject to payment in installments or other manner, then the
timing of the payment provided for hereunder shall be adjusted in a manner
consistent with the timing of the receipt of the Sale of Assets proceeds.
7.
<PAGE>
4.3 Unanimous Shareholders Agreement. Effective upon the Closing the
--------------------------------
Unanimous Shareholders Agreement attached hereto as Exhibit A shall terminate in
its entirety.
4.4 Revival of Agreements. In the event that Investor notifies the
---------------------
Company of its intention to exercise its rights in Section 4.1(a) above to
reacquire an interest in GenCan, the parties agree that they will in good faith
negotiate and enter into a new Unanimous Shareholders Agreement and Joint
Venture Agreement with the understanding that the parties will be placed in
substantially the same position as they were prior to the Closing Date; however,
the parties shall consider the transactions effected herein and other new
transactions that may be entered into by the parties.
4.5 Participation Right. Subject to the terms and conditions
-------------------
specified in this paragraph 4.5, the Company hereby grants to Investor a
participation right with respect to future sales by the Company of its Shares
(as hereinafter defined). Each time the Company proposes to issue any shares
of, or securities convertible into or exercisable for any shares of, any class
of its capital stock ("Shares"), the Company shall first make an offering of
such Shares to Investor in accordance with the following provisions:
(a) the Company shall deliver a notice by certified mail ("Notice") to
Investor stating (i) its bona fide intention to offer such Shares, (ii) the
number of such Shares to be offered, and (iii) the price and terms, if any, upon
which it proposes to offer such Shares.
(b) By written notification received by the Company within 10 calendar
days after giving of the Notice, Investor may elect to purchase or obtain, at
the price and on the terms specified in the Notice, that portion of the Shares
which equals Investor's percentage ownership of the Company's capital stock on a
fully-diluted basis. If Investor fails to exercise its rights to purchase its
pro-rata portion of the Shares, the Company may enter into an agreement for the
sale thereof on terms substantially the same as those described in the Notice.
If the Company does not enter into an agreement for the sale of the Shares
within 60 days from the date of the Notice, the right provided hereunder shall
be deemed to be revived and such Shares shall not be offered unless first
reoffered to Investor in accordance herewith.
(c) The participation right in this paragraph 4.5 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to employees for the primary purpose of soliciting or retaining their
employment, (ii) to or after consummation of a bona fide, firmly underwritten
public offering of shares of common stock of the Company, registered under the
Securities Act of 1933, as amended, pursuant to a registration statement on Form
S-1, (iii) the issuance of securities pursuant to the conversion or exercise of
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
8.
<PAGE>
or (v) the issuance of stock, warrants or other securities or rights to persons
or entities with which the Company has business relationships provided such
issuances are for other than primarily equity financing purposes.
(d) The participation right set forth in this Section 4.5 may not be
assigned or transferred.
(e) The participation right set forth in this Section 4.5 shall
terminate upon the filing of a Registration Statement under the Securities Act
of 1933 with the Securities and Exchange Commission.
(f) The participation right set forth in this Section 4.5 is in lieu
of the right of first refusal as set forth in the Rights Agreement.
4.6 Transferability of Securities. Notwithstanding Sections 3 and 4
-----------------------------
of the Rights Agreement, the parties agree that they will use their good faith,
commercially reasonable efforts to remove the restrictions on the disposition of
the Securities as early as permissible under Rule 144 or Regulation S of the
Securities Act.
4.7 Financial Reporting. The Company hereby covenants and agrees
-------------------
with Investor that from and after the Closing, so long as any shares of Series C
Preferred Stock is outstanding, the Company will deliver to Investor (i) within
thirty (30) days after the end of each quarter, quarterly unaudited financial
statements; (ii) within one hundred twenty (120) days after the end of each
fiscal year, audited financial statements for such period; and (iii) within
ninety (90) days after the end of the fiscal year, an annual financial plan for
the Company.
5. California Commissioner of Corporations.
---------------------------------------
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6. Conditions of Investor's Obligations at Closing. The obligations
-----------------------------------------------
of the Investor under Section 1.1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
9.
<PAGE>
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
6.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6.3 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States,
Canada or of any state or province that are required in connection with the
lawful issuance and sale of the Securities and the transfer of the Exchanged
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
6.4 Joint Venture Agreement. The Company shall have entered into the
-----------------------
Joint Venture Agreement with Investor, substantially in the form attached hereto
as Exhibit B, on or prior to the Closing.
6.5 Co-Sale Agreement. Greg Shenkman and Alec Miloslavsky shall have
-----------------
entered into the Co-Sale Agreement with the Investor, substantially in the form
attached hereto as Exhibit C, on or prior to the Closing.
6.6 Agreement with MCI Communications Corporation. The Company shall
---------------------------------------------
have closed on or prior to the Closing Date the purchase by MCI Communications
Corporation of an aggregate of at least 674,475 shares of Series C Preferred
Stock of the Company at a per share price of $11.12 each of which shares is, as
of the Closing Date, convertible into common stock on a one-to-one basis.
7. Conditions of the Company's Obligations at Closing. The
--------------------------------------------------
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
such Investor:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
7.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
consideration specified in Section 1.1.
7.3 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States,
Canada or of any state or province that are required in connection with the
lawful issuance and sale of the
10.
<PAGE>
Securities and the transfer of the Exchanged Shares pursuant to this Agreement
shall be duly obtained and effective as of the Closing.
7.4 Joint Venture Agreement. The Investor shall have entered into
-----------------------
the Joint Venture Agreement with the Company, substantially in the form attached
hereto as Exhibit B, on or prior to the Closing.
8. Miscellaneous.
-------------
8.1 Termination of Warranties. Notwithstanding any investigation
-------------------------
conducted at any time with regard thereto by or on behalf of any party, all of
the warranties and representations of the Company and the Investor contained in
Section 2 and 3 shall survive the execution, delivery and performance of this
Agreement and shall survive until the second anniversary of the date of this
Agreement.
8.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
8.7 Expenses. Irrespective of whether the Closing is effected, each
--------
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution,
11.
<PAGE>
delivery and performance of this Agreement. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
8.8 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company.
8.9 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Entire Agreement. This Agreement and the documents referred to
----------------
herein (including the Joint Venture Agreement and all documents referred to
therein) constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof, and supersede any and
all prior agreements and understandings among the parties.
12.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
By: /s/ Gregory Shenkman
--------------------------------------
Print: Gregory Shenkman
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
1155 Market Street, 11th Floor
San Francisco, CA 94103
BRUNCOR, INC.:
By: /s/ G. L. Pond
--------------------------------------
Print: G. L. Pond
--------------------------------------
Title: President
--------------------------------------
By: /s/ G. R. Parker
--------------------------------------
Print: G. R. Parker
--------------------------------------
Title: Treasurer
--------------------------------------
One Brunswick Square
Saint John, New Brunswick
Canada E2L 41A
[signature page to Stock Exchange Agreement]
13.
<PAGE>
EXHIBIT 4.11
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "AGREEMENT"), dated as of
February 26, 1997, is entered into by and among Genesys Telecommunications
Laboratories, a California corporation (the "COMPANY"), the holders of Series A
Preferred Stock of the Company (the "SERIES A HOLDERS"), the holders of Series B
Preferred Stock of the Company (the "SERIES B HOLDERS"), the purchasers of
Series C Preferred Stock of the Company (the "SERIES C HOLDERS") pursuant to a
Series C Preferred Stock and Warrant Purchase Agreement and a Securities
Purchase Agreement (the "SERIES C AGREEMENTS") approved by the Company's Board
of Directors, and the purchaser of Common Stock of the Company (the "COMMON
HOLDER") pursuant to a Stock Exchange Agreement (the "STOCK EXCHANGE AGREEMENT")
approved by the Company's Board of Directors. Such Series A Holders, Series B
Holders, Series C Holders and Common Holder (the "Purchasers") are listed on
Exhibit A attached hereto.
R E C I T A L S
---------------
A. All of the Series A Holders and the Company are parties to the Series
A Preferred Stock Purchase Agreement dated March 29, 1996 (the "SERIES A
AGREEMENT").
B. All of the Series B Holders and the Company are parties to the Series
B Preferred Stock Purchase Agreement dated June 13, 1996 (the "SERIES B
AGREEMENT").
C. The Company and certain of the Purchasers are parties to the
Registration Rights and Modification Agreement dated June 13, 1996 (the "PRIOR
AGREEMENT").
D. The Company and certain of the Purchasers are parties to the Series C
Agreements.
E. The Company and the Common Holder are parties to the Stock Exchange
Agreement.
F. In order to induce the Company and certain Purchasers to enter into
the Series C Agreements and the Stock Exchange Agreement, the Purchasers and the
Company desire to terminate the Prior Agreement and to enter into this Agreement
which shall govern the rights of the Purchasers to cause the Company to register
shares of Common Stock issuable to the Purchasers and certain other matters as
set forth herein, and replace and supersede the Prior Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
<PAGE>
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the common stock of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"HOLDER" shall mean any holder, or an assignee under Section 14
hereof, of outstanding Registrable Securities.
"INITIATING HOLDERS" shall mean any Holders who in the aggregate are
Holders of fifty percent (50%) or more of the outstanding Registrable Securities
(except that for the purposes of this Agreement, Bruncor Inc. shall not be an
Initiating Holder).
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
"PURCHASERS" shall mean the purchasers of Series A Preferred, Series B
Preferred, Series C Preferred and Common Stock pursuant to the Series A
Agreement, Series B Agreement, Series C Agreements, and Stock Exchange
Agreement, respectively.
"REGISTRABLE SECURITIES" shall mean shares of Common Stock (i) issued
or issuable pursuant to the conversion of the Shares or exercise of warrants to
purchase the Series C Shares, and (ii) issued in respect of securities issued
pursuant to the conversion of the Shares upon any stock split, stock dividend,
recapitalization, substitution, or similar event; provided, however, that
Registrable Securities shall not include any (a) shares of Common Stock which
have previously been registered, (b) shares of Common Stock which have
previously been sold to the public, or (c) securities which would otherwise be
Registrable Securities held by a Holder who is then permitted to sell all of
such securities within any three (3) month period following the Company's
initial public offering pursuant to Rule 144.
"REGISTRABLE SERIES C SECURITIES" shall mean shares of Common Stock
(i) issued or issuable pursuant to the conversion of Series C Shares or exercise
of warrants to purchase the Series C Shares and (ii) issued in respect of
securities issued pursuant to the conversion of the Series C Shares upon any
stock split, stock dividend, recapitalization, substitution, or similar event;
provided, however, that Registrable Series C Securities shall not include any
(a) shares of Common Stock which have previously been registered, (b) shares of
Common Stock which have previously been sold to the public, or (c) securities
which would otherwise be Registrable Securities held by a Holder who is then
permitted to sell all of such securities within any three (3) month period
following the Company's initial public offering pursuant to Rule 144.
2
<PAGE>
"REGISTRATION EXPENSES" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Section 5 and Section 6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
and the reasonable fees and expenses of one counsel for the selling Purchasers
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"RULE 144" shall mean Rule 144 as promulgated under the Securities
Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"SERIES C SHARES" shall mean shares of the Company's Series C
Preferred Stock and any shares of Series C Preferred Stock upon exercise of
warrants therefor outstanding as of the date of this Agreement.
"SHARES" shall mean (i) shares of the Company's Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, (ii) any shares of
Series C Preferred Stock upon exercise of warrants therefor outstanding as of
the date of this Agreement and (iii) any shares of Common Stock held by the
Common Holder acquired through the Stock Exchange Agreement.
2. Restrictions on Transferability. The Restricted Securities held
-------------------------------
by the Purchasers shall not be transferred except upon the conditions specified
in this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act and to assist in an orderly distribution. Each
Purchaser will cause any proposed transferee of Restricted Securities held by
that Purchaser to agree to take and hold those securities subject to the
provisions and upon the conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Shares,
------------------
and (ii) shares of the Company's Common Stock issued upon conversion of the
Shares, and (iii) any other securities issued in respect of the Shares, or the
Common Stock issued upon conversion of the Shares, upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted
3
<PAGE>
with a legend substantially in the following form (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT. COPIES OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICE OF THE CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate and issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(i) or
the "no-action" letter referred to in Section 4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
initial public offering of the Company's Common Stock under the Securities Act.
4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 5, 6 and 8 hereof), the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144 promulgated under the Securities Act or for a transfer
to a holder's spouse, ancestors, descendants or a trust for any of their
benefit, or in transactions involving the distribution without consideration of
Restricted Securities by a holder to any of its partners or retired partners or
to the estate of any of its partners or retired partners) by either (i) a
written opinion of legal counsel to the holder who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act or (ii) a "no-action" letter from the
Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
4
<PAGE>
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by such holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the restrictive legend set forth in Section 3 above,
except that such certificate shall not bear such restrictive legend after the
date of the Company's initial public offering under the Securities Act if the
opinion of counsel or "no-action" letter referred to above expressly indicates
that such legend is not required in order to establish compliance with the Act
or if such legend is no longer required pursuant to Rule 144(k).
5. Requested Registration.
----------------------
(a) Request for Registration. If the Company shall receive from:
------------------------
(1) Initiating Holders a written request that the Company effect any
registration with respect to the lesser of at least thirty percent (30%) of the
Registrable Securities or that number of Registrable Securities which would
result in an aggregate offering of at least $10,000,000, or
(2) Holders of 50% of the Registrable Series C Securities (who, for
the purposes of the remainder of this Agreement, shall also be deemed to be
Initiating Holders), the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request delivered
to the Company within fifteen (15) days after receipt of such written notice
from the Company; provided, however, that the Company shall not be obligated to
--------
effect, or to take any action to effect, any such registration pursuant to this
Section 5:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act; or
(B) More than three (3) years following the closing of the initial
offering to the public of the Company's stock pursuant to a firm commitment
5
<PAGE>
registered underwriting for the account of the Company in which the aggregate
gross proceeds received by the Company exceed $15,000,000 (the "PUBLIC
OFFERING"); provided, however, that with respect to the right set forth in
Section 5(a)(2) only, in the event that the Company does not qualify for
registration on Form S-3 in accordance with Section 8 of this Agreement and the
right to request registration pursuant to Section 5(a)(2) has not been
effected, than such right to request registration pursuant to Section 5(a)(2)
shall continue to remain outstanding notwithstanding the forgoing three (3) year
limitation; and provided further, however, that in no event shall the Company be
obligated to effect, or take any action to effect, any such registration
pursuant to Section 5(a)(2) more than seven (7) years following the Public
Offering, or
(C) Prior to six (6) months following the closing of
the Public Offering;
provided further, that the Company shall not be obligated to effect, or to take
- ----------------
any action to effect, any such registration pursuant to:
(D) (i) Section 5(a)(1) after the Company has effected two (2) such
registrations pursuant to Section 5(a)(1) and such registrations have been
declared or ordered effective and the sales of such Registrable Securities have
closed; or (ii) Section 5(a)(2) after the Company has effected one (1) such
registration pursuant to Section 5(a)(2) and such registrations have been
declared or ordered effective and the sales of such Registrable Securities have
closed.
Subject to the foregoing clauses (A), (B), (C) and (D) the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the request
or requests of the Initiating Holders; provided, however, that if the Company
shall furnish to such Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed on or before the time filing would
be required and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
(but not more than once during any twelve month period) for a period of not more
than one hundred twenty (120) days after receipt of the request of the
Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders, may, subject to the provisions of Section 5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no right to include any of its securities in any such
registration except as provided in Section 5(b) below.
(b) Underwriting. If the Initiating Holders intend to distribute the
------------
Registrable Securities covered by their request by means of an underwriting,
they shall so advise
6
<PAGE>
the Company as a part of their request made pursuant to Section 5(a), and the
Company shall include such information in the written notice referred to in
Section 5(a) above. The right of any Holder to registration pursuant to Section
5(a) shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder with respect to such participation and inclusion) to the
extent provided herein. A Holder may elect to include in such underwriting all
or a part of the Registrable Securities he holds.
If officers or directors of the Company shall request inclusion of
securities of the Company other than Registrable Securities in any registration
pursuant to Section 5(a)(1), or if holders of securities of the Company who are
entitled by contract with the Company to have securities included in such a
registration (such officers, directors, and other shareholders being
collectively referred to as the "OTHER PURCHASERS") request such inclusion, the
Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Purchasers in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Purchasers
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters (the "UNDERWRITER") selected for such underwriting
by the Initiating Holders holding at least fifty percent (50%) of the Shares
held by the Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 5, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the Underwriter may (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the
registration and underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated in the following priority:
(i) with respect to a request for registration pursuant to
Section 5(a)(1): first, among all Holders of Registrable Securities to the
extent of not less than fifty percent (50%) of the Registrable Securities
offered for sale in such offering (and pro rata among such holders on the
basis of all Registrable Securities then held by such holders), provided
that if the Underwriter determines that marketing factors require the sale
of less than such amount, then the entire offering shall be composed of
such Registrable Securities; and second, among all Other Purchasers in
proportion, as nearly as practicable, to the respective amounts of
securities which they had requested to be included in such registration at
the time of filing the registration statement; or
(ii) with respect to a request for registration pursuant to
Section 5(a)(2): first, among all Holders of Series C Registrable
Securities to the fullest extent (and pro rata among such holders on the
basis of such Series C Registrable Securities then held by such holders),
provided that if the Underwriter determines that marketing factors require
the sale of less than such amount, then the entire offering shall be
7
<PAGE>
composed of such Registrable Securities; and second, among all Other
Purchasers in proportion, as nearly as practicable, to the respective
amounts of securities which they had requested to be included in such
registration at the time of filing the registration statement.
If any Holder or Other Purchaser disapproves of the terms of any such
underwriting, such holder may elect to withdraw therefrom by written notice to
the Company and the Underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
the Underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company may include its securities for its
own account in such registration if the underwriter so agrees and if the number
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
6. Company Registration.
--------------------
(a) If the Company shall determine to register any of its securities
either for its own account or for the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which, to the
extent then known, shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all of the Registrable Securities specified in a written request or requests
made by any Holder within fifteen (15) days after receipt of the written notice
from the Company described in clause (b) above, except as set forth in Section
6(b) below. Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Purchasers distributing their
securities through such underwriting) enter into an underwriting agreement in
8
<PAGE>
customary form with the Underwriter selected for underwriting by the Company.
Notwith standing any other provision of this Section 6, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, and (a) if such registration is the first registered
offering of the Company's securities to the public, the Underwriter may
(subject to the allocation priority set forth below) exclude from such
registration and underwriting some or all of the Registrable Securities which
would otherwise be underwritten pursuant hereto, and (b) if such registration is
other than the first registered offering of the sale of the Company's securities
to the public, the Underwriter may (subject to the allocation priority set forth
below) limit the number of Registrable Securities to be included in the
secondary portion of the registration and underwriting to not less than fifty
percent (50%) of the securities to be included therein. The Company shall so
advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting by persons other than the Company shall be allocated in the
following priority: first, to Holders of Registrable Securities to the extent of
fifty percent (50%) of the securities to be included therein (and pro rata among
such Holders on the basis of all Registrable Securities then held by such
Holders); and second, among all Other Purchasers and Holders in proportion, as
nearly as practicable, to the respective amounts of securities, including
Registrable Securities, which they had requested to be included in such
registration at the time of filing the registration statement. If any Holder or
Other Purchaser disapproves of the terms of any such underwriting, he may elect
to withdraw therefrom by written notice to the Company and the Underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any three (3) registrations or qualifications pursuant to
Section 5 of this Agreement and any registrations or qualifications pursuant to
Sections 6 and 8 of this Agreement shall be borne by the Company, and all
Selling Expenses shall be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered; provided,
however, that the Company shall not be required to pay any Registration Expenses
if, as a result of the withdrawal of a request for registration by Initiating
Holders, the registration statement does not become effective, unless such
withdrawal is caused by a material adverse change in the business or operations
of the Company after such request for registration, or unless the Initiating
Holders agree to have such registration considered a registration pursuant to
Section 5(a)(1)(ii)(D) or Section 5(a)(2)(ii)(D), as applicable. If the Company
is not required to pay any Registration Expenses, then the Holders and Other
Purchasers requesting registration shall bear such Registration Expenses pro
rata on the basis of the number of their shares so included in the registration
request, and such registration shall not be considered a registration for
purposes of Section 5(a)(1)(ii)(D) or 5(a)(2)(ii)(D), as applicable.
8. Registration on Form S-3. The Company shall use its best efforts
------------------------
to qualify for registration on Form S-3, and to that end, the Company shall
comply with the reporting requirements of the Exchange Act following the
effective date of the first registration of any securities of the Company for a
registered public offering. After the Company has qualified for the use of Form
S-3, each holder of Registrable Securities shall have the right to
9
<PAGE>
request an unlimited number of registrations on Form S-3 (such requests shall be
in writing and shall state the number of shares of Registrable Securities to be
disposed of and the intended method of disposition of such shares by each such
holder), subject only to the following limitations:
(a) The Company shall not be obligated to cause a registration on Form
S-3 to become effective prior to one hundred eighty (180) days following the
effective date of a Company-initiated registration (other than a registration
effected solely to qualify an employee benefit plan or to effect a business
combination pursuant to Rule 145), provided that notice of such Company-
initiated registration is given to Holders prior to receipt of a request from a
holder of Registrable Securities for registration on Form S-3, and provided that
the Company shall use its best efforts to achieve such effectiveness promptly
following such one hundred eighty (180) day period;
(b) The Company shall not be obligated to cause a registration on Form
S-3 to become effective prior to expiration of one hundred eighty (180) days
following the effective date of the most recent registration pursuant to a
request by a holder of Registrable Securities under this Agreement or pursuant
to a request by a holder of registration rights under any other agreement of the
Company granting Form S-3 demand registration rights; provided, however, that
the Company shall use its best efforts to achieve such effectiveness promptly
following such one hundred eighty (180) day period;
(c) The Company shall not be required to effect a registration
pursuant to this Section 8 unless the Holder or Holders requesting registration
represent at least twenty-five percent (25%) or more of the outstanding
Registrable Securities and propose to dispose of shares of Registrable
Securities having an aggregate disposition price (before deduction of
underwriting discounts and expenses of sale) of at least $2,000,000;
(d) The Company shall not be required to file more than one (1) such
registration statement on Form S-3 during any 12-month period; and
(e) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding thirty (30) days from
the effective date thereof. The Company shall give notice to all Holders and
all holders of registration rights under any other agreement of the Company
granting Form S-3 or similar demand registration rights of the receipt of a
request for registration pursuant to this Section 8 and shall provide a
reasonable opportunity for all such other holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts
to effect promptly the registration of all shares of Registrable Securities on
Form S-3 to the extent requested by the Holder or Holders thereof for purposes
of disposition. In the event the Underwriter determines that market factors
require a limitation on the number of shares to be underwritten, then shares
shall be excluded from such registration and underwritten pursuant to the method
described in Section 6(b).
10
<PAGE>
9. Registration Procedures. In the case of each registration
-----------------------
effected by the Company pursuant to this Agreement, the Company will keep each
Holder advised in writing as to the initiation of such registration and as to
the completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of thirty (30) days
or until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions, and provided further that if the underwriter
so requests the underwriting agreement will contain customary indemnification
and contribution provisions, and provided further that the Underwriter is
reasonably acceptable to the Company.
10. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, if Registrable
Securities held by such Holder are included in the securities with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act including any rule or
regulation thereunder applicable to the Company relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission) based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein.
11
<PAGE>
(b) Each Holder and Other Purchaser will, if Registrable Securities or
other securities held by such Holder are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers and agents and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such Holder
and Other Purchaser and each of their officers, directors and partners, and each
person controlling such Holder or Other Purchaser, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
and will reimburse the Company and such Holders, Other Purchasers, directors,
officers, agents, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
of defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
or Other Purchaser and stated to be specifically for use therein; provided,
however, that the obligations of such Holders and Other Purchasers hereunder
shall be limited to an amount equal to the proceeds received by each such Holder
or Other Purchaser for securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 10 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. No Indemnifying
Party in the defense of any such claim or litigation shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
11. Information by Holder. Each Holder and each Other Purchaser
---------------------
holding securities included in any registration shall furnish to the Company
such information regarding
12
<PAGE>
such Holder or Other Purchaser as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
12. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(c) So long as a Purchaser owns any Restricted Securities, furnish to
the Purchaser forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Purchaser may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Purchaser to sell any such securities
without registration.
13. No-Action Letter or Opinion of Counsel in Lieu of Registration.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, if at any time
after the date of the Company's initial public offering of its securities under
the Securities Act the Company shall have obtained from the Commission a "no-
action" letter in which the Commission has indicated that it will take no action
if, without registration under the Securities Act, any Holder disposes of
Registrable Securities covered by any request for registration made under this
Agreement in the manner in which such Holder proposes to dispose of the
Registrable Securities included in such request, or if in the opinion of counsel
for the Company concurred in by counsel for such Holder no registration under
the Securities Act is required in connection with such disposition, the
Registrable Securities included in such request shall not be eligible for
registration under this Agreement; provided, however, with respect to any Holder
who may deemed to be an "affiliate," as that term is defined under Rule 144, if,
notwithstanding the opinion of such counsel, the Holder is unable to dispose of
all of the Registrable Securities included in his request in the manner in which
such Holder so proposes without registration, the Registrable Securities
included in such request shall be eligible for registration under this
Agreement.
13
<PAGE>
14. Transfer or Assignment of Registration Rights. The rights to
---------------------------------------------
cause the Company to register Purchaser's securities granted to Purchaser by the
Company under Sections 5, 6 and 8 hereof may be transferred or assigned by
Purchaser to a transferee or assignee of any of the Restricted Securities;
provided that the Company is given written notice by Purchaser at the time of
said transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights is not deemed by the Board of Directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided further that the transferee or assignee of such rights assumes the
obligations of a Purchaser under this Agreement; and provided further that the
transferee or assignee of such rights is transferred at least twenty percent
(20%) of the Registrable Securities originally issued to Purchaser.
15. Subsequent Grant of Registration Rights. The Company shall not
---------------------------------------
grant rights to have securities other than the Registrable Securities registered
under the Securities Act that are pari passu or superior to the registration
----------
rights granted herein without the written consent of the holders of at least a
majority of the outstanding Registrable Securities.
16. "Market Stand-off" Agreement. Each Purchaser agrees, if
----------------------------
requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, not to sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by Purchaser during a
period of time determined by the Company and its underwriters (not to exceed 180
days) following the effective date of a registration statement of the Company
filed under the Securities Act, provided that all officers and directors of the
Company who then hold Common Stock (or other securities) of the Company enter
into similar agreements. Such agreement shall be in writing in a form
satisfactory to the Company and such underwriter. The Company may impose stop-
transfer instructions with respect to the Shares (or securities) subject to the
foregoing restriction until the end of said period.
17. Right of First Refusal.
----------------------
(a) New Issuances. The Company hereby grants to the Holders the right
-------------
of first refusal (the "RIGHT OF FIRST REFUSAL") to purchase, pro rata, all (or
any part) of "NEW SECURITIES" (as defined in this Section 17) that the Company
may, from time to time propose to sell and issue. Such pro rata share, for
purposes of this right of first refusal, is the ratio of (X) the sum of the
number of shares of Common Stock then owned by such Holder and the number of
shares of Common Stock issuable upon the conversion of the Shares then owned by
such Holder, to (Y) the sum of the total number of shares of Common Stock then
outstanding and the total number of shares of Common Stock issuable upon the
conversion of the total number of shares then outstanding. This right of first
refusal shall be subject to the following provisions:
(i) "NEW SECURITIES" shall mean any Common Stock and Preferred Stock
--------------
of the Company whether or not authorized on the date hereof, and rights,
options, or
14
<PAGE>
warrants to purchase Common Stock or Preferred Stock and securities of any type
whatsoever that are, or may become, convertible into Common Stock or Preferred
Stock; provided, however, that "NEW SECURITIES" does not include the shares of
Common Stock and Preferred Stock issued or issuable:
(A) upon conversion of shares of Preferred Stock (i) outstanding as of
the date hereof or (ii) acquired upon exercise of any warrants to Preferred
Stock outstanding as of the date hereof;
(B) as a dividend or distribution on Preferred Stock or as a result of
any event for which adjustment is made pursuant to any antidilution adjustments
made pursuant the Company's Articles of Incorporation;
(C) to officers, directors and employees of, and consultants to, the
Company pursuant to the Company's 1995 Stock Option Plan or such other
arrangement approved by the Company's Board of Directors (up to an additional
2,300,000 shares after the date hereof, with such 2,300,000 limitation not
applicable to any shares of Common Stock issued or issuable upon exercise of any
option, warrant or other right issued, granted or outstanding on or prior to the
date hereof);
(D) upon exercise of any option, warrant or other right issued,
granted or outstanding on or prior to the date hereof; or
(E) shares of Common Stock or Preferred Stock issued in connection
with any stock split, stock dividend, or recapitalization by the Company.
(F) by way of dividend or other distribution on shares of Common Stock
excluded by the foregoing clause(s) (A), (B), (C), (D) and (F).
(ii) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Each Holder shall have twenty
(20) business days after receipt of such notice to agree to purchase its pro
rata share of such New Securities at the price and upon the terms specified in
the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased. If any Holder fails to agree to
purchase its full pro rata share within such twenty (20) business day period,
the Company will give the Holders who did so agree (the "ELECTING HOLDERS")
notice of the number of shares which were not subscribed for. Such notice may
be by telephone if followed by written confirmation within two days. The
Electing Holders shall have ten (10) business days from the date of such notice
to agree to purchase pro rata all of the New Securities not purchased by such
non-purchasing Holders.
(iii) In the event that the Holders fail to exercise in full the
right of first refusal within the twenty (20) business plus ten (10) business
day period specified above, the
15
<PAGE>
Company shall have one hundred twenty (120) days thereafter to sell (or enter
into an agreement pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within sixty (60) days from the date of said
agreement) the New Securities respecting which the rights of the Holders were
not exercised at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has
not sold the New Securities within such one hundred twenty (120) day period (or
sold and issued New Securities in accordance with the foregoing within sixty
(60) days from the date of such agreement) the Company shall not thereafter
issue or sell any New Securities, without first offering such New Securities to
the Holders in the manner provided above.
(iv) The Right of First Refusal granted under this Section 17
shall expire immediately prior to the Public Offering.
(v) This Right of First Refusal is nonassignable except to any
transferee to whom registration rights may be transferred pursuant to Section 15
of this Agreement.
(vi) This Right of First Refusal shall terminate as to any Holder (or
any transferee or assignee of such Holder) at such time as such Shareholder
ceases to own any Shares or Common Stock issuable upon conversion of the Shares.
18. Governing Law. This Agreement and the legal relations between
-------------
the parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
19. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties regarding rights to registration
and terminates the Prior Agreement. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
20. Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Purchaser, at the address set forth on Exhibit A attached hereto, or at
---------
such other address as the Purchaser shall have furnished to the other parties
hereto in writing, or (b) if to any other holder of any securities, at such
address as such holder shall have furnished the other parties hereto in writing,
or, until any such holder so furnishes an address to the Company, then to and at
the address of the last holder of such Shares who has so furnished an address to
the Company, or (c) if to the Company, at the address of its principal offices
set forth on the signature page of this Agreement, or at such other address as
the Company shall have furnished to the other parties hereto in writing.
16
<PAGE>
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Amendments. Any provision of this Agreement may be amended,
----------
waived or modified upon the written consent of the Company, and the Purchasers
(or their assignees to whom Purchasers have expressly assigned their rights in
compliance with Section 14 hereof) who then hold (a) at least fifty percent
(50%) of the Registrable Securities then held by persons entitled to
registration rights hereunder, and (b) at least seventy-five percent (75%) of
the Series C Registrable Securities then held by persons entitled to
registration rights hereunder, (except with respect to Section 15, as to which
any amendment, waiver or modification shall require the approval of not less
than a majority of such Registrable Securities); provided any such amendment,
--------
waiver or modification applies by its terms to each applicable Purchaser and
each such assignee of a Purchaser and that Purchaser or such assignee of
Purchaser may waive any of such Holder's rights or the Company's obligations
hereunder without obtaining the consent of any other Purchaser or assignee;
provided further, that Exhibit A hereto shall be automatically amended to add
- ---------------- ---------
thereto (i) any Purchaser that executes this Agreement subsequent to the date
hereof with the consent of the Company's Board of Directors, and (ii) any
warrant holder who receives a warrant to purchase the Company's equity
securities in connection with an equipment lease or debt transaction unanimously
offered by the Company's Board of Directors.
[intentionally blank]
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
GENESYS TELECOMMUNICATIONS LABORATORIES
By: /s/ Gregory Shenkman
------------------------------------------
Gregory Shenkman, Chief Executive Officer
Address: 1155 Market Street
San Francisco, CA 94103
PURCHASER
MCI Telecommunications Corporation
-----------------------------------------------
(Print Name of Purchaser)
/s/ John W. Gerdelman
-----------------------------------------------
(Signature of Purchaser or Authorized Signatory)
John W. Gerdelman, Executive Vice President
-----------------------------------------------
(Print Name and Title of Authorized Signatory)
Address: 1801 Pennsylvania Ave., N.W.
-----------------------------------------------
Washington, D.C. 20006
-----------------------------------------------
18
<PAGE>
EXHIBIT A
---------
Series A Holders
- ----------------
Benchmark Capital Partners, L.P.
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Benchmark Founders' Fund, L.P.
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
John Chambers
Cisco Systems, Inc.
255 West Tasman Drive
San Jose, CA 95134-1706
Denware, Warren Handelgesellschaft MBH TSD
Schillerstrasse 7
45964 Gladbeck
Germany
James Jordan
2507 Sixteenth Avenue
Carmel, CA 93923
RJ Family Trust
309 Eleanor Avenue
Los Altos, CA 94022
Ori S. Sasson
2 Irving Court
Orinda, CA 94563
WS Investments 96A
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Series B Holders
- ----------------
Benchmark Capital Partners, L.P.
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Benchmark Founders' Fund, L.P.
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Weiss Peck & Greer Venture Associates III, L.P.
c/o Weiss Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
WPG Enterprise Fund II, L.P.
c/o Weiss Peck & Greer
555 California Street, Suite 4760
San Francisco, CA 94104
Series C Holders
- ----------------
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: John W. Gerdelman
Intel Corporation
2625 Walsh Avenue
Santa Clara, CA 95052
Attn: Guy Anthony
Common Holder
- -------------
Bruncor Inc.
One Brunswick Square
Saint John, New Brunswick
Canada E2L 41 A
Attn: C. Reid Parker
<PAGE>
EXHIBIT 5.1
April 3, 1997
Genesys Telecommunications Laboratories, Inc.
1155 Market Street
San Francisco, CA 94103
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 to be filed
by you with the Securities and Exchange Commission (the "Commission") on April
3, 1997 (the "Registration Statement"), in connection with the registration
under the Securities Act of 1933, as amended, of 2,300,000 shares of your Common
Stock (the "Shares"). The Shares include an over-allotment option to purchase
300,000 shares granted to the Underwriters. As your counsel in connection with
this transaction, we have examined the proccedings taken and are familiar with
the proceedings proposed to be taken by you in connection with the sale and
issuance of the Shares.
It is our opinion that, upon conclusion of the proceedings being
taken or contemplated by us, as your counsel, to be taken prior to the issuance
of the Shares, such Shares, when issued and sold in the manner described in the
Registration Statement, will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to such
Registration Statement, and further consent to the use of our name wherever
appearing in such Registration Statement, including the prospectus constituting
a part thereof, and any amendment thereto.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("AGREEMENT") is made as of this ___
day of ______________, 199__, by and between Genesys Telecommunications
Laboratories, a California corporation (the "COMPANY"), and ______________
("INDEMNITEE").
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general
reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and
directors to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available
as adequate under the present circumstances, and Indemnitee and other
officers and directors of the Company may not be willing to continue to
serve as officers and directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as
to provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
INDEMNIFICATION.
---------------
Third Party Proceedings. The Company shall indemnify Indemnitee if
-----------------------
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement (if
such settlement is approved in advance by the Company, which approval shall not
be unreasonably withheld) actually and reasonably incurred by Indemnitee in
connection with such action or proceeding if Indemnitee acted in
<PAGE>
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's conduct
was unlawful. The termination of any action or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---------------
shall not, of itself, create a presumption that (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, or (ii) with respect to any
criminal action or proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.
Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and its shareholders, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudicated by court orders or judgment to be liable to the Company in
the performance of Indemnitee's duty to the Company and its shareholders unless
and only to the extent that the court in which such action or proceeding is or
was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for expenses and then only to the extent that the court shall
determine.
EXPENSES; INDEMNIFICATION PROCEDURE.
-----------------------------------
Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action or proceeding referenced in Section
1(a) or (b) hereof (but not amounts actually paid in settlement of any such
action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
2
<PAGE>
Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
--------------------------------
precedent to his right to be indemnified under this Agreement, give the Company
notice in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or will be sought under this Agreement. Notice
to the Company shall be directed to the Chief Executive Officer of the Company
at the address shown on the signature page of this Agree ment (or such other
address as the Company shall designate in writing to Indemnitee). Notice shall
be deemed received three business days after the date postmarked if sent by
domestic certified or registered mail, properly addressed; otherwise notice
shall be deemed received when such notice shall actually be received by the
Company. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
Procedure. Any indemnification and advances provided for in Section 1
---------
and this Section 2 shall be made no later than forty-five (45) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Articles of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within forty-five (45) days after a written request for payment
thereof has first been received by the Company, Indemnitee may, but need not, at
any time thereafter bring an action against the Company to recover the unpaid
amount of the claim and, subject to Section 12 of this Agreement, Indemnitee
shall also be entitled to be paid for the expenses (including attorneys' fees)
of bringing such action. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in connection with
any action or proceeding in advance of its final disposition) that Indemnitee
has not met the standards of conduct which make it permissible under applicable
law for the Company to indemnify Indemnitee for the amount claimed, but the
burden of proving such defense shall be on the Company and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Subsection 2(a)
unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
Notice to Insurers. If, at the time of the receipt of a notice of a
------------------
claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay,
3
<PAGE>
on behalf of the Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such policies.
Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, which approval shall
not be reasonably withheld, upon the delivery to Indemnitee of written notice of
its election so to do. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provi sions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule which
expands the right of a California corporation to indemnify a member of its Board
of Directors, an officer or other corporate agent, such changes shall be ipso
facto, within the preview of Indemnitee's rights and Company's obligations,
under this Agreement. In the event of any change in any applicable law, statute
or rule which narrows the right of a California corporation to indemnify a
member of its Board of Directors, an officer or other corporate agent, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement shall have no effect on this Agreement or the parties'
rights and obligations hereunder.
Nonexclusivity. The indemnification provided by this Agreement shall
--------------
not be deemed exclusive of any rights to which Indemnitee may be entitled under
the Company's Articles of Incorporation, its Bylaws, any agreement, any vote of
shareholders or disinterested Directors, the Corporation Law of the State of
California, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
4
<PAGE>
PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision of
-----------------------
this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge that
----------------------
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from time to
----------------------------------------
time, make the good faith determination whether or not it is practicable for the
Company to obtain and maintain a policy or policies of insurance with reputable
insurance companies providing the officers and directors of the Company with
coverage for losses from wrongful acts, or to ensure the Company's performance
of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.
SEVERABILITY. Nothing in this Agreement is intended to require or shall be
------------
construed as requiring the Company to do or fail to do any act in violation of
applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
5
<PAGE>
EXCEPTIONS. Any other provision herein to the contrary notwithstanding,
-----------
the Company shall not be obligated pursuant to the terms of this Agreement:
Excluded Acts. To indemnify Indemnitee for any acts or omissions or
-------------
transactions from which a director may not be relieved of liability under the
California General Corporation Law.
Claims Initiated by Indemnitee. To indemnify or advance expenses to
------------------------------
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or
Lack of Good Faith. To indemnify Indemnitee for any expenses incurred
------------------
by the Indemnitee with respect to any proceeding instituted by Indemnitee to
enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in such
proceeding was not made in good faith or was frivolous; or
Insured Claims. To indemnify Indemnitee for expenses or liabilities
--------------
of any type whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes or penalties, and amounts paid in settlement) which have been paid
directly to Indemnitee by an insurance carrier under a policy of officers' and
directors' liability insurance maintained by the Company.
Claims Under Section 16(b). To indemnify Indemnitee for expenses and
--------------------------
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
CONSTRUCTION OF CERTAIN PHRASES.
-------------------------------
For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as
6
<PAGE>
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement.
COUNTERPARTS. This Agreement may be executed in one or more counterparts,
------------
each of which shall constitute an original.
SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Company
----------------------
and its successors and assigns, and shall inure to the benefit of Indemnitee and
Indemnitee's estate, heirs, legal representatives and assigns.
ATTORNEYS' FEES. In the event that any action is instituted by Indemnitee
---------------
under this Agreement to enforce or interpret any of the terms hereof, Indemnitee
shall be entitled to be paid all costs and expenses, including reasonable
attorneys' fees, incurred by Indemnitee with respect to such action, unless as a
part of such action, the court of competent jurisdiction determines that each of
the material assertions made by Indemnitee as a basis for such action were not
made in good faith or were frivolous. In the event of an action instituted by
or in the name of the Company under this Agreement or to enforce or interpret
any of the terms of this Agreement, Indemnitee shall be entitled to be paid all
costs and expenses, including reasonable attorneys' fees, incurred by Indemnitee
in defense of such action (including with respect to Indemnitee's counterclaims
and cross-claims made in such action), unless as a part of such action the court
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
NOTICE. All notices, requests, demands and other communications under this
-------
Agreement shall be in writing and shall be deemed duly given (i) if delivered by
hand and receipted for by the party addressee, on the date of such receipt, or
(ii) if mailed by domestic certified or registered mail with postage prepaid, on
the third business day after the date postmarked. Addresses for notice to
either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.
CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
------------------------
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement
7
<PAGE>
and agree that any action instituted under this Agreement shall be brought only
in the state courts of the State of California.
CHOICE OF LAW. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of California, as applied to
contracts between California residents entered into and to be performed entirely
within California.
SUBROGATION. In the event of payment under this Agreement, the Company
-----------
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable to
corporation effectively to bring suit to enforce such rights.
CONTINUATION OF INDEMNIFICATION. All agreements and obligations of the
-------------------------------
Company contained herein shall continue during the period that Indemnitee is a
director, officer or agent of the Company and shall continue thereafter so long
as Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Indemnitee was
serving in the capacity referred to herein.
AMENDMENT AND TERMINATION. Subject to Section 17, no amendment,
-------------------------
modification, termination or cancellation of this Agreement shall be effective
unless in writing signed by both parties hereto.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
GENESYS TELECOMMUNICATIONS LABORATORIES
By:
--------------------------------
Title:
--------------------------------
Address: 1155 Market Street, 11th Floor
San Francisco, CA 94103
AGREED TO AND ACCEPTED:
INDEMNITEE:
- ----------------------------------------
- ----------------------------------------
ADDRESS:
- ----------------------------------------
- ----------------------------------------
9
<PAGE>
EXHIBIT 10.2
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
1995 STOCK OPTION PLAN
(as amended January 30, 1997)
Purposes of the Plan. The purposes of this Stock Option Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
Definitions. As used herein, the following definitions shall apply:
-----------
"Administrator" means the Board or any of its Committees appointed pursuant
-------------
to Section 4 of the Plan.
"Board" means the Board of Directors of the Company.
-----
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Committee" means a Committee appointed by the Board of Directors in
---------
accordance with Section 4 of the Plan.
"Common Stock" means the Common Stock of the Company.
------------
"Company" means Genesys Telecommunications Laboratories, Inc., a California
-------
corporation.
"Consultant" means any person who is engaged by the Company or any Parent
----------
or Subsidiary to render consulting or advisory services and is compensated for
such services, and any director of the Company whether compensated for such
services or not. If and in the event the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant shall
thereafter not include directors who are not compensated for their services or
are paid only a director's fee by the Company.
"Continuous Status as an Employee or Consultant" means that the employment
----------------------------------------------
or consulting relationship with the Company, any Parent or Subsidiary is not
interrupted or terminated. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of (i) any leave of absence approved
by the Company or (ii) transfers between
<PAGE>
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave. For purposes of Incentive
Stock Options, no such leave may exceed 90 days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract, including Company
policies. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 91st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
"Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
If the Common Stock is quoted on the NASDAQ System but not on the
Nasdaq National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination, or;
In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Administrator.
"Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
"Nonstatutory Stock Option" means an Option not intended to qualify as
-------------------------
an Incentive Stock Option.
"Officer" means a person who is an officer of the Company within the
-------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
"Option" means a stock option granted pursuant to the Plan.
------
-2-
<PAGE>
"Optioned Stock" means the Common Stock subject to an Option.
--------------
"Optionee" means an Employee or Consultant who receives an Option.
--------
"Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
"Plan" means this 1995 Stock Option Plan.
----
"Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 11 below.
"Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
Stock Subject to the Plan. Subject to the provisions of Section 11 of the
-------------------------
Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 6,292,834 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
Administration of the Plan.
---------------------------
Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
Plan Procedure after the Date, if any, upon Which the Company becomes
---------------------------------------------------------------------
Subject to the Exchange Act.
- ----------------------------
Administration with Respect to Directors and Officers. With respect to
-----------------------------------------------------
grants of Options to Employees who are also officers or directors of the
Company, the Plan shall be administered by (A) the Board if the Board may
administer the Plan in compliance with Rule 16b-3 promulgated under the Exchange
Act or any successor thereto ("Rule 16b-3") with respect to a plan intended to
qualify thereunder as a discretionary plan, or (13) a committee designated by
the Board to administer the Plan, which committee shall be constituted in such a
manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer
-3-
<PAGE>
the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan.
Multiple Administrative Bodies. If permitted by Rule 16b-3, the Plan may be
------------------------------
administered by different bodies with respect to directors, non-director
officers and Employees who are neither directors nor officers.
Administration With Respect to Consultants and Other Employees. With
--------------------------------------------------------------
respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by (A) the
Board or (13) a committee designated by the Board, which committee shall be
constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of California
corporate and securities laws, of the Code, and of any applicable stock exchange
(the "Applicable Laws"). Once appointed, such Committee shall continue to serve
in its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
Powers of the Administrator. Subject to the provisions of the Plan and, in
---------------------------
the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, including
the approval, if required, of any stock exchange upon which the Common Stock is
listed, the Administrator shall have the authority, in its discretion:
to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
to select the Consultants and Employees to whom Options may from
time to time be granted hereunder;
to determine whether and to what extent Options are granted
hereunder;
to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
to approve forms of agreement for use under the Plan;
to determine the terms and conditions of any award granted
hereunder;
to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(f) instead of Common Stock;
-4-
<PAGE>
to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option has declined since the date the Option was granted; and
to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
Effect of Administrator's Decision. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
Eligibility.
-----------
Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which
become exercisable for the first time during any calendar year
(under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:
No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 100,000 Shares.
-5-
<PAGE>
The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.
If an Option is canceled in the same fiscal year of the Company in
which it was granted (other than in connection with a transaction described in
Section 11), the canceled Option will be counted against the limit set forth in
Section 5(d)(i). For this purpose, if the exercise price of an Option is
reduced, the transaction will be treated as a cancellation of the Option and the
grant of a new Option.
Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
Option Exercise Price and Consideration.
---------------------------------------
The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
In the case of an Incentive Stock Option
granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be no less than 100%
of the Fair Market Value per Share on the date of grant.
In the case of a Nonstatutory Stock Option
granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
-6-
<PAGE>
granted to any person, the per Share exercise price shall be
no less than 85% of the Fair Market Value per Share on the date of grant.
The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
Exercise of Option.
-------------------
Procedure for Exercise: Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event that an Optionee's Continuous Status as an Employee or Consultant
terminates but not in the event of
-7-
<PAGE>
a change of status from Employee to Consultant (in which case an Employee's
Incentive Stock Option shall automatically convert to a Nonstatutory Stock
Option on the ninety-first (91st) day following such change of status) or from
Consultant to Employee), other than upon the Optionee's death or disability, the
Optionee may exercise his or her Option, but only within such period of time but
not less than thirty (30) days, as is determined by the Administrator, and only
to the extent that the Optionee was entitled to exercise it at the date of
termination but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
Disability of Optionee. In the event of termination of an Optionee's
----------------------
consulting relationship or Continuous Status as an Employee as a result of his
or her disability, Optionee may, but only within six (6) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a Nonstatutory
Stock Option on the day three months and one day following such termination. To
the extent that Optionee is not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
Death of Optionee. In the event of the death of an Optionee, the Option
-----------------
may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
Rule 16b-3. Options granted to persons subject to Section 16(b) of the
----------
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
Buyout Provisions. The Administrator may at any time offer to buy out
-----------------
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions
-8-
<PAGE>
as the Administrator shall establish and communicate to the Optionee at the time
that such offer is made.
Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
Adjustments Upon Changes in Capitalization or Merger.
-----------------------------------------------------
Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of con
sideration by the Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, the Board shall notify the Optionee at least
fifteen (15) days prior to such proposed action. To the extent it has not been
previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.
Merger. In the event of a merger of the Company with or into another
------
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the
-9-
<PAGE>
exercise of the Option for each Share of Optioned Stock subject to the Option to
be solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger.
Time of Granting Options. The date of grant of an Option shall, for all
------------------------
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
Amendment and Termination of the Plan.
-------------------------------------
Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
Effect of Amendment or Termination. Any such amendment or termination
----------------------------------
of the Plan shall not affect Options already granted, and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
----------------------------------
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-10-
<PAGE>
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
Agreements. Options shall be evidenced by written agreements in such
----------
form as the Board shall approve from time to time.
Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
-11-
<PAGE>
EXHIBIT 10.3
GENESYS TELECOMMUNICATIONS LABORATORIES
---------------------------------------
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
This Agreement is made as of the 22nd day of January, 1997 by and
between Genesys Telecommunications Laboratories, a California corporation (the
"COMPANY"), and ______________ (the "PURCHASER").
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. Purchase and Sale of the Shares. Subject to the terms and
-------------------------------
conditions of this Agreement, the Company hereby agrees to sell to Purchaser and
Purchaser agrees to purchase from the Company at the Closing 42,000 shares of
the Company's Common Stock (the "SHARES") at a price of $0.75 per share (the
"PURCHASE PRICE"), for an aggregate purchase price of $31,500 (the "AGGREGATE
PURCHASE PRICE").
2. Closing. The purchase and sale of the Shares shall occur at a
-------
closing (the "CLOSING") to be held at a time to be mutually agreed upon by the
Company and Purchaser. The Closing will take place at the principal office of
the Company or at such other place as shall be designated by the Company. At
the Closing, Purchaser shall deliver to the Company the Aggregate Purchase Price
payable upon delivery to the Company, at the election of Purchaser, of (i) a
check in the amount of $31,500 made payable to the Company, (ii) Purchaser's
promissory note (the "NOTE") with a face principal amount of $31,500,
substantially in the form attached hereto as Exhibit A, or a combination of
---------
check and Note. The Note shall be secured by a pledge of all of the Shares
purchased hereunder, pursuant to a security agreement of even date herewith to
be entered into between Purchaser and the Company (the "SECURITY AGREEMENT"), in
the form attached hereto as Exhibit B. The Company will, promptly after
execution of this Agreement, issue a stock certificate representing the Shares
registered in the name of the Purchaser.
3. Repurchase Option.
-----------------
(a) In the event that Purchaser's continuous status as an employee or
consultant of the Company (including a parent or subsidiary of the Company)
terminates for any or no reason, including resignation, involuntary termination,
death or disability (collectively, a "TERMINATION"), the Company shall upon the
date of such Termination (as reasonably fixed and determined by the Company)
(the "TERMINATION DATE") have an irrevocable right for a period of ninety (90)
days from such Termination Date to repurchase any or all of the Unreleased
Shares (as defined in Section 4 hereof) (the "REPURCHASE OPTION"), at the
Purchase Price for the Unreleased Shares being repurchased (subject to
adjustment as set forth in Section 11 hereof) (the "REPURCHASE PRICE").
<PAGE>
(b) The Repurchase Option shall be exercised by the Company within
ninety (90) days following the Termination Date by delivering or mailing to
Purchaser or Purchaser's executor, (i) written notice in the manner provided for
in Section 15 hereof, and (ii) a check in the amount of the aggregate Repurchase
Price. Upon delivery of such notice and the payment of the aggregate Repurchase
Price as described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Shares being repurchased by the Company.
(c) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Company, or a parent or subsidiary of the Company, or
their respective shareholders from removing or otherwise terminating Purchaser's
status as an employee or consultant of the Company.
(d) The Company may assign its rights and delegate its duties under
this Agreement, including the Repurchase Option. Accordingly, whenever the
Company shall have the right to repurchase Shares hereunder, the Company may
designate and assign one or more employees, officers, directors or shareholders
of the Company or other persons or organizations to exercise all or a part of
the Company's Repurchase Option under this Agreement. If the Repurchase Option
is assigned by the Company and the fair market value (as of the Termination
Date) of the Unreleased Shares being repurchased, as determined in good faith by
the Board of Directors of the Company, exceeds the aggregate Repurchase Price,
and such assignee exercises the Repurchase Option, then the assignee shall pay
to the Company the difference between the fair market value of the Unreleased
Shares that are repurchased and the aggregate Repurchase Price.
4. Release of Shares From Repurchase Option.
----------------------------------------
(a) Provided in each case that Purchaser's continuous status as an
employee or consultant of the Company has not terminated prior to such date:
the Shares subject to this Agreement shall be released from the
Repurchase Option to the extent of twenty-five percent (25%) of the Shares
subject to this Agreement as of July 17, 1997 and one-forty-eighth (1/48th) of
the Shares subject to the Agreement at the end of each month thereafter;
in addition to the foregoing, unless expressly waived by Purchaser, in
the event of (A) the sale of all or substantially all of the Company's assets or
the merger or consolidation of the Company (or any series of transactions which
results in such a merger or consolidation) with or into another company pursuant
to which the shareholders of the Company immediately prior to the closing of
such merger or consolidation (or series of transactions) own less than 50% of
the voting securities of the surviving company immediately following the closing
of such merger or consolidation (a "MERGER" and collectively with the sale of
assets an "ACQUISITION"), and (B) the acquiror fails
---
2
<PAGE>
to provide Purchaser with both cash compensation and operational responsibility
that is at least equal in terms of salary and benefits and operating duties,
respectively, to that which Purchaser was receiving from the Company at the time
of the Acquisition, then all of the Unreleased Shares will be released from the
Repurchase Option as of the closing date of the Acquisition and become fully
vested immediately prior to the closing of the Acquisition.
(b) Any of the Shares which have not yet been released from the
Company's Repurchase Option are referred to herein as "Unreleased Shares."
5. Representations of Purchaser. In connection with Purchaser's
----------------------------
purchase of the Shares, Purchaser hereby represents and warrants to the Company
as follows:
(a) Investment Intent, Capacity to Protect Interests. Purchaser is
------------------------------------------------
purchasing the Shares solely for his own account for investment and not with a
view to or for sale in connection with any distribution of the Shares or any
portion thereof and not with any present intention of selling, offering to sell
or otherwise disposing of or distributing the Shares or any portion thereof in
any transaction other than a transaction exempt from registration under the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Purchaser also
represents that the entire legal and beneficial interest of the Shares is being
purchased, and will be held, for Purchaser's account only, and neither in whole
or in part for any other person. Purchaser either has a pre-existing business
or personal relationship with the Company or one or more of its officers,
directors or controlling persons or by reason of Purchaser's business or
financial experience or the business or financial experience of Purchaser's
professional advisors who are unaffiliated with and who are not compensated by
the Company or any affiliate or selling agent of the Company, directly or
indirectly, could be reasonably assumed to have the capacity to evaluate the
merits and risks of an investment in the Company and to protect Purchaser's own
interests in connection with this transaction.
(b) Resident. Purchaser's principal residence is as set forth on the
--------
signature page hereof.
(c) Information Concerning Company. Purchaser has heretofore
------------------------------
discussed the Company and its plans, operations and financial condition with the
Company's officers, knows that the Company is a highly speculative business and
has heretofore received all such information as Purchaser has deemed necessary
and appropriate to enable Purchaser to evaluate the financial risk inherent in
making an investment in the Shares, and Purchaser has received satisfactory and
complete information concerning the business and financial condition of the
Company in response to all inquiries in respect thereof.
(d) Economic Risk. Purchaser realizes that the purchase of the Shares
-------------
will be a highly speculative investment and involves a high degree of risk, and
Purchaser is able, without impairing his financial condition, to hold the Shares
for an indefinite period of time and to suffer a complete loss on Purchaser's
investment.
3
<PAGE>
(e) Restricted Securities. Purchaser understands and acknowledges
---------------------
that:
(i) The sale of the Shares has not been registered under the
Securities Act, and the Shares must be held indefinitely unless subsequently
---
registered under the Securities Act or an exemption from such registration is
available (such as Rule 144 or the resale provisions of Rule 701 under the
Securities Act) and the Company is under no obligation to register the Shares;
(ii) The share certificate representing the Shares will be stamped
with the legends specified in Section 9 hereof; and
(iii) The Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(f) Disposition under the Securities Act. Purchaser understands that
------------------------------------
the Shares are restricted securities within the meaning of Rule 144 promulgated
under the Securities Act; that the exemption from registration under Rule 144
will not be available in any event for at least two years from the date of
purchase and payment of the Shares (unless Rule 701 promulgated under the
Securities Act is available), and even then will not be available unless (i) a
public trading market then exists for the Common Stock of the Company, (ii)
adequate information concerning the Company is then available to the public, and
(iii) other terms and conditions of Rule 144 are complied with; and that any
sale of the Shares may be made only in limited amounts in accordance with such
terms and conditions. Purchaser further understands that the resale provisions
of Rule 701, if available, will not apply until 90 days after the Company
becomes subject to the reporting obligations under the Securities Exchange Act
of 1934 (the "EXCHANGE ACT"). There can be no assurance that the requirements
of Rule 144 or Rule 701 will be met, or that the stock will ever be saleable.
(g) Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, Purchaser further agrees that he shall in
no event make any disposition of all or any portion of the Shares unless and
until:
(i) (A) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said Registration Statement; (B) the resale provisions of
Rule 701 or Rule 144 are available in the opinion of counsel to the Company; or
(C)(1) Purchaser shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, (2) Purchaser shall have furnished the
Company with an opinion of Purchaser's counsel to the effect that such
disposition will not require registration of such Shares under the Securities
Act, and (3) such opinion of Purchaser's counsel shall have been
4
<PAGE>
concurred with by counsel for the Company and the Company shall have advised
Purchaser of such concurrence; and,
---
(ii) The Shares proposed to be transferred shall no longer be subject
to the Repurchase Option set forth in Section 3 hereof and Purchaser shall have
complied with the right of first refusal set forth in Section 6 hereof and the
"lock-up" provisions set forth in Section 10 hereof.
(h) Valuation of Common Stock. Purchaser understands that the Shares
-------------------------
have been valued by the Board of Directors and that the Company believes this
valuation represents a fair attempt at reaching an accurate appraisal of their
worth; Purchaser understands, however, that the Company can give no assurances
that such price is in fact the fair market value of the Shares and that it is
possible that, with the benefit of hindsight, the Internal Revenue Service would
successfully assert that the value of the Shares on the date of purchase is
substantially greater than so determined.
If the Internal Revenue Service were to succeed in a tax determination
that the Shares received had value greater than that upon which the transaction
was based, the additional value would constitute ordinary income as of the date
of his receipt. The additional taxes (and interest) due would be payable by
Purchaser, and there is no provision for the Company to reimburse him for that
tax liability, and Purchaser assumes all responsibility for such potential tax
liability. In the event that such additional value would represent more than 25
percent of Purchaser's gross income for the year in which the value of the
Shares was taxable, the Internal Revenue Service would have six years from the
due date for filing the return (or the actual filing date of the return if filed
thereafter) within which to assess Purchaser the additional tax and interest
which would then be due.
The Company would have the benefit, in any such transaction, if a
determination was made prior to the three year statute of limitations period
affecting the Company, of an increase in its deduction for compensation paid,
which would offset its operating profits, or, if not profitable, would create
net operating loss carry forward arising from operations in that year.
(i) Section 83(b) Election. Purchaser understands that Section 83 of
----------------------
the Internal Revenue Code of 1986 (the "CODE"), taxes as ordinary income the
difference between the amount paid for the Shares and the fair market value of
the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
pursuant to the Repurchase Option. Purchaser understands that he may elect to
be taxed at the time the Shares are purchased rather than when and as the
Repurchase Option expires by filing an election under Section 83(b) of the Code
with the Internal Revenue Service within 30 days from the date of purchase.
Even if the fair market value of the Shares equals the amount paid for the
Shares, the election must be made to avoid adverse tax consequences in the
future. The form for making this election is attached as Exhibit C hereto.
---------
Purchaser understands that failure to make this
5
<PAGE>
filing timely will result in the recognition of ordinary income by Purchaser, as
the Repurchase Option lapses, on the difference between the purchase price and
the fair market value of the Shares at the time such restrictions lapse.
(j) PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
PURCHASER'S BEHALF.
6. Company's Right of First Refusal. Before any Shares held by
--------------------------------
Purchaser or any transferee (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 6 (the "RIGHT OF FIRST REFUSAL").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee (a "PROPOSED TRANSFEREE"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price per share or other consideration for which the Holder
proposes to transfer the Shares (the "OFFERED PRICE"), and the Holder shall
offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within 30 days
----------------------------------
after receipt of the Notice, the Company and/or its assignee(s) may, by giving
written notice to the Holder, elect to purchase all or any portion of the Shares
proposed to be transferred to any one or more of the Proposed Transferees, at
the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price for the Shares purchased by
--------------
the Company or its assignee(s) shall be the Offered Price, or such other amount
agreed to in writing by the Company and the Purchaser (the "COMPANY PURCHASE
PRICE"). If the Offered Price includes consideration other than cash, the cash
equivalent value of the non-cash consideration shall be determined by the Board
of Directors of the Company in good faith.
(d) Payment. Payment of the Company Purchase Price shall be made in
-------
cash (or such other form of consideration mutually agreed to by the parties)
within thirty (30) days after receipt of the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred are not purchased by the Company and/or its assignee(s)
as provided in this Section 6, then the Holder may sell or otherwise transfer
such Shares to the
6
<PAGE>
Proposed Transferee(s) at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within ninety (90) days after the
date of the Notice and provided further that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of Sections 5 and 6 of this
Agreement shall continue to apply to the Shares that are transferred to such
Proposed Transferee. If the Shares described in the Notice are not transferred
to the Proposed Transferee(s) within such ninety (90) day period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section 6 notwithstanding, the transfer of any or all of the
Shares during Purchaser's lifetime or on Purchaser's death by will or intestacy
to Purchaser's immediate family or a trust for the benefit of Purchaser or
Purchaser's immediate family shall be exempt from the provisions of this Section
6. "Immediate family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section 6, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 6.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate upon the earlier of the closing of (i) the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act, (ii) a sale of all or substantially all the assets of
the Company and (iii) a Merger.
(h) Application of Repurchase Option. Nothing contained in this
--------------------------------
Section 6 shall serve to allow the transfer by Purchaser of any Unreleased
Shares.
7. Rights as Shareholder. Subject to the terms and conditions of
---------------------
this Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers full payment for the Shares until such time as Purchaser disposes of
the Shares or the Company and/or its assignee(s) exercises the Repurchase Option
hereunder. Upon such exercise, Purchaser shall have no further rights as a
holder of the Shares so purchased except the right to receive payment for the
Shares so purchased in accordance with the provisions of this Agreement, and
Purchaser shall forthwith cause the certificate(s) evidencing the Shares so
purchased to be surrendered to the Company for transfer or cancellation.
8. Escrow. As security for the faithful performance of this
------
Agreement, Purchaser agrees, immediately upon receipt of the certificate(s)
evidencing the Shares, to deliver such certificate(s), together with a stock
power in the form of Exhibit D attached hereto, executed by Purchaser and by
---------
Purchaser's spouse, if any (with the date and number
7
<PAGE>
of Shares left blank), to the Secretary of the Company or its designee ("ESCROW
AGENT"); said documents are to be held by the Escrow Agent pursuant to the Joint
Escrow Instructions of the Company and Purchaser set forth in Exhibit E attached
---------
hereto and incorporated by this reference, which instructions shall also be
delivered to the Escrow Agent after the Closing.
9. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Purchaser understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A MARKET STANDOFF PROVISION AND A RIGHT OF
REPURCHASE HELD BY THE ISSUER OR ITS ASSIGNEE(S), AS SET FORTH IN THE
RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND
MARKET STANDOFF PROVISION ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8
<PAGE>
10. Market Standoff Agreement. Purchaser hereby agrees that if so
-------------------------
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any equity securities of the Company
under the Securities Act, Purchaser shall not sell or otherwise transfer any
Shares or other securities of the Company during the period of time following
the effective date of a registration statement of the Company filed under the
Securities Act that is agreed to by the Company and such representatives of the
underwriters as the lock-up period for the holders of the Company's Common
Stock. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period of
time.
11. Adjustment for Stock Split. All references to the number of
--------------------------
Shares and the Purchase Price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
12. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Purchaser and its heirs, executors, administrators, successors and assigns.
13. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Company's Board of Directors which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board shall be final and
binding on the Company and on Purchaser.
14. Governing Law; Severability. This Agreement shall be governed by
---------------------------
and construed in accordance with the laws of the State of California, excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
15. Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given (a) five (5) days after deposit with
the U.S. Postal Service, if delivered by first class mail, postage prepaid, (b)
upon delivery, if delivered by hand, or (c) one business day after the business
day of deposit with Federal Express or similar overnight courier, freight
prepaid, and shall be addressed (i) if to Purchaser, at Purchaser's address as
set forth beneath Purchaser's signature to this Agreement, or at such other
address as Purchaser shall have furnished to the Company in writing, (ii) if to
the Company, to Genesys Telecommunications Laboratories, with copy to Brobeck,
Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto,
California 94303-0913, Attention: Jacqueline E. Cowden, or at such other address
as the Company shall have furnished to
9
<PAGE>
Purchaser, or (iii) if to the Escrow Agent, to Jacqueline E. Cowden, Two
Embarcadero Place, 2200 Geng Road, Palo Alto, California 94303-0913.
16. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. Entire Agreement. This Agreement constitutes the entire
----------------
agreement of the parties and supersedes in its entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof.
18. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
PURCHASER
----------------------------------------------
-------------------------
Address:
GENESYS TELECOMMUNICATIONS LABORATORIES, a
California corporation
By:
-------------------------------------------
Gregory Shenkman, President
Address: 1155 Market Street, 11th Floor
San Francisco, California 94103
10
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned, ______________, spouse of ___________, has read and
hereby approves the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest shall be
similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-
fact with respect to any amendment or exercise of any right under the Agreement.
-------------------------------------------
------------------------
11
<PAGE>
FULL RECOURSE, SECURED PROMISSORY NOTE
$31,500.00 San Francisco, California January 22, 1997
FOR VALUE RECEIVED, _____________ promises to pay to Genesys
Telecommunications Laboratories, a California corporation (the "Corporation"),
-----------
or order, the principal sum of Thirty-One Thousand Five Hundred Dollars
($31,500.00), together with interest on the unpaid principal balance from the
date hereof at the rate of six and one-half percent (6.5%) per annum, compounded
annually.
Principal and accrued interest hereunder shall be payable in lawful
money of the United States of America.
The unpaid balance of principal and interest subject to this Note
shall be due and payable upon the earlier of (i) January 22, 2002 and (ii) the
sale of shares of Common Stock of the Corporation by the Purchaser; provided,
however, in the event that the undersigned's continuous status as an employee or
consultant should terminate for any reason, this Note shall, at the option of
the Company, be accelerated, and the whole unpaid balance of principal and
accrued interest subject to this Note shall be due and payable within ninety
(90) days of the date of such termination. Should any action be instituted for
the collection of this Note, the reasonable costs of collection of the holder,
including attorneys' fees and expenses, shall be paid by the undersigned.
The Corporation may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of (i) a Restricted Stock Purchase
Agreement dated January 22, 1997 (the "Purchase Agreement") and (ii) a Security
------------------
Agreement of even date January 22, 1997, each between the Corporation and the
Purchaser. Capitalized terms used herein, unless otherwise defined, shall have
the meanings assigned to them in the Purchase Agreement. This Note is secured
by a pledge of Common Stock under the terms of the Security Agreement and is
subject to all the provisions thereof.
This Note shall be with full recourse against the undersigned. In the
event of default, the initial recourse of the holder of the note for payment of
the undersigned's obligations hereunder (including principal, interest and costs
of collection) shall be to proceed against the collateral securing the Note
pursuant to the Security Agreement. The undersigned waives notice of default,
presentation or demand for payment and protest and notice of nonpayment or
dishonor.
12
<PAGE>
This Note shall be governed by the laws of the State of California as they apply
to contracts entered into and wholly to be performed within such state.
PURCHASER
---------------------------------------
--------------------
13
<PAGE>
EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of January 22, 1997 among Genesys
Telecommunications Laboratories, a California corporation ("Pledgee"),
-------
________________ ("Pledgor") and _____________________ of Brobeck, Phleger &
-------
Harrison LLP (the "Escrow Agent").
------------
WHEREAS, Pledgor has elected to purchase a total of 42,000 Shares of
Common Stock of Pledgee (the "Shares") pursuant to a Restricted Stock Purchase
------
Agreement dated January 22, 1997 (the "Purchase Agreement") for an aggregate
------------------
purchaser price of $31,500 (the "Purchase Price"). Under the terms of such
--------------
Purchase Agreement, Pledgor has further elected to pay $31,500 of the Purchase
Price with Pledgor's promissory note dated January 22, 1997 (the "Note").
Capitalized terms used herein, unless otherwise defined, shall have the meanings
assigned to them in the Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Creation and Description of Security Interest. In consideration
---------------------------------------------
of the transfer of the Shares to Pledgor under the Purchase Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges the Shares (herein
sometimes referred to as the "Collateral"). The Shares are represented by
----------
certificate number __________, duly endorsed in blank or with executed Stock
powers, and Pledgor herewith delivers said certificate of the Escrow Agent
pursuant to the Purchase Agreement, who shall hold said certificate subject to
the terms and conditions of this Security Agreement.
(a) The pledged Stock (together with an executed blank Stock
assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the
Escrow Agent as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the
Purchase Agreement, and the Escrow Agent shall not encumber or dispose of such
Shares except in accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
---------------------------------------
enter into this Security Agreement, Pledgor represents and covenants to Pledgee,
his successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
-----------------------
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
14
<PAGE>
(b) Encumbrances. The Shares are free of all other encumbrances,
------------
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock is
------------------
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
------------
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
-------------
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Options and Rights. In the event that, during the term of this
------------------
pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such rights, options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new Stock or other
securities so acquired by Pledgor in connection with the pledged Shares then
held by the Escrow Agent shall be immediately delivered to Escrow Agent to be
held under the terms of this Security Agreement in the same manner as the
pledged Shares.
5. Default. Pledgor shall be deemed to be in default of the Note
-------
and of this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be
delinquent for a period of 30 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Purchase Agreement, or contained in this Security Agreement, for a period of 30
days after written notice thereof from Pledgee.
(c) In the case of an event of default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor.
Pledgee's initial recourse in such an event, shall be to proceed against the
Collateral held pursuant to this Security Agreement, but shall not be limited to
such Collateral.
6. Release of Collateral. Subject to any applicable contrary rules
---------------------
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by the Escrow Agent hereunder upon payments of the principal
of the Note. The number of the pledged Shares which shall be released shall be
that number of full Shares which bears the same proportion to the initial number
of Shares pledged hereunder as the payment of principal bears to the initial
full principal amount of the Note.
15
<PAGE>
7. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
8. Term. The within pledge of Shares shall continue until the
----
payment of all indebtedness secured hereby, at which time the remaining pledged
Stock shall be promptly delivered to Pledgor, subject to the provisions for
prior release of a portion of the Collateral as provided in paragraph 6 above.
9. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against him, or if a receiver is appointed for
the property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
10. Escrow Agent Liability. In the absence of willful negligence,
----------------------
the Escrow Agent shall not be liable to any party for any of his acts, or
omissions to act, as the Escrow Agent.
11. Invalidity of Particular Provisions. The parties hereto agree
-----------------------------------
that the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions herein
contained unenforceable or invalid.
12. Successors or Assigns. The parties hereto agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
------- -------
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
13. Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given (a) four (4) days after deposit with
the U.S. Postal Service, if delivered by first class mail, postage prepaid, (b)
upon delivery, if delivered by hand, or (c) one business day after the business
day of deposit with Federal Express or similar overnight courier, freight
prepaid, and shall be addressed (i) if to Pledgor, at Pledgor's address as set
forth beneath Pledgor's signature to this Security Agreement, or at such other
address as Pledgor shall have furnished to Pledgee in writing, (ii) if to
Pledgee, to Genesys Telecommunications Laboratories, 1155 Market Street, 11th
Floor, San Francisco, California 94103, Attention: President and with copy to
Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, CA 94303, Attention: Jacqueline E. Cowden, Esq., or at such other address
as Pledgee shall have furnished to Pledgor or (iii) if to the Escrow Agent, to
Jacqueline E. Cowden, c/o Brobeck, Phleger & Harrison LLP, Two Embarcadero
Place, 2200 Geng Road, Palo Alto, CA 94303.
16
<PAGE>
14. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the laws of the State of California as they apply to contracts
entered into and wholly to be performed within such state.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR"
-----------------------------------------
---------------------
Address:
"PLEDGEE"
GENESYS TELECOMMUNICATION
LABORATORIES, a California corporation
By:
--------------------------------------
Gregory Shenkman, President
"ESCROW AGENT"
-----------------------------------------
Jackie E. Cowden
17
<PAGE>
EXHIBIT D
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM CERTIFICATE
-------------------------
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement dated as of January 22, 1997, the undersigned hereby sells,
assigns and transfers unto ____________________, ____________________
(____________________) shares of Common Stock of Genesys Telecommunications
Laboratories, a California corporation, standing in the undersigned's name on
the books of said corporation represented by certificate number
____________________ delivered herewith, and does hereby irrevocably constitute
and appoint ____________________ as attorney-in-fact, with full power of
substitution, to transfer said stock on the books of said corporation.
Dated: ____________________, 19__
-------------------------------------------
(Signature)
-------------------------------------------
(Please Print Name)
-------------------------------------------
(Spouse's Signature, if any)
-------------------------------------------
(Please Print Name)
This Assignment Separate From Certificate was executed in conjunction with the
terms of a Restricted Stock Purchase Agreement between the above assignor and
Genesys Telecommunications Laboratories dated as of January 22, 1997.
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
18
<PAGE>
EXHIBIT D
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM CERTIFICATE
-------------------------
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement dated as of January 22, 1997, the undersigned hereby sells,
assigns and transfers unto ____________________, ____________________
(____________________) shares of Common Stock of Genesys Telecommunications
Laboratories, a California corporation, standing in the undersigned's name on
the books of said corporation represented by certificate number __________
delivered herewith, and does hereby irrevocably constitute and appoint Wilson
Sonsini Goodrich & Rosati as attorney-in-fact, with full power of substitution,
to transfer said stock on the books of said corporation.
Dated: ____________________, 19__
-------------------------------------------
(Signature)
-------------------------------------------
(Please Print Name)
-------------------------------------------
(Spouse's Signature, if any)
-------------------------------------------
(Please Print Name)
This Assignment Separate From Certificate was executed in conjunction with the
terms of a Restricted Stock Purchase Agreement between the above assignor and
Genesys Telecommunications Laboratories dated as of January 22, 1997.
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
19
<PAGE>
EXHIBIT E
---------
JOINT ESCROW INSTRUCTIONS
-------------------------
January 22, 1997
Jacqueline E. Cowden
c/o Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Dear Ms. Cowden:
As Escrow Agent for both Genesys Telecommunications Laboratories, a
California corporation (the "COMPANY"), and Michael McCloskey ("PURCHASER"), you
are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Restricted Stock Purchase Agreement (the
"AGREEMENT"), dated as of January 22, 1997, to which a copy of these Joint
Escrow Instructions is attached, in accordance with the following instructions:
1. In the event that the Company and/or any assignee of the Company
(referred to collectively for convenience herein as the "COMPANY") exercises the
Repurchase Option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (by check or such other form
of consideration mutually agreed to by the parties) for the number of shares of
stock being purchased pursuant to the exercise of the Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his attorney-in-
fact and agent for the term of this escrow to execute with respect to such
securities all documents necessary or appropriate to make such securities
negotiable and to complete any transaction herein contemplated, including but
not limited to the filing with the Department of Corporations of the State of
California of an
20
<PAGE>
Application for Consent to Transfer Securities Subject to Legend or Escrow
Condition Pursuant to Section 25151 of the California Corporate Securities Law
of 1968. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of Purchaser after each successive one-year
period from the date of the Agreement, unless the Repurchase Option has been
exercised, you will deliver to Purchaser a certificate or certificates
representing so many shares of stock as are not then subject to the Repurchase
Option. Ninety days after cessation of Purchaser's service as an employee or
consultant of the Company, you will deliver to Purchaser a certificate or
certificates representing the aggregate number of shares sold and issued
pursuant to the Agreement and not purchased by the Company or its assignees
pursuant to exercise of the Repurchase Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
21
<PAGE>
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or four (4) days
following deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses, or at such other addresses as a
party may designate by written notice to each of the other parties hereto.
COMPANY: Genesys Telecommunications Laboratories
1155 Market Street, 11th Floor
San Francisco, California 94103
PURCHASER:
22
<PAGE>
ESCROW AGENT: Jacqueline E. Cowden
c/o Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
GENESYS TELECOMMUNICATIONS
LABORATORIES
a California corporation
By:
----------------------------------------
Gregory Shenkman, President
PURCHASER:
-------------------------------------------
ESCROW AGENT:
- ----------------------------------------
Jacqueline E. Cowden
23
<PAGE>
Exhibit 10.7
[LOGO]
IMPERIAL BANK
Member FDIC
CORPORATE RESOLUTION REGARDING CREDIT
Office: Santa Clara Valley Regional ADDRESS: 226 Airport Parkway
San Jose, California 95110
Resolved, that GENESYS TELECOMMUNICATIONS LABORATORIES borrow from IMPERIAL
BANK, hereinafter referred to as "Bank", from time to time, such sums of money
as, in the judgement of the officer or officers hereinafter authorized, this
corporation may require; provided that the aggregate amount of such borrowing,
pursuant to this resolution, shall not at any one time exceed the principal sum
of Three Million and No/100 DOLLARS ($3,000,000.00), in addition to such amount
as may be otherwise authorized;
RESOLVED FURTHER, that any 1 of the following named officers
----------------
(Specify Number)
Greg Shenkman the President
- ---------------------------------- ------------------------------------
Seth Homayoon the COO
- ---------------------------------- ------------------------------------
Alec Miloslavsky the VP Engineering
- ---------------------------------- ------------------------------------
Michael McCloskey the CFO
- ---------------------------------- ------------------------------------
the
- ---------------------------------- ------------------------------------
of this corporation (the officer or officers acting in combination, authorized
to act pursuant hereto being hereinafter designated as "authorized officers"),
be and they are hereby authorized, directed and empowered, for and on behalf and
in the name of this corporation (1) to execute and deliver to the Bank such
notes or other evidences of indebtedness of this corporation for the monies so
borrowed, with interest thereon, as the Bank may require, and to execute and
deliver, from time to time, renewals or extensions of such notes or other
evidences of indebtedness; (2) to grant a security interest in, transfer, or
otherwise hypothecate or deed in trust for Bank's benefit and deliver by such
instruments in writing or otherwise as may be demanded by the Bank, any of the
property of this corporation as may be required by the Bank to secure the
payment of any notes or other indebtedness of this corporation or third parties
to the Bank, whether arising pursuant to this resolution or otherwise; and (3)
to perform all acts and execute and deliver all instruments which the Bank may
deem necessary to carry out the purposes of this resolution;
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized and empowered, and that any one of said authorized officers be and
he/she is hereby authorized and empowered (1) to discount with or sell to the
Bank conditional sales contracts, notes, acceptances, drafts, bailment
agreements, leases, receivables and evidences of indebtedness payable to this
corporation, upon such terms as may be agreed upon by them and the Bank, and to
endorse in the name of this corporation said notes, acceptances, drafts,
bailment agreements, leases, receivables and evidences of indebtedness so
discounted, and to guarantee the payment of the same to the Bank, and (2) to
apply for and obtain from the Bank letters of credit and in connection therewith
to execute such agreement, applications, guarantees, indemnities and other
financial undertakings as Bank may require;
RESOLVED FURTHER, that said authorized officers are also authorized to
direct the disposition of the proceeds of any such obligation, and to accept or
direct delivery from the Bank of any property of this corporation at any time
held by the Bank;
RESOLVED FURTHER, that the authority given hereunder shall be deemed
retroactive and any and all acts authorized hereunder performed prior to the
passage of this resolution are hereby ratified and affirmed;
RESOLVED FURTHER, that this resolution will continue in full force and
effect until the Bank shall receive official notice in writing from this
corporation of the revocation thereof by a resolution duly adopted by the Board
of Directors of this corporation, and that the certification of the Secretary of
this corporation as the signatures of the above named persons shall be binding
on this corporation.
I, Richard DeGolia, Secretary of the above named corporation, duly
organized and existing under the laws of the State of California, do hereby
certify that the foregoing is a full, true and correct copy of a resolution of
the Board of Directors of said corporation, duly and regularly passed and
adopted by the Board of Directors of said corporation.
I further certify that said resolution is still in full force and effect
and has not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for this corporation
by virtue of said resolution.
EXECUTED ON 10/28/96
AUTHORIZED SIGNATURES
Signature: /s/ Greg Shenkman
----------------------------
Greg Shenkman
Signature: /s/ Seth Homayoon /s/ Richard C. DeGolia
---------------------------- -------------------------------
Seth Homayoon (Secretary)
Richard DeGolia
Signature: /s/ Alec Miloslavsky
----------------------------
Alec Miloslavsky
Signature: /s/ Michael McCloskey
----------------------------
Michael McCloskey
Signature:
----------------------------
<PAGE>
[LOGO]
IMPERIAL BANK
Member FDIC
226 Airport Parkway
San Jose, California October 28, 1996
Subject: Credit Terms and Conditions ("Agreement")
Borrower: Genesys Telecommunications Laboratories
Gentlemen:
To induce you to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans to you, in your sole discretion, may make
to Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. EXISTENCE AND RIGHTS.
Company is a corporation
Borrower is duly organized and existing and in good standing under the laws of
the State of California and is authorized and in good standing to do business in
the State of California. Borrower has powers and adequate authority, rights and
franchises to own its property and to carry on its business as now conducted,
and is duly qualified and in good standing in each State in which the character
of the properties owned by it therein or the conduct of its business makes such
qualification necessary, and Borrower has the power and adequate authority to
make and carry out this Agreement, Borrower has no investment in any other
business entity, except as previously disclosed to Bank.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; are not in contravention of or
in conflict with any law or regulation or any term or provision of Borrower's
articles of incorporation, by-laws, or Articles of Association, as the case may
be, and this Agreement is the valid, binding and legally enforceable obligation
of Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any of
its property may be bound or affected, and do not cause any lien, charge or
other encumbrance to be created or imposed upon any such property by reason
thereof.
4. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.
5. FINANCIAL CONDITION. The balance sheet of Borrower as of 6/30/96, and
the related profit and loss statement for the year ended on that date, a copy of
which has heretofore been delivered to you by Borrower, and all other statements
and data submitted in writing by Borrower to you in connection with this request
for credit are true and correct, and said balance sheet and profit and loss
statement truly present the financial condition of Borrower as of the date
thereof and the results of the operations of Borrower for the period covered
thereby, and have been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no materially adverse changes in the financial condition or business of
Borrower. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are
not reflected in said balance sheet, other than in the ordinary and normal
course of its business, which may have a materially adverse effect upon its
financial condition, operations or business as now conducted.
6. TITLE TO ASSETS. Borrower has good title to its assets and the same
are not subject to any liens or encumbrances other than those permitted by
Section C.3 hereof.
7. TAX STATUS. Borrower has no liability for any delinquent state, local
or federal taxes, and if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8. TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
9. REGULATION U. The proceeds of this loan shall not be used to purchase
or carry margin stock (as defined with Regulation U of the Board of Governors of
the Federal Reserve System).
B. Borrower agrees that so long as it is indebted to you, it will, unless you
shall otherwise consent in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate proceedings
in such manners as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder, and
(b) it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate with
respect thereto.
4. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit your representatives to have access to,
and to examine its properties, books and records at all reasonable times; and
furnish you:
(a) As soon as available, and in any event within 30 days after the close of
each month of each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate officer of
Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 150 days after the close of
each fiscal year of Borrower, a report of audit of Company as of the close of
and for such fiscal year, all in reasonable detail and stating in comparative
form the figures as of the close of and for the previous fiscal year, with the
unqualified opinion of accountants satisfactory to you.
<PAGE>
(c) Within 30 days after the close of each month of each fiscal month of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
contained in this Letter of Inducement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein or, if any such
event has occurred or any such condition exists, specifying the nature thereof;
(d) Promptly after the receipt thereof by Borrower, copies of any detailed
audit reports submitted to Borrower by independent accountants in connection
with each annual or interim audit of the accounts of Borrower made by such
accountants;
(e) Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower shall send to its stockholders, if
any, and copies of all reports which Borrower may file with the Securities and
Exchange Commission or any governmental authority at any time substituted
therefor; and
(f) Such other information relating to the affairs of Borrower as you
reasonably may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence
of any event of default hereunder or any event which upon notice and lapse of
time would be an event of default.
C. Borrower agrees that so long as it is indebted to you, it will not, without
your written consent:
1. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business;
2. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you except: (a)
Obligations now existing as shown in financial statement dated 6/30/96,
excluding those being refinanced by your bank
(b) Indebtedness subordinated to the indebtedness to you on
terms and conditions reasonably satisfactory to you;
(c) Indebtedness of Borrower to any of its subsidiaries;
(d) Indebtedness secured by Permitted Liens (as defined in the
Security and Loan Agreement; and
(e) Other Indebtedness in an amount not exceeding $100,000 in
the aggregate outstanding at any time; or sell or transfer, either with or
without recourse, any accounts or notes receivable or any moneys due to become
due.
3. LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage, pledge
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
liens for taxes not delinquent and liens in your favor and other than Permitted
Liens.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except: (a) By endorsement of negotiable instruments for deposit or collection
in the ordinary and normal course of its business (b) (i) Marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency or any State thereof maturing within one (1) year from the date of
acquisition thereof, (ii) commercial paper maturing no more than 270 days from
the date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank, and (iv) any Investments permitted by
Borrower's investment policy, a amended from time to time, provided that such
investment policy (and any such amendment thereto) has been approved by the
Bank, which approval shall not be unreasonably withheld;
(c) Investments (whether consisting of the purchase of securities,
loans, capital contributions or otherwise) of Borrower in or to subsidiaries and
investments by Borrower in or to companies which simultaneously with such
investments become subsidiaries, provided that the sum of (i) all such
investments by Borrower in or to Subsidiaries, plus (ii) guarantees by Borrower
outstanding at any time with respect to the obligations of subsidiaries, minus
the sum of (x) investments by Subsidiaries in or to Borrower, plus (y) payments
to Borrower on account of investments of Borrower in or to Subsidiaries, plus
(z) distributions or dividends by Subsidiaries to Borrower, in each case, made,
incurred or arising on or after the date hereof does not exceed $750,000.
(d) Receivables owing to Borrower or its subsidiaries and advances to
customers or suppliers, in each case, if created, acquired or made in the
ordinary course of business;
(e) Loans and advances consisting (i) travel advances, employee
relocation loans and other employee loans and advances in the ordinary course of
business, (ii) loans to employees, officers or directors.
relating to the purchase of equity securities of Borrower, (iii) other loans to
officers and employees approved by the Board of Directors in an aggregate amount
not in excess of $250,000 outstanding at any time;
(f) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
(g) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who are not
Affiliates in the ordinary course of business;
(h) Investments constituting acquisitions permitted hereunder;
(i) Deposit accounts of Borrower maintained in the ordinary course
of business; and
(j) Other Investments aggregating not in excess of $250,000 at any
time.
5. ACQUISITION OR SALE OF BUSINESS: MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets of business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same; provided, that:
---------
(a) Borrower may sell and leaseback equipment within 90 days of
its original purchase;
(b) Borrower may sell other assets for cash outside the ordinary
course of business in an amount not exceeding $500,000 in any fiscal year;
(c) Borrower may purchase the assets or business of other entities
for cash in an amount not exceeding $500,000 in any fiscal year or for stock in
a transaction valued at not more than $5,000,000; and
(d) Borrower may merge with any subsidiary so long as it is the
surviving corporation.
6. DIVIDENDS, STOCK PAYMENTS. If a corporation, declare or pay any
dividend (other than dividends payable in common stock of Borrower) or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchase, redeem or retire any of such stock, provided, that:
--------
(a) Borrower may convert any of its convertible securities into other
securities pursuant to the terms of such convertible securities or otherwise in
exchange therefor, and
(b) Borrower may redeem or repurchase its in connection with any
agreement between Borrower and any officer, director, employee or consultant of
Borrower entered into in the ordinary course of business wherein Borrower is
obligated or entitled to repurchase from such officer, director, employee or
consultant shares of equity securities of Borrower upon such person's
termination of employment or services or other event.
D. The occurrence of any one of the following events of default shall, at your
option, terminate the commitment to lend and make all sums of principal and
interest then remaining unpaid on all Borrower's indebtedness to you immediately
due and payable, all without demand, presentment or notice, all of which are
hereby expressly waived:
1. FAILURE TO PAY NOTE. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to you and such failure shall continue
for three (3) business days after receipt of notice thereof
2. BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement binding upon Borrower and such failure shall
continue for fifteen (15) days after an officer of Borrower becomes aware
thereof
3. BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.
4. INSOLVENCY: RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated, unbonded or unstayed for a period of
10 days or in any event later than five days prior to the date of any proposed
sale thereunder.
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
E. MISCELLANEOUS PROVISIONS.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
your Bank or any holder of Notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this agreement or any note issued in
connection with a loan that your Bank may make hereunder, are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
See addendum dated October 28, 1996, and Inserts attached hereto and
incorporated herein by this reference for additional terms. In the event of a
conflict between this Agreement and the Addendum and/or Inserts, the terms in
the Addendum and/or Inserts prevail.
Genesys Telecommunications Laboratories
By /s/ Michael McCloskey
----------------------------------------
(Authorized Signature and Title)
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES
ADDENDUM TO CREDIT TERMS & CONDITIONS
DATED OCTOBER 28, 1996
BORROWING BASE
- --------------
A) In accordance with the attached loan documents, advances under the line of
credit ("Line") will be limited to the lesser of: (i) 80% (subject to audit
results) of Eligible Accounts receivable (as hereinafter defined), or (ii)
$2,500,000. Line to include a $500,000 sublimit for the issuance of trade-
related standby and commercial letters of credit. As used herein,
"Eligible Accounts" shall be defined as: Borrower's accounts receivable
which are outstanding less than 90 days from invoice, with certain
exclusions for foreign (unless approved in writing by Bank), government,
contra, and inter-company accounts. Any account which alone exceeds more
than 25% of Borrower's total accounts receivable will have the amount in
excess of 25% excluded, and any account with more than 25% of the account
outstanding more than 90 days from invoice will be excluded.
B) In accordance with the attached loan documents, advances under the
equipment loan ("Term Loan") will be limited to a maximum of 90% of
submitted invoices less tax and freight. Term Loan includes an interest
only drawdown period ending 3/31/97 (in accordance with the terms and
conditions of the Note dated October 28, 1996). After 3/31/97, the
outstanding balance will be amortized on a thirty-six month basis with
principal and interest to be paid on a monthly basis.
FINANCIAL COVENANTS
- -------------------
Borrower to maintain on a fiscal monthly basis unless otherwise noted (covenants
apply to all loans):
1) A minimum Tangible Net Worth (defined as the financial statement net worth
of the Borrower prepared according to generally accepted accounting
principles less intangible assets, plus indebtedness fully subordinated to
the debt due to the Bank) greater than $6,000,000.
Beginning with the month ending 4/30/97, Borrower to maintain on a fiscal
monthly basis unless otherwise noted (covenants apply to all loans):
1) A minimum Quick Ratio (defined as cash and cash equivalents plus trade
accounts receivable to current liabilities) of 1.0:1.
2) A minimum Tangible Net Worth (defined as the financial statement net worth
of the Borrower prepared according to generally accepted accounting
principles less intangible assets, plus indebtedness fully subordinated to
the debt due to the Bank) greater than $6,500,000.
3) A maximum ratio of Total Liabilities (defined as all of the Borrower's
liabilities except for indebtedness fully subordinated to the debt due to
the Bank) less Deferred Revenues to Tangible Net Worth of 1.0:1.
4) Quarterly profitability required beginning with the quarter ending 9/30/97.
REPORTING
- ---------
Borrower to provide:
1) Unqualified audited financial statements within 150 days of fiscal year
end.
2) Beginning the earlier of: (i) 12/31/96, or (ii) five days prior to any
borrowing under the Line or Term Loan, Company prepared monthly financial
statements and Compliance Certificate within 30 days of each month end.
<PAGE>
GENESYS TELECOMMUNICATIONS
LABORATORIES
Addendum to Credit Terms &
Conditions Dated October 28, 1996
Page Two
3) As a condition to any borrowing by Borrower, and at least 30 days prior to
the initial advance by Bank, monthly aged listings of accounts receivable
(to include customer addresses and telephone numbers) and accounts payable
along with a Borrowing Base Certificate in form and substance acceptable to
Bank within 20 days of each month end.
4) Budgets, sales projections, operating plans, or other financial exhibits
which Bank may reasonably request within five (5) business days after
Bank's request.
OTHER CONDITIONS
- ----------------
1) Borrower's primary banking relationship and accounts to be maintained at
Imperial Bank, including the operating account.
2) Borrower to notify Bank in writing of any legal action commenced against it
which, in the opinion of Borrower's counsel is reasonably likely to result
in damages over $50,000. Bank to be notified within fifteen (15) business
days after receipt by Borrower of written notice of the commencement of
such action.
3) As a condition to any borrowing by Borrower, Borrower to provide Bank proof
of insurance adequately covering all tangible corporate assets and a
Lender's Loss Payable Clause with Bank as beneficiary with respect to
Bank's collateral.
4) At its option and prior to any borrowing by Borrower, Bank may require an
annual accounts receivable audit by Bank's asset-based lending group at
Borrower's expense, with results satisfactory to Bank.
5) Prior to loan closing, Borrower shall execute and deliver to Bank any and
all documents required by Bank. Borrower to pay to Bank all reasonable fees
for loan documentation preparation, due at closing.
6) If any installment payment, interest payment, principal payment or
principal balance payment due hereunder is delinquent ten or more days,
Obligor agrees to pay Bank a late charge in the amount of 5% of the payment
so due and unpaid, in addition to the payment; but nothing in this
paragraph is to be construed as any obligation on the part of the holder of
this note to accept payment of any payment past due or less than the total
unpaid principal balance after maturity.
All payments shall be applied first to any late charges owing, then to
interest and the remainder, if any, to principal.
GENESYS TELECOMMUNICATIONS
LABORATORIES
By: /s/ Michael McCloskey
----------------------------------
Title: C.F.O.
--------------------------------
Date: 10/28/96
--------------------------------
<PAGE>
IMPERIAL BANK
Member FDIC
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between GENESYS TELECOMMUNICATIONS LABORATORIES
, a Corporation
(herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts as may be
determined by Bank up to, but not exceeding in the aggregate unpaid principal
balance, the following Borrowing Base:
80% of Eligible Accounts
and in no event more than $2,500,000.
2. The amount of each loan made by Bank to Borrower hereunder shall be debited
to the loan ledger account of Borrower maintained by Bank (herein called "Loan
Account") and Bank shall credit the Loan Account with all loan repayments made
by Borrower. Borrower promises to pay Bank (a) the unpaid balance of Borrower's
Loan Account on demand and (b) on or before the tenth day of each month,
interest on the average daily unpaid balance of the Loan Account during the
immediately preceding month at the rate of No & 500/1000ths percent (0.500%) per
annum in excess of the rate of interest which Bank has announced as its prime
lending rate ("Prime Rate") which shall vary concurrently with any change in
such Prime Rate. Interest shall be computed at the above rate on the basis of
the actual number of days during which the principal balance of the loan account
is outstanding divided by 360, which shall for interest computation purposes be
considered one year. Bank at its option may demand payment of any or all of the
amount due under the Loan Account including accrued but unpaid interest in the
event of default. Such notice may be given verbally or in writing and should be
effective upon receipt by Borrower. The amount of interest payable each month
by Borrower shall not be less than a minimum monthly charge of $250.00. Bank is
hereby authorized to charge Borrower's deposit account(s) with Bank for all sums
due Bank under this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by Borrower
in a form satisfactory to Bank and shall contain a certification setting forth
the matters referred to in Section 1, which shall disclose that Borrower is
entitled to the amount of loan being requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
A. "Accounts" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter
how evidenced, including accounts receivable, contract rights, chattel
paper, instruments, purchase orders, notes, drafts, acceptances, general
intangibles and other forms of obligations and receivables,
B. "Collateral" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now
has or hereafter acquires a security interest.
C. "Eligible Accounts" means all of Borrower's Accounts excluding, however,
(1) all Accounts under which payment is not received within 90 days from
any invoice date, (2) all Accounts against which the account debtor or any
other person obligated to make payment thereon asserts any defense, offset,
counterclaim or other right to avoid or reduce the liability represented by
the Account and (3) any Accounts if the account debtor or any other person
liable in connection therewith is insolvent, subject to bankruptcy or
receivership proceedings or has made an assignment for the benefit of
creditors or whose credit standing is unacceptable to Bank and Bank has so
notified Borrower. Eligible Accounts shall only include such accounts as
Bank in its sole discretion shall determine are eligible from time to time.
D. "Permitted Liens" means any of the following:
(a) liens arising from judgments, attachments or similar proceedings
not constituting an Event of Default under Section D.5 of the Credit Terms
and Conditions;
(b) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security or similar obligations;
(d) liens of carriers, mechanics and materialmen and other like
liens in respect of obligations not overdue;
(e) such minor defects, irregularities, encumbrances, easements, rights
of way, and clouds on title as normally exist with respect to similar
properties which do not, individually or in the aggregate, materially
impair the property affected thereby for the purpose of which it was
acquired;
(f) liens of landlords or lessors under leases arising by
contract or operation of law;
(g) liens arising from purchase money obligations for tangible personal
property used in Borrower's business, and rights of lessors under capital
leases; provided that no such liens shall extend to any assets of Borrower
other than those financed by such a purchase money obligation or capital
lease (and accessions and additions thereto and replacements thereof and
the proceeds thereof);
(h) licenses granted to third parties the granting of which does
not result in a material adverse effect on the business of Borrower;
(i) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods;
(j) liens securing reimbursement obligations of Borrower under
documentary letters of credit; provided that such liens shall attach
--------
only to documents relating to such letters of credit, goods covered
thereby and products and proceeds thereof;
(k) liens which constitute rights of set-off of a customary nature or
bankers' liens on amounts on deposit, whether arising by contract or by
operation of law, in connection with arrangements entered into with
depository institutions in the ordinary course of business; and
(l) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any
--------
of Bank's security interests;
(m) liens in favor of Bank.
5. Borrower hereby assigns to Bank all Borrower's present and future Accounts,
including all proceeds due thereunder, all guaranties and security therefor, and
hereby grants to Bank a continuing security interest in all moneys in the
Collateral Account referred to in Section 6 hereof as security for any and all
obligations of Borrower to Bank, whether now owing or hereafter incurred and
whether direct, indirect, absolute or contingent. So long as Borrower is
indebted to Bank or Bank is committed to extend credit to Borrower, Borrower
will execute and deliver to Bank such assignments, including Bank's standard
forms of Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may require in
order to affirm, effectuate or further assure the assignment to Bank of the
Collateral or to give any third party, including the account debtors obligated
on the Accounts, notice of Bank's interest in the Collateral.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10. Borrower will collect with diligence all Borrower's Accounts. Any
collection of Accounts by Borrower, whether in the form of cash, checks, notes,
or other instruments for the payment of
<PAGE>
money (properly endorsed or assigned where required to enable Bank to collect
same), shall be in trust for Bank. If an Event of Default has occurred,
Borrower shall keep all such collections separate and apart from all other funds
and property so as to be capable of identification as the property of Bank and
deliver said collections daily to Bank in the identical form received. The
proceeds of such collections when received by Bank may be applied by Bank
directly to the payment of Borrower's Loan Account or any other obligation
secured hereby. Any credit given by Bank upon receipt of said proceeds shall be
conditional credit subject to collection. Returned items collected by Bank
after an Event of Default may, at Bank's option, be charged to Borrower's
general account. All collections of the Accounts shall be set forth on an
itemized schedule, showing the name of the account debtor, the amount of each
payment and such other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect to
returned merchandise and adjustments. However, Borrower shall immediately
notify Bank of all cases involving returns, repossessions, and loss or damage of
or to merchandise represented by the Accounts and of any credits, adjustments or
disputes arising in connection with the goods or services represented by the
Accounts and, in any of such events, Borrower will immediately pay to Bank from
its own funds (and not from the proceeds of Accounts or Inventory) for
application to Borrower's Loan Account or any other obligation secured hereby
the amount of any credit for such returned or repossessed merchandise and
adjustments made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a corporation,
that Borrower is duly organized and existing in the State of its incorporation
and the execution, delivery and performance hereof are within Borrower's
corporate powers, have been duly authorized and are not in conflict with law or
the terms of any charter, by-law or other incorporation papers, or of any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is found or affected; (ii) Borrower is, or at the time the collateral
becomes subject to Bank's security interest will be, the true and lawful owner
of and has, or at the time the Collateral becomes subject to Bank's security
interest will have, good and clear title to the Collateral, subject only to
Bank's rights therein; (iii) Each Account is, or at the time the Account comes
into existence will be, a true and correct statement of a bona fide indebtedness
incurred by the debtor named therein in the amount of the Account for either
merchandise sold or delivered (or being held subject to Borrower's delivery
instructions) to, or services rendered, performed and accepted by, the account
debtor; (iv) that there are or will be no defenses, counterclaims, or setoffs
which may be asserted against the Accounts; and (v) any and all financial
information, including information relating to the Collateral, submitted by
Borrower to Bank, whether previously or in the future, is or will be true and
correct.
9. Borrower will: (i) Furnish Bank from time to time such financial statements
and information as Bank may reasonably request and inform Bank immediately upon
the occurrence of a material adverse change therein; (ii) Furnish Bank
periodically, in such form and detail and at such times as Bank may require,
statements showing aging and reconciliation of the Accounts and collections
thereon; (iii) Permit representatives of Bank to inspect the Borrower's books
and records relating to the Collateral and make extracts therefrom at any
reasonable time and to arrange for verification of the Accounts, under
reasonable procedures, acceptable to Bank, directly with the account debtors or
otherwise at Borrower's expense; (iv) Promptly notify Bank of any attachment or
other legal process levied against any of the Collateral and any information
received by Borrower relative to the Collateral, including the Accounts, the
account debtors or other persons obligated in connection therewith, which may in
any way affect the value of the Collateral or the rights and remedies of Bank in
respect thereto; (v) Reimburse Bank upon demand for any and all legal costs,
including reasonable attorneys' fees, and other expense incurred in collecting
any sums payable by Borrower under Borrower's Loan Account or any other
obligation secured hereby, enforcing any term or provision of this Security
Agreement or otherwise or in the checking, handling and collection of the
Collateral and the preparation and enforcement of any agreement relating
thereto; (vi) Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept; (vii) Provide,
maintain and deliver to Bank policies insuring the Collateral against loss or
damage by such risks and in such amounts, forms and companies as Bank may
require and with loss payable solely to Bank, and, in the event Bank takes
possession of the Collateral, the insurance policy or policies and any unearned
or returned premium thereon shall at the option of Bank become the sole property
of Bank, such policies and the proceeds of any other Insurance covering or in
any way relating to the Collateral, whether now in existence or hereafter
obtained, being hereby assigned to Bank; and (viii) In the event the unpaid
balance of Borrower's Loan Account shall exceed the maximum amount of
outstanding loans to which Borrower is entitled under Section 1 hereof, Borrower
shall immediately pay to Bank, from its own funds and not from the proceeds of
Collateral, for credit to Borrower's Loan Account the amount of such excess.
10. After and during the continuance of an Event of Default Bank may, without
prior notice to Borrower, collect the Accounts and may give notice of assignment
to any and all account debtors, and Borrower does hereby make, constitute and
appoint Bank its irrevocable, true and lawful attorney with power to receive,
open and dispose of all mail addressed to Borrower, to endorse the name of
Borrower upon any checks or other evidences of payment that may come into the
possession of Bank upon the Accounts to endorse the name of the undersigned upon
any document or instrument relating to the Collateral; in its name or otherwise,
to demand, sue for, collect and give acquittances for any and all moneys due or
to become due upon the Accounts; to compromise, prosecute or defend any action,
claim or proceeding with respect thereto; and to do any and all things necessary
and proper to carry out the purpose herein contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or grant a
security interest in any of the Collateral other than to Bank, or execute any
financing statements covering the Collateral in favor of any secured party or
person other than Bank.
12. Upon the occurrence, and during the continuance, of an Event of Default (as
defined in the Credit Terms and Conditions) Bank may, at its option and without
demand first made and without notice to Borrower, do any one or more of the
following: (a) Terminate its obligation to make loans to Borrower as provided in
Section 1 hereof; (b) Declare all sums secured hereby immediately due and
payable; (c) Immediately take possession of the Collateral wherever it may be
found, using all necessary force so to do, or require Borrower to assemble the
Collateral and make it available to Bank at a place designated by Bank which is
reasonably convenient to Borrower and Bank, and Borrower waives all claims for
damages due to or arising from or connected with any such taking; (d) Proceed in
the
<PAGE>
foreclosure of Bank's security interest and sale of the Collateral in any manner
permitted by law, or provided for herein; (e) Sell, lease or otherwise dispose
of the Collateral at public or private sale, with or without having the
Collateral at the place of sale, and upon terms and in such manner as Bank may
determine, and Bank may purchase same at any such sale; (f) Retain the
Collateral in full satisfaction of the obligations secured thereby; (g) Exercise
any remedies of a secured party under the Uniform Commercial Code. Prior to any
such disposition, Bank may, at its option, cause any of the Collateral to be
repaired or reconditioned in such manner and to such extent as Bank may deem
advisable, and any sums expanded therefor by Bank shall be repaid by Borrower
and secured hereby. Bank shall have the right to enforce one or more remedies
hereunder successively or concurrently, and any such action shall not estop or
prevent Bank from pursuing any further remedy which it may have hereunder or by
law. If a sufficient sum is not realized from any such disposition of Collateral
to pay all obligations secured by this Security Agreement, Borrower hereby
promises and agrees to pay Bank any deficiency.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in connection
with the transactions contemplated herein at any time subsequent to four months
from the time such items are delivered to Bank.
15. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Borrower, but each
and every condition hereof shall be in addition thereto.
16. Additional Provisions: Subject to conditions and limitations contained in
the Credit Terms and Conditions dated October 28, 1996.
Executed this 28th day of October, 1996
GENESYS TELECOMMUNICATIONS LABORATORIES
-----------------------------------------
(Name of Borrower)
By: /s/ Michael McCloskey
____________________________________
IMPERIAL BANK (Authorized Signature and Title)
By: By:
- ----------------------------- ------------------------------------
(Authorized Signature and Title)
<PAGE>
SECURITY AGREEMENT (CONTINUED)
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs
of collecting the Debt, of protecting, insuring or realizing on Collateral, and
any expenditure of Bank pursuant hereto, including attorneys' fees and expenses,
with interest at the rate of 24% per year, or the rate applicable to the Debt,
whichever is less, from the date of expenditure, and (c) any deficiency after
realization of Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefore, and will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor's possession (unless specifically
otherwise agreed to by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location
disclosed to Bank and will not remove the Collateral from the
location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it
if necessary, clean, feed, shelter, water, medicate, fertilize,
cultivate, irrigate, prune and otherwise deal with the Collateral in
all such ways as are considered good practice by owners of like
property, use it lawfully and only as permitted by insurance policies,
and permit Bank to inspect the Collateral at any reasonable time.
(d) Not sell, contract to sell, lease, encumber or transfer the
Collateral (other than inventory Collateral) until the Debt has been
paid, even though Bank has a security interest in proceeds of such
Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as
received in a demand deposit account with Bank, containing only such
proceeds and deliver statements identifying units of inventory
disposed of, accounts which gave rise to proceeds, and all
acquisitions and returns of inventory as required by Bank
(c) Will receive in trust, schedule on forms satisfactory to the Bank
and deliver to Bank all non-cash proceeds other than inventory
received in trade.
(d) If not in default, may obtain release of Bank's interest in
individual units of inventory upon request, therefore, payment to Bank
of the release price of such units shown on any Collateral schedule
supplementary hereto, and compliance herewith as to proceeds thereof.
5. As to Collateral which are accounts, chattel paper, general
intangibles and proceeds described in 4(c) above, Obligor warrants, represents
and agrees:
(a) All such Collateral is genuine, enforceable in accordance with
its terms, free from default, prepayment, defense and conditions
precedent (except as disclosed to and accepted by Bank in writing),
and is supported by consecutively numbered invoices to, or rights
against, the debtors thereon. Obligor will supply bank with duplicate
invoices or other evidence of Obligor's rights on Bank's request;
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form, content
and manner of preparation and execution and has been properly
registered, recorded, and/or filed to protect Obligor's interest
thereunder;
(d) If an account debtor shall also be indebted to Obligor on another
obligation, any payment made by him not specifically designated to be
applied on any particular obligation shall be considered to be a
payment on the account in which Bank has a security interest. Should
any remittance include a payment not on an account, it shall be
delivered to Bank and, if no event of default has occurred, Bank shall
pay Obligor the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account or
renew or extend the time of payment thereof without Bank's prior
written consent.
6. Obligor owns all Collateral absolutely, and no other person has or
claims any interest in any Collateral, except as disclosed to and accepted by
Bank in writing. Obligor will defend any proceeding which may affect title to
or Bank's security interest in any Collateral, and will indemnify and hold Bank
free and harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession, the
realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactorily to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request, and authorizes Bank to make any claim thereunder, to cancel the
insurance on Obligor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail to
deliver the required policy or policies to the Bank, Bank may, at Obligor's cost
and expense, without any duty to do so, get and pay for insurance naming as the
insured, at Bank's option, either both Obligor and Bank, or only Bank, and the
cost thereof shall be secured by this Security Agreement, and shall be repayable
as provided in Paragraph 1 above.
9. Obligor will give Bank any information it requires. All information
at any time supplied to Bank by Obligor (including, but not limited to, the
value and condition of Collateral, financial statements, financing statements,
and statements made in documentary Collateral) is correct and complete, and
Obligor will notify Bank of any adverse change in such information. Obligor
will promptly notify Bank of any change of Obligor's residence, chief executive
office or mailing address.
10. Bank is irrevocably appointed Obligor's attorney-in-fact to do any act
which Obligor is obligated hereby to do, to exercise such rights as Obligor may
exercise, to use such equipment as Obligor might use, to enter Obligor's
premises to give notice of Bank's security interest, and to collect Collateral
and proceeds and to execute and file in Obligor's name any financing statements
and amendments thereto required to perfect Bank's security interest hereunder,
all to protect and preserve the Collateral and Bank's rights hereunder. Bank
may:
(a) Endorse, collect and receive delivery or payment of instruments
and documents constituting Collateral;
(b) Make extension agreements with respect to or affecting
Collateral, exchange it for other Collateral, release persons liable
thereon or take security for the payment thereof, and compromise
disputes in connection therewith;
(c) Use or operate Collateral for the purpose of preserving
Collateral or its value and for preserving or liquidating Collateral.
11. If more than one Obligor signs this Agreement, their liability is
joint and several. Any Obligor who is married agrees that recourse may be had
against separate property for the Debt. Discharge of any Obligor except for
full payment, or any extension, forbearance, change of rate of interest, or
acceptance, release or substitution of Collateral or any impairment or
suspension of Bank's rights against an Obligor, or any transfer of an Obligor's
interest to another shall not affect the liability of any other Obligor. Until
the Debt shall have been paid or performed in full, Bank's rights shall continue
even if the Debt is outlawed. All Obligors waive: (a) any right to require
Bank to proceed against any Obligor before any other, or to pursue any other
remedy; (b) presentment, protest and notice of protest, demand and notice of
nonpayment, demand or performance, notice of sale, and advertisement of sale;
(c) any right to the benefit of or to direct the application of any Collateral
until the Debt shall have been paid; (d) and any right of subrogation to Bank
until Debt shall have been paid or performed in full.
12. Upon default, at Bank's option, without demand or notice, all or any
part of the Debt shall immediately become due. Bank shall have all rights given
by law, and may sell, in one or more sales, Collateral in any county where Bank
has an office. Bank may purchase at such sale. Sales for cash or on credit to a
wholesaler, retailer or user of the Collateral, or at public or private auction,
are all to be considered commercially reasonable. Bank may require Obligor to
assemble the Collateral and make it available to Bank at the entrance to the
location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with
Bank or breach of any warranty herein, or Borrower's failure to pay or
perform any agreement with Bank.
(b) Any change in Obligor's or Borrower's financial condition which
in Bank's judgment impairs the prospect of Borrower's payment or
performance.
(c) Any actual or reasonably anticipated deterioration of the
Collateral or in the market price thereof which causes it, in Bank's
judgment, to become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors,
insolvency, appointment of receiver, or the filing of any petition
under bankruptcy or debtor's relief laws of, by or against Obligor or
Borrower or any guarantor of the Debt.
(f) Any warranty or representation which is false or is believed in
good faith by Bank to be false.
13. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of Obligor
or Borrower or right of Bank to modify this Agreement, or waive any other
similar default.
14. On transfer of all or any part of the Debt, Bank may transfer all or
any part of the Collateral. Bank may deliver all or any part of the Collateral
to any Obligor at any time. Any such transfer or delivery shall discharge Bank
from all liability and responsibility with respect to such Collateral
transferred or delivered. This Agreement benefits Bank's successors and assigns
and binds Obligor's heirs, legatees, personal representatives, successors and
assigns. Obligor agrees not to assert against any assignee of Bank any claim or
defense that may exist against Bank. Time is of the essence. This Agreement and
supplementary schedules hereto contain the entire security agreement between
Bank and Obligor. Obligor will execute any additional agreements, assignments
or documents reasonably required by Bank to carry this Agreement into effect.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, to the jurisdiction of whose courts the
Obligor hereby agrees to submit. Obligor agrees that service of process may be
accomplished by any means authorized by California law. All words used herein
in the singular shall be considered to have been used in the plural where the
context and construction so require.
<PAGE>
[LOGO]
IMPERIAL BANK
MEMBER FDIC
GENERAL SECURITY AGREEMENT
(TANGIBLE AND INTANGIBLE PERSONAL PROPERTY)
This Agreement is executed on October 28, 1996, by GENESYS TELECOMMUNICATIONS
LABORATORIES
(hereinafter called "Obligor").
In consideration of financial accommodations given, to be given or continued,
the Obligor grants to IMPERIAL BANK (hereinafter called "Bank") a security
interest in (a) all property (i) delivered to Bank by Obligor, (ii) which shall
be in Bank's possession or control in any matter or for any purpose, (iii)
described below, (iv) now owned or hereafter acquired by Obligor of the type
or class described below and/or in any supplementary schedule hereto, or in any
financing statement filed by Bank and executed by or on behalf of Obligor; (b)
the proceeds, increase and products of such property, all accessions thereto,
and all property which Obligor may receive on account of such collateral which
Obligor will immediately deliver to Bank (collectively referred to as
"Collateral") to secure payment and performance of all of Obligor's present or
future debts or obligations to Bank, whether absolute or contingent (hereafter
referred to as "Debt"). Unless otherwise defined, words used herein have the
meanings given them in the California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
- --------------------------------------------------------------------------------
Identification License or
Year Make/Manufacturer Model and Serial No. Registration No. New or Used
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Engine or other equipment:
------------------------------------------------------
(For aircraft - original ink signature on copy to FAA)
B. DEPOSIT ACCOUNTS:
Type _________________ Account Number _______________ Amount $ _________________
In name of___________________________ Depository _______________________________
AND ALL EXTENSIONS OR RENEWALS THEREOF
C. ACCOUNTS, INTANGIBLES AND OTHER: (Describe)
All personal property, whether presently existing or hereafter created or
acquired, including but not limited to: All accounts, chattel paper,
documents, instruments, money, deposit accounts and general intangibles
including returns, repossessions, books and records relating thereto, and
equipment containing said books and records. All goods including equipment
and inventory. All proceeds including, without limitation, insurance
proceeds. All guarantees and other security therefor.
The collateral not in Bank's possession will be located at: 1155 Market St.,
10th Fl., San Francisco, CA 94103
[_] If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted In the Collateral described herein. The party being accommodated is
("Borrower").
All the terms and provisions on the reverse side hereof are incorporated herein
as though set forth in full, and constitute a part of this Agreement.
<TABLE>
<CAPTION>
Signature
Name (indicate title, if applicable) Address
<S> <C> <C>
GENESYS /s/ Michael McCloskey BY /s/ Michael McCloskey 1155 Market St., 10th
- ---------------------------------- ------------------------------ ------------------------------
TELECOMMUNICATIONS LABORATORIES C.F.O.
Fl. San Francisco, CA
- ---------------------------------- ------------------------------ ------------------------------
94103
- ---------------------------------- ------------------------------ ------------------------------
</TABLE>
<PAGE>
[LOGO OF IMPERIAL BANK]
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
Name(s): GENESYS TELECOMMUNICATIONS LABORATORIES Date: October 28, 1996
$ paid to you directly by Cashiers Check No.
$2,500,000.00 credited to deposit account No. 20-001-232 when
advances are
$ paid on Loan(s) No. requested
$ 500,000.00 amounts paid to Bank for: Letters of Credit issuance
sublimit*
Amounts paid to others on your behalf:
$ to Title Insurance Company
$ to Public Officials
$ to Sublimit within total credit amount of
$2,500,000.00
$ to
$ to
$ to
$2,500,000.00 SUBTOTAL (NOTE AMOUNT)
Less $ 0.00 Prepaid Finance Charge (Loan fee(s))
$2,500,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
GENESYS TELECOMMUNICATIONS LABORATORIES
BY /s/ Michael McCloskey
- ---------------------------------- ------------------------------------
Signature Signature
- ---------------------------------- ------------------------------------
Signature Signature
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF IMPERIAL BANK] AUTOMATIC DEBIT AUTHORIZATION
California's Business Bank(SM)
MEMBER FDIC
================================================================================
TO: IMPERIAL BANK
RE: LOAN #__________________
$2,500,000.00
You are hereby authorized and instructed to charge account No. 20-00l-232 in
----------
the name of GENESYS TELECOMMUNICATIONS LABORATORIES for principal and interest
---------------------------------------
payments due on above referenced loan as set forth below and credit the loan
referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
[_] Debit each principal payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
================================================================================
Borrower Signature Date
GENESYS TELECOMMUNICATIONS LABORATORIES 10/28/96
- ------------------------------------------------- --------------------------
BY /s/ Michael McCloskey
- ------------------------------------------------- --------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF IMPERIAL BANK]
MEMBER FDIC
NOTE
$ 500,000.00 San Jose ; California October 28, 1996
On March 31, 2000, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Santa Clara Valley Regional office, the principal
sum of $500,000.00 or such sums up to the maximum if so stated, as the Bank may
now or hereafter advance to or for the benefit of the undersigned in accordance
with the terms hereof, together with interest from date of disbursement or N/A,
whichever is later, on the unpaid principal balance [_] at the rate of % per
year [X] at the rate of 1.000% per year in excess of the rate of interest
which Bank has announced as its prime lending rate (the "Prime Rate"), which
shall vary concurrently with any change in such Prime Rate, or $ 250.00,
whichever is greater. Interest shall be computed at the above rate on the basis
of the actual number of days during which the principal balance is outstanding,
divided by 360, which shall, for interest computation purposes, be considered
one year.
Interest shall be payable [X] monthly [_] quarterly [_] included with principal
[X] in addition to principal [_] beginning November 30, 1996, and if not so paid
shall become a part of the principal. All payments shall be applied first to
interest, and the remainder, if any, on principal. [X] (If checked), Principal
shall be payable in installments of $ **, or more, each installment on the last
day of each month, beginning April 30, 1997. Advances not to exceed any unpaid
balance owing at any one time equal to the maximum amount specified above, may
be made at the option of Bank.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of principal and accrued interest then remaining unpaid shall (a)
become immediately due and payable, and (b) thereafter bear interest, until paid
in full, at the increased rate of 5% per year in excess of the rate provided for
above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the maker(s)
to pay principal or interest when due; the filing as to each person obligated
hereon, whether as maker, co-maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of any
attachment or execution against any asset of any Obligor; the death of any
Obligor; or any deterioration of the financial condition of any Obligor which
results in the holder hereof considering itself, in good faith, insecure.
[X] If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all costs
and expenses of collection and reasonable attorney's fees incurred by the holder
hereof on account of such collection, plus interest at the rate applicable to
principal, whether or not suit is filed hereon. Each Obligor shall be jointly
and severally liable hereon and consents to renewals, replacements and
extensions of time for payment hereof, before, at, or after maturity; consents
to the acceptance, release or substitution of security for this note; and waives
demand and protest and the right to assert any statute of limitations. Any
married person who signs this note agrees that recourse may be had against
separate property for any obligations hereunder. The indebtedness evidenced
hereby shall be payable in lawful money of the United States. In any action
brought under or arising out of this note, each Obligor, including successor(s)
or assign(s) hereby consents to the application of California law, to the
jurisdiction of any competent court within the State of California, and to
service of process by any means authorized by California law.
No single or partial exercise of any power hereunder, or under any deed of
trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
** See Addendum attached
GENESYS TELECOMMUNICATIONS LABORATORIES
- ---------------------------------- -----------------------------------------
BY /s/ Michael McCloskey
- ---------------------------------- -----------------------------------------
- ---------------------------------- -----------------------------------------
<PAGE>
[LOGO IMPERIAL BANK]
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
Name(s): GENESYS TELECOMMUNICATIONS LABORATORIES Date: October 28, 1996
$ paid to you directly by Cashiers Check No.
$500,000.00 credited to deposit account No. 20-001-232 from undispersed
$ paid on Loan(s) No. loan proceeds when requested
$ amounts paid to Bank for:
Amounts paid to others on your behalf:
$ to Title Insurance Company
$ to Public Officials
$ to
$ to
$ to
$ to
$500,000.00 SUBTOTAL (NOTE AMOUNT)
LESS $ 0.00 Prepaid Finance Charge (Loan fee(s))
$500,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
GENESYS TELECOMMUNICATIONS LABORATORIES
BY /s/ Michael McCloskey
- ---------------------------------------- -------------------------------
Signature Signature
- ---------------------------------------- -------------------------------
Signature Signature
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF IMPERIAL BANK] AUTOMATIC DEBIT AUTHORIZATION
CALIFORNIA'S BUSINESS BANK(SM)
MEMBER FDIC
================================================================================
TO: IMPERIAL BANK
RE: LOAN #__________________
$500,000.00
You are hereby authorized and instructed to charge account No. 20-00l-232 in the
----------
name of GENESYS TELECOMMUNICATIONS LABORATORIES for principal and interest
---------------------------------------
payments due on above referenced loan as set forth below and credit the loan
referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
[X] Debit each principal payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
================================================================================
Borrower Signature Date
GENESYS TELECOMMUNICATIONS LABORATORIES 10/28/96
- ------------------------------------------------- --------------------------
BY Michael McCloskey
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This FINANCING STATEMENT is presented for filing and will remain effective, with
certain exceptions, for five years from the date of filing, pursuant to Section
9403 of the California Uniform Commercial Code.
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<S> <C> <C>
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1. DEBTOR (LAST NAME FIRST - IF AN INDIVIDUAL 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
GENESYS TELECOMMUNICATIONS LABORATORIES 94-3120525
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1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
1155 Market St., 10th Fl. San Francisco, CA 94103
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2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST - IF AN INDIVIDUAL 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
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2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
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3. DEBTOR'S TRADE NAMES OR STYLES 3A. FEDERAL TAX NUMBER
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4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
IMPERIAL BANK OR BANK TRANSIT AND A.B.A. NO.
NAME 226 Airport Parkway
MAILING ADDRESS San Jose, California 95110 16-144/1222
CITY STATE ZIP CODE
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5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
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6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on
which located and owner of record when required by instruction 4).
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All personal property, whether presently existing or hereafter created
or acquired, including but not limited to: All accounts, chattel
paper, documents, instruments, money, deposit accounts and general
intangibles including returns, repossessions, books and records
relating thereto, and equipment containing said books and records. All
goods including equipment and inventory. All proceeds including,
without limitation, insurance proceeds. All guarantees and other
security therefor.
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<S> <C> <C> <C>
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7. CHECK [X] 7A. PRODUCTS OF 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE [X] COLLATERAL ARE ALSO INSTRUCTION 5 (a) ITEM:
COVERED [_](1) [_](2) [_](3) [_](4)
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8. CHECK [X]
IF APPLICABLE [_] DEBTOR IS A `TRANSMITTING UTILITY' IN ACCORDANCE WITH UCC SECTION 9105 (1) (n)
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9. DATE: 10/28/96 C 10. THIS SPACE FOR USE OF FILING OFFICER
BY /s/ Michael McCloskey O (DATE, TIME, FILE NUMBER AND
SIGNATURE(S) OF DEBTORS D FILING OFFICER)
E
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GENESYS TELECOMMUNICATIONS LABORATORIES 1
TYPE OR PRINT NAME(S) OF DEBTOR(S)
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BY /s/ Michael McCloskey 3
SIGNATURE(S) 0F SECURED PARTY(IES)
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IMPERIAL BANK
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TYPE OR PRINT NAME(S) OF SECURED PARTY(IES)
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11. Return copy to:
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NAME IMPERIAL BANK
ADDRESS 9920 La Cienega Blvd. 8
CITY Inglewood, California 90301
STATE Att: Note Center 9
ZIP CODE
0
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[LOGO OF IMPERIAL BANK]
MEMBER FDIC
AGREEMENT TO PROVIDE INSURANCE
(REAL OR PERSONAL PROPERTY)
TO: IMPERIAL BANK Date: October 28, 1996
226 Airport Parkway Borrower:
San Jose, California 95110 GENESYS TELECOMMUNICATIONS LABORATORIES
In consideration of a loan in the amount of $3,000,000.00, secured by All
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force during the
term of the loan.
I/We also agree to advise the below named agent to add Imperial Bank as loss
payee on the new or existing insurance policy, and to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
a) The amount of the loan, OR
b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the
real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Imperial
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent: Aon Risk Services Telephone No.: (408) 535-2817
Agent's Address: 100 Park Center Plaza, Ste. 506
San Jose, CA 95113
GENESYS TELECOMMUNICATIONS LABORATORIES
Signature of Obligor: BY /s/ Michael McCloskey
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Signature of Obligor:
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FOR BANK USE ONLY
INSURANCE VERIFICATION: Date: _________________
Person Spoken to: ___________________________________
Policy Number: ________________________________________
Effective From: _________________ To: _________________
Verified By: ____________________________________
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<PAGE>
Exhibit 10.8
LEASE
Dated as of July 1, 1996
Between
1155 Market Partners
As The Landlord
And
Genesys Telecommunications Laboratories, Inc.
As The Tenant
City and County of San Francisco
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TABLE OF CONTENTS
1. Premises............................................ 1
2. Use of Premises..................................... 1
3. Initial Term........................................ 1
4. Possession.......................................... 1
5.1 Minimum Rent........................................ 2
5.2 Additional Rent..................................... 2
5.3 Prepaid Rent........................................ 4
5.4 Security Deposit.................................... 4
5.5 Payment of Rent..................................... 5
5.6 Option to Renew..................................... 5
6. Common Areas........................................ 6
7. Uses Prohibited..................................... 7
8. Compliance with Law................................. 7
9. Certificates of Occupancy........................... 7
10. Improvements and Alterations........................ 8
11. Repair.............................................. 9
12. Abandonment......................................... 10
13. Liens............................................... 10
14. Assignment and Subletting........................... 10
15. Indemnification..................................... 12
16. Insurance........................................... 13
17. Mutual Waiver of Subrogation........................ 14
18. Services and Utilities.............................. 14
19. Inability to Perform................................ 16
20. Disruption of Services for Repair or Maintenance.... 17
21. Life-Safety System.................................. 17
22. Personal Property and Other Taxes and Assessments... 17
23. Rules and Regulations............................... 17
24. Holding Over........................................ 18
25. Subordination of Lease.............................. 18
26. Entry by the Landlord............................... 18
27. Insolvency or Bankruptcy............................ 19
28. Default............................................. 19
29. Damage or Destruction of Premises................... 20
30. Eminent Domain...................................... 21
31. Plats and Riders.................................... 21
32. Sale by the Landlord................................ 21
33. Estoppel Certificates............................... 22
34. Right of the Landlord to Perform.................... 22
35. Attorney Fees....................................... 22
36. Surrender of Premises............................... 22
37. End of Term......................................... 22
38. Quiet Possession.................................... 23
39. Brokerage........................................... 23
40. No Waiver........................................... 23
41. Notices............................................. 24
42. Defined Terms and Marginal Headings................. 24
43. Time and Applicable Law............................. 24
44. Successors.......................................... 24
45. Late Charge......................................... 24
46. Authority........................................... 24
47. Name of Building.................................... 25
48. Entire Agreement.................................... 25
49. No Offer............................................ 25
50. Exhibits & Additional Provisions.................... 25
RULES AND REGULATIONS..................................... 29
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This LEASE (the "Lease") is made and entered into as of this 3rd day of
July, 1996, by and between 1155 Market Partners, a California general
partnership (the "Landlord") and Genesys Telecommunications Laboratories,
Inc. (the "Tenant").
WITNESSETH:
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1. Premises. The Landlord, in reliance upon and in consideration of
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the rents hereinafter reserved and of the covenants and agreements hereinafter
mentioned to be kept and performed by the Tenant, does by these presents lease
and let unto the Tenant, and the Tenant does hereby hire and take from the
Landlord, approximately 36,198 square feet on the 9 , 10 , and 11th floors as
outlined in red on Exhibit A attached hereto and made a part hereof (the
"Premises" or "Leased Premises") of a certain building located at 1155 Market
Street in the city and County of San Francisco, State of California (the
"Building") located on the real property more particularly described in Exhibit
B attached hereto and made a part hereof (the "Property"). On or before the
Commencement Date with respect to each floor, Landlord shall have each such
floor measured in accordance with BOMA standards. If any measurement discloses
that the number of rentable square feet in the Premises is not, in fact, 36,198
square feet, then this Lease shall be amended to reflect the true square footage
of the space with appropriate adjustments to Minimum Rent and the definition of
Tenant's Share.
2. Use of Premises. The Premises shall be used for offices and
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training and for no other use or purpose without the prior written consent of
Landlord.
3. Initial Term. (A) This Lease shall commence and the payment of
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rent shall start: (i) with respect to the tenth floor, on August 1, 1996, (the
"Tenth Floor Commencement Date"), (ii) with respect to the eleventh floor, on
September 1, 1996 ("Eleventh Floor Commencement Date") and (iii) with respect to
the ninth floor, the later of December 1, 1996 or sixty (60) days after the
Landlord obtains possession of the ninth floor from the existing tenant ("Ninth
Floor Commencement Date"). The term of this lease shall expire on September 30,
2000 (the "Expiration Date").
(B) The Rent Commencement Date for the 9th and 11th floors shall not
occur until the work has been substantially completed. The term "substantially
complete" shall mean the date that all of the following shall have occurred: (a)
Tenant' s architect shall have certified to Landlord and Tenant that the Tenant
Improvements are substantially complete in accordance with the final plans and
specifications therefor, and (b) there remains no incomplete or defective item
of Tenant Improvements that would adversely affect or interfere with Tenant's
occupancy of the floor in question for Tenant's intended use thereof. Landlord
promises to use diligent good faith efforts to substantially complete the
improvements required by Tenant to be constructed on the tenth floor by August
1, 1996. Tenant shall submit to Landlord the architectural drawings for the
work on the 11th floor on or before July 24, 1996 and for the 9th floor on or
before September 17, 1996. If for any reason the Tenant does not deliver its
complete architectural plans on or before the above-referenced date, then rent
payment shall commence on the dates set forth in paragraph 3(A)hereof regardless
of when the work is completed.
4. Possession. Possession of the Premises shall be delivered to the
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Tenant as soon as the Tenant Improvement Work ordered by the Tenant is
substantially completed. If the Landlord for any reason does not use its best
efforts to complete the work timely and properly, then the Tenant shall not pay
rent until possession of the Premises is actually turned over to the Tenant.
Landlord warrants and represents that as of the Commencement Date
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for each floor, such floor shall be broom clean, in good condition and repair
and the electrical, mechanical, HVAC, plumbing, elevator, fire safety, security
and other systems serving such floor will be in good condition and repair. If a
non-compliance with said warranty exists as of the applicable Commencement Date,
Landlord shall, promptly after receipt of notice from Tenant (even if such
notice is received after the applicable Commencement Date, but in no event more
than 90 days after the Commencement Date), rectify the same at Landlord' 5
expense.
As of the applicable Commencement Date, each floor of the Premises and
the Building shall comply with all underwriter' 5 requirements and all rules,
regulations, statutes, ordinances, laws and building codes applicable thereto.
None of the provisions of the preceding sentence shall affect the Commencement
Date for the payment of rent as set forth above.
5.1 Minimum Rent. Tenant agrees to pay to Landlord, without demand, a
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minimum monthly rental (the "Minimum Rent") for the Premises, for each and every
month, payable in advance the first day of each month, based on the following
schedule:
08/1/96 - 08/31/96 $20,110.00
09/1/96 - 11/30/96 $40,220.00
12/1/96 - 07/31/98 $60,330.00
08/1/98 - 07/31/00 $63,346.50
Should for any reason as set forth herein, the commencement date for a floor not
be the first day of the month, the rent for that month shall be pro-rated for
the number of days in the shortened month. Notwithstanding the above, Tenant
shall have a ten (10) day grace period from the 1st of the month to the 10th of
the month to pay rent to Landlord three times in each twelve-month period
beginning on the Tenth Floor Commencement Date.
(a) As Additional Rent, Tenant shall pay to Landlord at the times
hereinafter set forth, an amount equal to (a) Tenant's Share specified
hereinbelow of any increase in "operating expenses" (defined below in this
paragraph 5.2) paid or incurred by Landlord on account of the operation or
maintenance of the Building above such operating expenses paid or incurred by
Landlord during the Base Year specified hereinbelow, and (b) Tenant's share of
any increase in "direct taxes" (defined below in this paragraph 5.2) paid or
incurred by Landlord in any calendar year in excess of those paid or incurred in
the Base Year specified hereinbelow. Notwithstanding the foregoing to the
contrary, Tenant shall not be responsible for any increase in "operating"
expenses or increase in "direct taxes" attributable to any period of time
commencing on the Tenth Floor Commencement Date and ending on the first
anniversary of the Tenth Floor Commencement Date. If at any time during the
term of the Lease, less than ninety-five percent (95%) of the total leasable
area of the Building is occupied, the operating expenses and direct taxes shall
be adjusted by Landlord to reasonably approximate the operating expenses and
direct taxes which would have been incurred if the Building had been at least
ninety-five percent (95%) occupied.
At or after the commencement of any calendar year subsequent to the Base
Year Landlord may, but shall not be required to, notify Tenant of Landlord's
estimate of the amount of any increase in operating expenses for such calendar
year over operating expenses for the Base Year, the amount of any increase in
direct taxes over those paid or incurred in the Base Year and of the amount of
such estimated increases payable by Tenant. Tenant shall pay to Landlord on the
first day of each calendar month during such calendar year one-twelfth (1/12) of
the amount of such estimated increases in operating expenses and direct taxes
payable by Tenant hereunder; provided, however, that Tenant shall not be
responsible for any increases in operating expenses or direct taxes allocable to
the first twelve (12) months of the term of this Lease. Statements of the
amount of actual operating expenses for the preceding calendar year and the Base
Year,
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of direct taxes for the appropriateyear and the Base Year and of the
amount of such increases payable by Tenant shall be given to Tenant on such date
as Landlord shall from time to time determine during each calendar year
subsequent to the calendar year immediately next succeeding the Base Year. All
amounts payable by Tenant as shown on said statement, less any amounts
theretofore paid by Tenant on account of Landlord' 5 estimate of increases in
operating expenses and direct taxes made pursuant to this paragraph 5.2, shall
be paid by Tenant upon delivery of said statement to Tenant. In the event that
the Tenant has paid in any given year estimated increases beyond those later
determined from actual reconciliation, then such overpayment shall be applied
toward the Rent for the following year or, if the Lease has terminated and not
been renewed as provided herein, such overpayment shall be promptly refunded to
Tenant.
(b) The amount of any increase in operating expenses and direct taxes
payable by Tenant for the first calendar year of the term and the calendar year
in which this Lease terminates shall be prorated on the basis in which the
number of days from and including the commencement of said calendar year to and
including the date on which this Lease terminates bears to 365 and shall be due
and payable when rendered notwithstanding termination of this Lease.
(c) The term "operating expenses" as used herein shall include all
direct costs of operation, maintenance and management of the Building, including
the Premises, as determined by generally accepted accounting practices, except
those costs which are the exclusive responsibility of the Tenant or any other
tenant of the Building under this lease or other applicable leases. By way of
illustration, but not limitation, operating expenses shall include the cost or
charges for the following items: heat, light, water, sewer, power, steam, and
other utilities (including without limitation any temporary or permanent utility
surcharge or other exaction, whether now or hereafter imposed), waste disposal,
janitorial services, guard services, window cleaning, air conditioning,
materials and supplies, equipment and tools, service agreements on equipment,
insurance premiums, licenses, permits and inspections, wages and salaries,
employee benefits and payroll taxes, accounting and legal expenses, management
fees, and the reasonable cost of contesting the validity or applicability of any
governmental enactments which may affect operating expenses, not to exceed the
cost savings realized.
Notwithstanding anything to the contrary in this Lease Tenant shall not
be obligated to perform or to pay or reimburse Landlord for any of the
following: (i) costs occasioned by fire, acts of God, or other casualties or by
the exercise of the power of eminent domain, (ii) costs which would properly be
capitalized under generally accepted accounting principles ("GAAP") except to
the extent that (a) the foregoing reduces the expenses otherwise payable by
Tenant under this Lease and (b) Tenant's share of such cost during any twelve-
month period of the Lease is amortized over the useful life of the capital item
in question determined in accordance with GAAP, (iii) costs for which Landlord
has a right of reimbursement from others, (iv) costs to comply with any Law
applicable to the Premises or the building on the Tenth Floor Commencement Date,
(v) costs arising from the disproportionate use of any utility or service
supplied by Landlord to any other occupant of the building, (vi) depreciation or
expense reserves, (vii) interest, charges and fees incurred on debt, payments on
mortgages and rent under ground leases, (viii) insurance premiums for coverage
not customarily paid by tenants of similar projects in the vicinity of the
Premises or that are not commercially reasonable, insurance deductibles, and co-
insurance payments, (ix) a management fee in excess of 5% of all actual
operating expenses, and (x) costs for maintenance, repair or replacement to or
of the structural elements of the building.
The term "direct taxes" as used herein shall include all real property
taxes and assessments on the Building, the land on which the Building is
situated, and the various estates in the Building and the land. Direct taxes
shall also include all personal property taxes levied on the property used in
the
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operation of the Building; taxes of every kind and naturewhatsoever levied
and assessed in lieu of, in substitution for, or in addition to, existing or
additional real or personal property taxes on said Building, land or personal
property, whether or not now customary or within the contemplation of the
parties hereto, other than taxes covered by paragraph 22 to the extent that
Landlord is reimbursed therefor by Tenant or by any other tenant of the
Building; taxes upon the gross or net rental income of Landlord derived from the
Building and land (excluding, however, state and federal gift, inheritance,
personal or corporate income taxes measured by the income of Landlord from all
sources) and the reasonable cost of Landlord of contesting the amount or
validity or applicability of any of the aforementioned taxes not to exceed the
cost savings realized. Net recoveries through protest, appeals or other actions
taken by Landlord in its discretion, after deduction of all costs and expenses,
including counsel and other fees, shall be deducted from direct taxes for the
year of receipt.
(d) The annual determination and statement of operating expenses and
direct taxes shall be made by an accounting or auditing officer designated by
Landlord. A copy of said determination shall be made available to Tenant upon
demand. If the Tenant contests such statement in writing within thirty (30) days
after receipt thereof, the Tenant shall have the right to have the statement
audited, at Tenant's cost, in conformity with generally accepted accounting
procedures, by an accounting firm mutually acceptable to Landlord and Tenant.
The audit shall be binding on the parties; if the audit determines an
overpayment by the Tenant, the Landlord shall promptly refund the amount of such
overpayment to Tenant.
(e) The Base Year referred to hereinabove is defined as the calendar
year 1996.
The Base Tax Year referred hereinabove is defined as the fiscal year
ending 1996.
Tenant's Share, as referred to hereinabove, is 27.45% which amount is
subject to adjustment pursuant to paragraph 1. Tenant's Share is calculated by
dividing the number of rentable square feet in the Premises by the number of
rentable square feet in the building which has been determined to be 131,862.
When all three floors are entirely delivered, Tenant's Share shall be 27.45%.
Until that time, Tenant Share shall be the resulting quotient determined in
accordance with the formula set forth above.
(f) The Minimum Rent and the Additional Rent are hereinafter sometimes
individually or collectively referred to as the Rent, as applicable.
5.3 Prepaid Rent. On execution of this Lease, Tenant shall pay
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$40,220 to Landlord, which shall be credited to Tenant's payment of the Minimum
Rent for the first two months of the initial term for which Tenant must pay the
Minimum Rent. Landlord shall not be required to pay Tenant interest on the
prepaid rent.
5.4 Security Deposit. Prior to the expiration of the Letter of Credit
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as described in paragraph of Rider No. 1, Tenant shall deposit with Landlord
the greater of $60,330.00 or an amount equal to one month's base rent for the
Premises as a security deposit for the performance by Tenant of the provisions
of this Lease. If Tenant is in default, Landlord can use the security deposit,
or any portion of it, to cure the default or to compensate Landlord for all
damage sustained by Landlord resulting from Tenant's default. Tenant shall
immediately on demand pay to Landlord a sum equal to the portion of the security
deposit expended or applied by Landlord as provided in this paragraph so as to
maintain the security deposit in the sum initially deposited with Landlord. If
Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return the security deposit to Tenant. Landlord's obligations
with respect to the security deposit are those of a debtor and not a trustee.
Landlord can
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maintain the security depositseparate and apart from Landlord's general funds or
can commingle the security deposit with Landlord's general and other funds. At
the termination of the Lease and provided the Tenant is not in default, the
portion of the security deposit to which the Tenant is entitled, shall be
returned to the Tenant together with interest computed at 3% per annum simple
interest.
5.5 Payment of Rent. The Tenant agrees to pay said Rent to the
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Landlord, without deduction, demand or offset, in lawful money of the United
States of America, at the office of the Landlord at 2101 Market Street, San
Francisco, CA 94114, or to such other person or at such other place as the
Landlord may from time to time designate in writing.
No security or guaranty, which may now or hereafter be furnished to the
Landlord for the payment of the Rent herein reserved or for performance by the
Tenant of the other covenants or conditions of this Lease, shall in any way be a
bar or defense to any action in unlawful detainer, or for the recovery of the
Premises, or to any action which the Landlord may at any time commence for a
breach of any of the covenants or conditions of this Lease.
5.6 Option to Renew.
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(a) Provided that Tenant is not in material default hereunder and that
the Tenant named herein (and not a sublessee or assignee, except a Permitted
Transferee as defined herein) is then occupying at least one-third of the entire
Premises demised hereunder, Tenant shall have the option to renew this Lease for
one additional term of, at Tenant's option, six (6) months minimum to twenty
four (24) months maximum commencing upon expiration of the initial term of the
Lease.
(b) If Tenant wishes to exercise said option, Tenant must do so by
written notice given to Landlord not less than six (6) months prior to
expiration of the initial term.
(c) If the Tenant exercises said option, the renewal lease shall be on
all the same terms and conditions as set forth herein as applicable to the
initial term (as the initial term is defined in paragraph 3.1 hereof), excepting
as follows: (i) the option so exercised shall not itself be renewed; (ii) the
Landlord shall have no obligation to pay for any alterations or improvements to
the Premises (as the Premises may then be constituted); (iii) the Base Year
shall be the calendar year in which such renewal term commences; and (iv) the
Minimum Rent payable by Tenant for and during the applicable renewal period
shall be an amount which is equal to 100% of the prevailing fair market rent for
the Premises for the option period as of the date of commencement of the
applicable extended term, as shall be mutually agreed upon in writing by
Landlord and Tenant within thirty (30) days after exercise of option; the
prevailing fair market value shall be net of leasing commissions and Tenant
shall be solely responsible for leasing commissions should he retain the
services of an agent. In no event shall the Minimum Rent for any extended term
be less than the Minimum Rent in effect during the last year of the preceding
term. Landlord represents that Landlord is not obligated to pay to
Stubbs/Collenette any commissions on account of the option to renew.
If the parties are unable to agree on the Minimum Rent for the
extended term within such thirty (30) day period, then within ten (10) days
after the expiration of such thirty (30) day period, each party, at its cost and
by giving notice to the other party, shall appoint a real estate appraiser with
at least five (5) years full time commercial appraisal experience in the area in
which the Premises are located to appraise and set the Minimum Rent. If a party
does not appoint an appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the Minimum Rent for the extended term. If the two
appraisers are appointed by the parties as stated in this paragraph, they shall
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meet within thirty (30) days after the last appraiser isappointed and if, within
ten (10) business day. after such first meeting, the two appraisers are unable
to agree promptly upon the amount of the Minimum Rent for the extended term,
they, themselves, shall within ten (10) business days thereafter appoint a third
appraiser meeting the qualifications stated in this paragraph; in the event that
the two appraisers are unable to agree upon the appointment of a third appraiser
within such ten (10) business days, either of the parties to this Lease, by
given ten (10) days notice to the other party, can apply to the then president
of the county real estate board of the county in which the Premises are located,
or to the presiding judge of the Superior Court of that county, for the
selection of a third appraiser who meets the qualifications stated in this
paragraph. Each of the parties shall bear one-half of the cost of appointing
the third appraiser and paying the third appraiser's fee. The third appraiser,
however selected, shall be a person who has not previously acted in any capacity
for either party. In the event of the failure, refusal or inability of any
appraiser to act, his successor shall be appointed by him within a period of ten
(10) days but, in the case of the third appraiser, his successor shall be
appointed as hereinabove provided.
Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the Minimum Rent for the extended term. If
a majority. of the appraisers are unable to set the Minimum Rent within the
stipulated period of time, the three appraisals shall be added together and
their total divided by three; the resulting quotient shall be the Minimum Rent
for the Premises during the extended term.
If, however, the low appraisal and/or the high appraisal are/is more
than 10% lower and/or higher than the middle appraisal, the low appraisal and/or
the high appraisal shall be disregarded. If only one appraisal is disregarded,
the remaining two appraisals shall be added together and their total divided by
two; the resulting quotient shall be the Minimum Rent for the Premises during
the extended term. If both the low appraisal and the high appraisal are
disregarded as stated in this paragraph, the middle appraisal shall be the
Minimum Rent for the Premises during the extended term.
6. Common Areas. Tenant, its employees and invitees may, except as
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otherwise specifically provided in this Lease, use the common areas of the
Building as such common areas may be designated from time to time by Landlord
(the "Common Areas"), in common with other persons for ingress and egress and
open-space purposes and for other purposes specifically designated by Landlord
during the term of this Lease, which use shall be subject to the restrictions
set forth in this Lease (including, without limitation, the Rules and
Regulations) and any further reasonable restrictions promulgated by Landlord
from time to time. Landlord shall at all times have the right and privilege of
determining the nature and extent of the Common Areas and of making such changes
therein and thereto from time to time which, in its reasonable opinion, are
deemed to be desirable and for the best interests of all persons using the
Common Areas and of Landlord, including, without limitation, the withdrawal of
any portion thereof and the relocation of driveways, entrances, exits,
corridors, automobile parking spaces (if any), the direction and flow of
traffic, installation of prohibited areas, landscaped areas, and all other
facilities thereof. Nothing contained herein shall be deemed to create any
liability upon Landlord for any injury to or death of persons or for damage to
or destruction of property, including, without limitation, for any damage to
motor vehicles of Tenant, its customers or employees, or for loss of property
from within such motor vehicles, unless caused by the negligence of Landlord,
its agents, contractors, servants or employees. Landlord shall at all times
during the term of this Lease have the sole and exclusive control of the Common
Areas and may at any time and from time to time during the term hereof exclude
and restrain any person from use or occupancy thereof excepting, however, bona
fide invitees of Tenant and other tenants of Landlord who make use of said
Common Areas in accordance with the Rules and Regulations pertaining thereto.
The rights of Tenant hereunder in and to the
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Common Areas shall at all times be subject to the rights of Landlord and other
tenants of Landlord who use the same in common with Tenant, and it shall be the
duty of Tenant to keep all the Common Areas free and clear of any obstructions
created or permitted by Tenant or resulting from Tenant's operation, and to
permit the use of any of the Common Areas only for ingress and egress by the
invitees of Tenant to and from the Building. If, in the opinion of Landlord,
unauthorized persons are using the Common Areas by reason of the presence of
Tenant in the Leased Premises, Tenant, upon demand of Landlord, shall correct
such situation by appropriate action or proceedings against all such
unauthorized persons. Nothing herein shall affect the right of Landlord at any
time to remove any such unauthorized persons from said areas or to prevent the
use of any of said areas by unauthorized persons.
7. Uses Prohibited. The Tenant shall not do or permit anything to be
---------------
anything therein, which will in any way increase the rate of or affect any fire
or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy covering the Building or its contents. The
Tenant shall, at its sole cost and expense, comply with any and all requirements
pertaining to the Premises of any insurance organization or company necessary
for the maintenance of the fire and public liability insurance covering the
Premises. The Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or injure or annoy them, or use or allow
the Premises to be used for any immoral, unlawful, hazardous or objectionable
purposes, and the Tenant shall not cause, maintain or permit any nuisance in, on
or about the Premises. The Tenant shall not change the use of the Premises in
any way that will result in a conflict with any other lease of premises in the
Building; provided, however, that Tenant shall always have the right to use the
Premises for offices and training. No loudspeakers or other similar device,
system or apparatus which can be heard or experienced outside the Premises
shall, without the prior written approval of the Landlord, be used in or at the
Premises. The Tenant shall not commit or suffer to be committed any waste in or
upon the Premises. The Tenant agrees immediately upon the discovery of any such
unlawful, illegal, disreputable or extra hazardous use, to take all necessary
steps, legal and equitable, to compel the discontinuance of such use and to oust
and remove any subtenants, occupants or other persons guilty of such unlawful,
illegal, disreputable or extra hazardous use. The Tenant shall indemnify and
save harmless the Landlord against and from all costs, expenses, liabilities,
losses, damages, injunctions, suits, fines, penalties, claims and demands,
including reasonable counsel fees, arising out of, by reason of, or on account
of, any violation of or default in the covenants of this paragraph. The
provisions of this paragraph are for the benefit of the Landlord only and are
not nor shall they be construed to be for the benefit of any tenant or occupant
of the Building.
8. Compliance with Law. The Tenant shall not use or permit anything to
-------------------
be done in or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule, regulation or requirement now in force
or which may hereafter be enacted or promulgated. The Tenant, at its sole cost
and expense, shall promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force (collectively, "Laws") and with the requirements of any
board of fire underwriters or other similar body now or hereafter constituted
regulating the Tenant's improvements, acts or omissions. The judgment of any
court of competent jurisdiction or the admission of the Tenant in an action
against the Tenant (whether the Landlord be a party thereto or not) that the
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement shall be conclusive of that fact as between the Landlord and the
Tenant.
9. Certificates of Occupancy. Tenant shall not at any time use or
-------------------------
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occupy the Leased Premises in violation of the certificates of occupancy or of
any present or future governmental orders or directives issued for the Building.
In the event that any department of the City or County in which the Building is
located, or of the State of California, shall hereafter at any time contend or
declare that the Premises are used for a purpose which is in violation of such
certificate or certificates of occupancy, Tenant shall, upon five (5) days
notice from Landlord or any governmental agency, immediately discontinue such
use of the Premises. Failure by Tenant to discontinue such use after such
notice shall be considered a default under this Lease and Landlord shall have
the right to terminate this Lease immediately, and in addition thereto shall
have the right to exercise any and all rights and privileges and remedies given
to Landlord by and pursuant to the provisions of paragraph 28 hereof. The
statement in this Lease of the nature of the business to be conducted by Tenant
in the Premises shall not be deemed or construed to constitute a representation
or guaranty by Landlord that such business is lawful or permissible or will
continue to be lawful or permissible under any certificate of occupancy issued
for the Building, or otherwise permitted by law.
10. Improvements and Alterations. Except to the extent provided to the
----------------------------
contrary herein, the Tenant shall take the Premises in their "ASIS" condition.
The Tenant shall not make or suffer to be made any alterations, additions or
improvements to or of the Premises or any part thereof, except as expressly
provided in this paragraph 10.
Tenant may cause such alterations, additions or improvements to be made
only upon the following conditions:
(a) By a contractor reasonably approved in writing by the Landlord in
advance;
(b) Tenant submits plans, specifications and cost estimates of such work
prepared by a competent architect in accordance with existing building
ordinances of federal, state or local laws or orders to the Landlord for the
Landlord's approval which Landlord shall not unreasonably withhold. Default by
the Tenant in the payment of any sums agreed to be paid by the Tenant to
Landlord for or in connection with alterations, additions or improvements to the
Premises shall entitle the Landlord to all the same remedies as for nonpayment
of Rent hereunder. Any alterations, additions or improvements to or of the
Premises shall at once become the property of the Landlord. Movable furniture,
equipment and trade fixtures shall remain the property of the Tenant. The
Landlord shall indicate to the Tenant when Landlord's approval of the above
plans and specifications is sought which alterations, additions or improvements
made for or by the Tenant will be required to be removed from the Premises at
the termination of this Lease. If the Landlord so elects, the Tenant shall
restore the Premises to the condition of same prior to the making of such
alterations, additions or improvements which are so required to be removed at
the termination of this lease; said work of removal and restoration shall be
performed, at the Landlord's sole election, either (i) by the Tenant, at the
Tenant's sole cost and expense, or (ii) by the Landlord at the expense of the
Tenant and, in the latter election, the Tenant shall pay to the Landlord,
promptly upon the Landlord's demand, the amount of the Landlord's reasonable
cost of such removal and restoration. Prior to the commencement of Landlord' 5
removal and or restoration work, Landlord shall submit the cost estimate to
Tenant and Tenant shall have the right to reasonably approve such estimate and
any amendments thereto. In the event that, as a result of any such alterations,
additions or improvements, it shall be necessary for the Landlord to make other
improvements (including, but not limited to, upgrading of installations of life
safety systems or compliance with standards for handicapped persons) in the
Building, whether within or without the Premises, then the Tenant agrees to pay
the cost of such other improvements if they are a condition of the building
permit; provided however, that Tenant shall not be responsible for any costs or
improvements (i) made necessary as a result of the failure of Landlord or any
occupant of the Building to obtain building permits, where required and/or
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(ii) to comply with any Laws (a) applicable thePremises as of the date the
construction of Tenant's tenant improvements are completed by Landlord and/or
(b) applicable to the Building as of the Tenth floor Commencement Date. Landlord
shall be responsible for those costs and improvements that are not the
responsibility of Tenant.
(c) Upon request, Tenant shall procure and deliver to Landlord evidence
of compliance with all applicable laws, ordinances, rules, regulations and
requirements for permits and approvals. Sufficient evidence will be deemed to
be normal approvals, permits and certificates required or provided by entities
with jurisdiction over the performance of the construction at the Premises;
(d) Tenant shall deliver to Landlord evidence that Tenant has procured
or caused procurement of (i) "builder's risk" insurance, (ii) workers'
compensation insurance covering all persons employed in connection with the work
for whom death or bodily injury claims could be asserted against Landlord or the
Premises, and (iii) the policies of insurance required to be obtained by Tenant
under paragraph 16 of this Lease. Tenant or its contractor shall pay all
premiums required to maintain the insurance hereinabove described at all times
during the performance of the work and shall, immediately upon receipt, deliver
to Landlord copies of insurance certificates for the policies required. Such
certificates shall include an additional named insured endorsement in favor of
Landlord and a provision that in the event of cancellation, nonrenewal or
change in coverage, the insurance carrier will send Landlord a notice thereof at
least thirty (30) days preceding the effective date of cancellation, nonrenewal
or change in coverage;
(e) Tenant shall give Landlord ten (10) days advance written notice of
Tenant's intention to commence work or delivery of building materials. The
notice shall specify the nature of the work. Landlord shall have the right to
post and maintain on the Premises any notices of nonresponsibility provided for
under applicable law, and to enter the Premises upon twentyfour (24) hour
notice, except in the case of emergency, where no notice shall be required, and
inspect the construction at all reasonable times;
(f) If Tenant installs any electrical equipment that overloads the lines
of the Premises or the Building, Landlord may require Tenant to make whatever
changes to the lines as may be necessary to render same in good order and
repair, and in compliance with all insurance requirements and applicable legal
requirements;
(g) Tenant shall construct all work in a good and workmanlike manner, in
compliance with the plans and specifications approved by Landlord and with all
applicable laws, ordinances, rules, regulations and requirements for permits and
approvals;
(h) Within 30 days after completion of the work, Tenant shall record a
notice of completion; and
(i) On completion of any work, Tenant shall supply Landlord with the
final plans obtained by Tenant, including "asbuilt" drawings, if obtained,
which shall accurately reflect all such work as completed.
11. Repair. Except as otherwise provided herein, by entry upon
------
commencement of the term hereof, the Tenant acknowledges and accepts the
Premises as being in good, sanitary order, condition and repair. Except to the
extent provided to the contrary in paragraph 17, the Tenant, at the Tenant's
sole cost and expense, agrees to keep the Premises and every part thereof
(including its own trade fixtures and personal property) in good condition and
repair. Tenant hereby waives all rights to make repairs at the expense of the
Landlord as provided by law, statute or ordinance now or hereafter in effect, or
to offset the cost thereof against Rent. Except as otherwise provided in this
Lease, it is
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specifically understood and agreed that the Landlord has no obligation and has
made no promises to alter, remodel, improve, repair, decorate or paint the
Premises or any part thereof and, except as expressly set forth in this Lease,
no representations respecting the condition of the Premises or the Building have
been made by the Landlord to the Tenant. If, in an emergency, it shall become
necessary to make promptly any repairs or replacements required to be made by
Tenant, Landlord may reenter the Premises and proceed forthwith to have the
repairs or replacements made and pay the cost thereof. Within thirty (30) days
after Landlord renders a bill therefor, Tenant shall reimburse Landlord for the
cost of making the repairs. Notwithstanding anything to the contrary in this
Lease, Landlord, and not Tenant, shall perform and construct, any repair,
maintenance or improvement (i) required as a consequence of any violation of Law
or construction defect in the Premises as of the applicable Commencement Date,
(ii) for which Landlord has a right of reimbursement from others, (iii) which
would be treated as a "capital expenditure" under generally accepted accounting
principles, and (iv) to the heating, ventilating, air conditioning, electrical,
water, sewer, and plumbing systems serving the Premises. Tenant' s obligation,
if any, to reimburse Landlord for the costs of such repairs, maintenance and
improvements shall be governed by the other provisions of this Lease.
12. Abandonment. The Tenant shall not abandon the Premises at any time
-----------
during the term hereof and, if the Tenant shall abandon or surrender the
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to the Tenant and left on the Premises shall be deemed to be
abandoned at the option of the Landlord, except such property as may be security
for a debt to the Landlord.
13. Liens. Tenant agrees to keep the Premises, and every part
-----
thereof, at all times during the term of this Lease, free and clear of
mechanics' liens and other liens for labor, services, supplies, equipment or
material, furnished to the Premises on account of work performed by Tenant or
anyone claiming on behalf of Tenant or through Tenant and that it will at all
times fully and promptly pay and discharge and wholly protect and save harmless,
by bond or otherwise, the Landlord, and all and every part of the estate, right,
title and interest of the Landlord in and to all and every part of the Premises,
against any and all such demands or claims which may or could ripen into such
liens or claims therefore; the Tenant agrees to give the Landlord not less than
ten (10) days notice in writing in advance of the commencement of any
construction, alteration, addition or repair of the Premises in order that the
Landlord may post an appropriate notice of Landlord's nonresponsibility
therefor.
14. Assignment and Subletting.
-------------------------
(a) In entering this Lease for the term and of the provisions of this
Lease, Landlord has relied upon Tenant's business reputation and experience.
Accordingly, Tenant agrees that it will not mortgage or hypothecate this Lease
or any interest therein. Tenant may not assign this Lease or sublet the
Premises without first having obtained the written consent of the Landlord.
Such consent by Landlord shall not be unreasonably withheld. Tenant agrees that
should Tenant assign this Lease or sublet all or a portion of the Premises,
Tenant will remain fully liable on and responsible for payment of the Rent and
the other terms, conditions, covenants and duties of this Lease. Tenant shall
not sublet all or portion of the Premises for any period of time extending
beyond the period of this Lease or any renewal thereof. The Tenant agrees that
reasonable grounds for the Landlord's refusal to consent shall include, but not
be limited to: (1) financial instability of the proposed subtenant, and (2)
credit rating of the subtenant, if any.
No permitted subtenant shall assign, mortgage, pledge, encumber,
transfer, modify, extend or renew its sublease or further sublet all or any
portion of its sublet space, or otherwise permit any portion of the sublet space
to be used or occupied by others, without the prior written consent of Landlord
10
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first had and obtained in each instance, which consent may be withheld in
Landlord's sole and absolute discretion, except that the Landlord may flat
unreasonably withhold its consent in the case of an assignee or sublessee of
this entire Lease, and each proposed sublease shall contain appropriate
restrictions in furtherance of the foregoing. Any mortgage, pledge,
hypothecation, encumbrance or transfer or any such assignment, subletting,
occupation or use without the consent of Landlord as aforesaid shall be void
and, at the option of Landlord, constitute a default entitling Landlord to
terminate this Lease and give rise to all other remedies available to Landlord
for breach of this Lease. For purposes of this paragraph 14, the following
events shall be deemed an assignment of this Lease or a sublease, as
appropriate: (i) the issuance of equity interests in Tenant or any subtenant
(whether stock or partnership interests or otherwise) to any person or group of
related persons, in a single transaction or a series of related or unrelated
transactions, such that, following such issuance, such person or group shall
have control of Tenant or such subtenant; or (ii) a transfer of control of
Tenant or of any subtenant in a single transaction or a series of related or
unrelated transactions (including, without limitation, by consolidation, merger
or reorganization), except that the transfer of the outstanding capital stock of
any corporate Tenant or subtenant (by persons or parties other than "insiders"
within the meaning of the Securities Exchange Act of 1934, as amended) through
the "overthe counter" market or any recognized national or international
securities exchange shall not be included in the determination of whether
control has been transferred. "Control" shall mean ownership of not less than
51% of all of the voting stock of such corporation or not less than 51% of all
of the legal and equitable interest in any other business entity. If this Lease
is assigned, whether or not in violation of the terms of this Lease, Landlord
may collect rent from the assignee. If the Premises or any part thereof is
sublet or is used or occupied by anybody other than Tenant, Landlord may, after
default by Tenant, collect rent from such subtenant or occupant. In either
event, Landlord may apply the next amount collected to the rents herein
reserved. The consent by Landlord to an assignment, transfer, encumbering or
subletting pursuant to any provision of this Lease shall not relieve Tenant or
any assignee or subtenant from obtaining the express prior written consent of
Landlord to any other or further assignment, transfer, encumbering or
subletting. Neither any assignment of this Lease or any interest created hereby
or any interest of Tenant in any sublease, nor any subletting, occupancy or use
of the Premises or any part thereof by any person other than Tenant, nor any
collection of rent by Landlord from any person other than Tenant, nor any
application of any such rent as provided in this subparagraph (a) shall be
deemed a waiver of any of the provisions of this subparagraph, or (b)
relieve, impair, release or discharge Tenant of its obligation fully to
perform the terms of this Lease on Tenant ' s part to be performed, and Tenant
shall remain fully and primarily liable hereunder.
(b) The Tenant agrees to pay to the Landlord the amount of the
Landlord's reasonable cost of processing every proposed subletting, (including,
without limitation, the costs of attorneys' and other professional fees and
administrative, accounting and clerical time of the Landlord), and the
reasonable amount of all direct and indirect expenses incurred by the Landlord
arising from any sublessee taking occupancy (including, without limitation,
freight elevator operation for moving of furnishings and trade fixtures,
security service, janitorial and cleaning service and rubbish removal service).
Notwithstanding anything herein to the contrary, the Landlord shall have no
obligation to process any request for such consent prior to the Landlord's
receipt of payment by the Tenant of the amount of the Landlord's estimate of the
processing costs and expenses and all other direct and indirect costs and
expenses of the Landlord and its agents arising from such proposed subletting.
(c) In no event shall the Tenant assign this Lease or sublet the
Premises or any portion thereof to any then existing or prospective tenant of
the Building. However, Tenant shall have the right to assign this Lease orsublet
the Premises or any portion thereof to an existing tenant of the Building if (i)
the
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sublease or the assignment is for less than the entire balance of the term
or extended term of the Lease and the Tenant will reoccupy the subleased or
assigned space once the sublease or the assignment is over, or (ii) only part of
the Premises is to be sublet or assigned and no dividing walls are to be built
between the space retained by Tenant and the sublet or assigned space.
(d) In the event of (i) any permitted subletting at a greater rental
rate than the Rent payable by the Tenant hereunder or (ii) any permitted
subletting providing for payment of any consideration (including, without
limitation, payment for leasehold improvements) by the sublessee to the Tenant,
the amount of all such sublease rental and/or consideration which is in excess
of the Rent payable by the Tenant hereunder shall be paid to Landlord to the
extent consistent with paragraph 5 of Rider 1.
(e) Notwithstanding anything to the contrary in this paragraph 14, and
provided Tenant remains liable under this Lease and is not released thereby,
Tenant may, without Landlord' 5 prior written consent and without being subject
to any of the provisions of this paragraph 14 including without limitation,
Landlord's right to participate in assignment and subletting proceeds, sublet
the Premises or assign the Lease to (collectively hereafter referred to as the
"permitted transferees"): (i) a subsidiary, affiliate, division or corporation
controlling, controlled by or under common control with Tenant; (ii) a successor
corporation related to Tenant by merger, consolidation or nonbankruptcy
reorganization; or (iii) a purchaser of substantially all of Tenant's assets.
Notwithstanding anything to the contrary in this paragraph 14, the sale or
transfer of Tenant's capital stock in connection with the merger, consolidation
or nonbankruptcy reorganization of Tenant shall not be deemed an assignment,
subletting, or any other transfer of the Lease or the Premises.
15. Indemnification.
---------------
(a) Except for claims resulting from the negligence or willful
misconduct of the Landlord or the holders of any Superior Interests, Landlord
and the holders of any Superior Interests (as defined in paragraph 25 hereof)
shall not be liable to Tenant and Tenant hereby waives all claims against such
parties for any loss, cost, damage, injury, illness or death suffered by any
person or damage to any property in or about the Premises or the real property
of which the Premises are a part by or from any cause whatsoever and, without
limiting the generality of the foregoing, whether caused by water leakage of any
character from the roof, walls, basement or other portion of the Premises or
said real property or caused by gas, fire, electricity or any cause whatsoever,
in, on or about the Premises or said real property or any part thereof.
(b) Tenant shall hold Landlord and the holders of any Superior
Interests, the respective individual partners therein and the respective
shareholders thereof (as applicable), and all of their agents, contractors,
servants, officers, directors, employees and licensees (hereinafter collectively
called the "Indemnitees") harmless from and against any and all loss, cost,
liability, claim, damage and expense including, without limitation, penalties,
fines and reasonable attorneys' fees and expenses, incurred in connection with
or arising from any default by Tenant hereunder or from any loss, cost, damage,
injury, illness or death suffered by any person or damage to any property or
from any other cause whatsoever: (i) occurring in or on the Premises or any part
thereof arising at any time during the term of this Lease and from any cause
whatsoever other than by reason of the negligence or willful misconduct of any
of the Indemnitees or (ii) arising at any time and occurring in, on or about any
part of said real property other than the Premises (including, without
limitation, any facilities of said real property, such as elevators, stairways,
passageways, hallways, plaza areas or adjacent sidewalks the use of which Tenant
may have in common with other tenants of the building), to the extent such
injury, illness, death or damage shall be caused by any act, neglect or default
or omission of any duty with respect to the same by Tenant, its agents,
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employees, invitees or licensees except to the extent caused by the negligence
or willful misconduct of any of the Indemnities. The provisions of this
paragraph 15(b) shall survive the termination of this Lease with respect to any
injury, illness, death or damage occurring prior to such termination. In case
any action or proceeding be brought against any of the Indemnitees by reason of
any such claim or liability, Tenant upon notice from Landlord covenants to
resist and defend such action or proceeding by counsel reasonably satisfactory
to Landlord, with the cost to be shared between Tenant and Landlord in
accordance with their respective responsibility. Except for damages caused by
the negligence or willful misconduct of the Indemnitees, Tenant, as a material
part of the consideration to Landlord for this Lease, hereby assumes all risks
of damage to property (to whomever belonging) in, upon or about the Premises
from any source, and Tenant hereby waives all claims in respect thereof against
the Indemnitees. In the event of any inconsistency between the terms of this
Paragraph 15 and the terms of paragraph 17, the terms of paragraph 17 shall
prevail.
16. Insurance.
---------
(a) The Tenant agrees to keep in force during the term hereof, at the
Tenant's expense, comprehensive general liability insurance, including
contractual liability insurance, with a minimum combined single limit of
liability of One Million dollars and no/100 ($1,000,000.00) per occurrence for
injuries to or death of persons and damage to property occurring in or about the
Premises and its appurtenances. Said policy shall name the Landlord and any
other parties designated by the Landlord as additional insureds and the policy
shall contain cross liability endorsements; shall insure the Landlord's and such
other parties' contingent liability as respects acts or omissions of the Tenant;
shall be issued by an insurance company licensed to do business in the State of
California and approved by the Landlord, which approval Landlord shall not
unreasonably withhold; shall specifically include the liability assumed by the
Tenant under this Lease (provided, however, that such contractual liability
coverage shall not satisfy the Tenant's indemnity obligations under this Lease);
shall provide that said insurance shall not be canceled or coverage thereof
changed unless thirty (30) days prior written notice from the insurer to the
Landlord is given first. The Landlord reserves the right to increase the
foregoing amount of insurance from time to time as the Landlord's insurance
broker reasonably determines is required to adequately protect the Landlord and
the other parties designated by the Landlord from the matters insured against,
provided that such amounts are customary in the vicinity of the Premises.
(b) Said policy or a certificate thereof shall be delivered to the
Landlord by the Tenant upon commencement of the term, and thereafter there shall
be delivered to the Landlord by the Tenant renewal policies or certificates at
least thirty (30) days in advance of the expiration dates of expiring policies.
In the event the Tenant shall fail to procure such insurance, or to deliver such
policies or certificates, the Landlord may, at its option, and without
obligation to do so, procure the same for the account of the Tenant, and the
cost thereof shall be paid to the Landlord by the Tenant upon demand.
(c) The Tenant agrees additionally to keep in force during the entire
term hereof, at the Tenant' 5 expense, Property Insurance, including Special
Form coverage on any and all improvements and alterations installed in the
Premises by or for the Tenant and all the Tenant's furnishings and equipment,
and personal property in the Premises, which insurance shall be in an amount of
not less than their full replacement value naming the Landlord as additional
insured. The Landlord agrees to use the proceeds from any such policy to replace
personal property and restore improvements or alterations.
(d) The Tenant shall, throughout the term of this Lease, procure and
effect Workers' Compensation insurance as required by law.
(e) Lessor shall obtain and keep in force during the term of this
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Lease a policy or policies of insurance covering loss or damage to theBuilding,
but not Lessee's personal property, fixtures, equipment, or tenant improvements,
in the amount of full replacement cost thereof, providing protection against all
perils included within the classification of fire, extended coverage, vandalism,
malicious mischief, and such other perils as Lessor deems advisable or may be
required by any lender having a lien on the Building; Lessor shall not be
required to carry earthquake insurance.
17. Mutual Waiver of Subrogation. Landlord waives any and all rights
----------------------------
of recovery against Tenant for or arising out of damage to or destruction of the
Building, or Leased Premises, or any other property of Landlord from causes then
included under standard fire and extended coverage insurance policies or
endorsements, whether or not such damage or destruction shall have been caused
by the negligence of Tenant, its agents, servants, employees, contractors,
visitors or licensees, but only to the extent that Landlord's insurance policies
then in force permit such waiver and only to the extent of actual recovery from
the insurance company. Tenant also waives any and all rights of recovery
against Landlord for or arising out of damage to or destruction of any property
of Tenant, from causes then included under standard fire and extended coverage
insurance policies or endorsements, whether or not caused by the negligence of
Landlord, its agents, servants, employees, contractors, visitors or licensees,
but only to the extent that Tenant's insurance policies then in force permit
such waiver and only to the extent of actual recovery from the insurance
company. Landlord and Tenant represent that their present insurance policies now
in force permit such waiver.
If, at any time during the term of this Lease, either party shall give
no less than fifteen (15) days prior notice to the other certifying that any
insurance carrier which shall have issued any such policy covering any of the
property above mentioned shall refuse to consent to the aforesaid waiver of
subrogation, or such carrier shall revoke a consent previously given or shall
cancel or threaten to cancel any policy previously issued and then in force and
effect, because of such waiver of subrogation, then, in any of such events, the
waiver in this paragraph shall thereupon be of no further force or effect as to
the loss, damage or destruction covered by such policy; provided however, that
if at any time thereafter such consent shall be obtained therefor, the waiver
hereinabove provided for shall again become effective.
18. Services and Utilities.
----------------------
(a) The Landlord shall furnish to the Premises, during the period from
6:00 A.M. to 6:00 P.M. on business days Monday through Friday, excepting federal
and state holidays, and subject to the Rules and Regulations of the Building and
to federal, state and local codes and directives of governmental agencies or the
public utility company furnishing the service, or as otherwise determined by the
Landlord, the following: (i) electricity for lighting and power suitable for
the use of the Premises for general office purposes, which shall be available at
all times; provided, however, that Tenant shall not at any time have a connected
electrical load for lighting purposes in excess of one (1) watt per square foot
of net rentable area of the Premises as determined by Landlord or a connected
load for all other power requirements in excess of two (2) watts per square foot
of net rentable area of the Premises as determined by Landlord, and the
electricity so provided for lighting and power shall not exceed such limits;
(ii) heat and air conditioning required in the Landlord's judgment for the
comfortable use and occupancy of the Premises for such purposes; (iii) water for
restroom and drinking purposes; (iv) elevator service by nonattended automatic
elevators for general office pedestrian usage, which shall be available at all
times; and (v) janitorial services limited to emptying and removal of general
office refuse, light vacuuming of floors as needed and window washing as
determined by the Landlord.
(b) The Landlord shall not be liable for any loss or damage suffered
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by the Tenant or others by reason of the Landlord's failure to furnish any of
the services or utilities referred to in paragraph 18 (a) when such failure is
caused by acts of God, accidents, breakage, repairs, strikes, lockouts or other
labor disputes, the making of repairs, alterations or improvements to the
Premises or the Building, the inability to obtain an adequate supply of fuel,
water, electricity, labor or other supplies for any other condition beyond the
Landlord's reasonable control including, without limitation, any governmental
energy conservation program, and any such failure shall not constitute or be
construed as a constructive or other eviction of the Tenant. If Tenant's access
to the Premises or use thereof is prevented for more than five (5) working days
as a result of any of the above occurrences, then the Rent shall abate beginning
upon the 6th working day until Tenant's access to the Premises is restored. The
Landlord shall not be liable under any circumstances for loss of business or
injury to property however occurring, through or in connection with or
incidental to failure to furnish any of the services or utilities referred to in
paragraph 18(a). In the event any governmental entity promulgates or revises any
statute, ordinance or building, fire or other code, or establishes mandatory or
voluntary controls or guidelines applicable to the Property or the Premises or
any part thereof or appurtenances thereto, relating to the use or conservation
of energy, water, gas, light or electricity, or the reduction of automobile or
other emissions, or the provision of any other utility or service provided with
respect to this Lease, or in the event the Landlord is required or elects to
make alterations to the Building or any other part of the Property in order to
comply with such mandatory or voluntary controls or guidelines, or make such
alterations to the Building or any other part or said property related thereto,
such compliance and the making of such alterations shall in no event entitle the
Tenant to any damages, relieve the Tenant of the obligation to pay the full
monthly Rent reserved hereunder, or constitute or be construed as a constructive
or other eviction of the Tenant. Landlord shall not be obligated to provide or
maintain any security patrol or security system. Should Landlord elect to
provide such patrol or system, Landlord shall not be responsible for the quality
of any such patrol or system which may be provided hereunder, or for damage or
injury to Tenant, its employees, invitees or others due to failure, action or
inaction of such patrol or system.
(c) Without the prior written consent of the Landlord, which consent may
not be unreasonably withheld, the Tenant will not use any apparatus or device in
the Premises (including, without limitation, air conditioning equipment,
condenser pumps and condenser water, electronic data processing machines, punch
card machines, CRT (cathode ray tubes) and related equipment, supplementary
heating equipment, coffee makers, microwave ovens, fans or copy machines) which
will in any way cause the amount of electricity, water, heating, air
conditioning or ventilation furnished to the Premises to exceed the amount
thereof required for use of the Premises for general office purposes or to
exceed any limits established in paragraph 18(a), or connect with electric
current (except through existing outlets in the Premises) or water pipes any
apparatus or device for the purpose of using electric current or water.
Landlord acknowledges that Tenant's electrical requirement for the Premises will
exceed the amounts set forth in paragraph 18(a). Tenant agrees to either (a)
meter and bill Landlord for up to 3 watts per square foot, or (b) pay to
Landlord any electrical cost above 3 watts per square foot to be calculated
based on Tenant's current average consumption and use basis. Landlord and Tenant
agree to visit each other after three (3) months to discuss Tenant's electrical
usage if any major change in electrical usage occurs.
(d) The Tenant shall pay for all services and utilities not required to
be furnished by the Landlord pursuant to paragraph 18 (a). If the Tenant shall
require water, heat, air conditioning, electric current, elevator or janitorial
service in excess of that required to be furnished by the Landlord as specified
in paragraph 18(a), the Tenant must first obtain the written consent of the
Landlord to the use thereof, which the Landlord cannot unreasonably withhold. If
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the Landlord consents to an excess use of electriccurrent or water, the
Landlord, at its election, may cause an electric current or water meter
(including, without limitation, any additional wiring, conduit or panel required
therefor) to be installed in the Premises in order to measure the amount of
excess electric current or water consumed by the Tenant. The Tenant agrees to
pay to the Landlord upon demand, in addition to the amounts set forth in
paragraphs 5.1 through 5.4 of this Lease, the following: the cost of any and all
water, heat, air conditioning, electric current, janitorial, elevator or other
services or utilities required by and furnished to the Tenant in excess of the
services and utilities required to be furnished by the Landlord as provided in
paragraph 18(a); the cost of any meter installed in the Premises and the cost of
the installation, maintenance and repair thereof; and any cost incurred by the
Landlord in keeping account of or determining such excess utilities or services
furnished to the Tenant. The cost of the foregoing shall be determined by
methods (which may or may not include installation of separate meters as allowed
above) and in accordance with rates not in excess of that charged by the
applicable utility company.
(e) The Landlord makes no representation with respect to the adequacy or
fitness of the heating, air conditioning or ventilation equipment in the
Building to maintain temperatures which may be required for, or because of, any
equipment of the Tenant other than normal fractional horsepower office
equipment, and the Landlord shall have no liability for loss or damage suffered
by the Tenant or others in connection therewith. If the temperature otherwise
maintained in any portion of the Premises by the heating, air conditioning or
ventilation systems is affected as a result of (i) any lights, machines or
equipment (including, without limitation, electronic data processing machines)
used by the Tenant in the Premises, (ii) the occupancy of the Premises by more
than one person per one hundred (100) square feet of net rentable area therein
or (iii) an electrical load for lighting and power in excess of that required
for general office purposes, the Landlord shall have the right to install any
machinery and equipment which the Landlord deems reasonably necessary to restore
temperature balance, including, without limitation, modification to the standard
air conditioning equipment, and the cost thereof including, without limitation,
the cost of installation and any additional cost of operation, maintenance or
repair incurred thereby, shall be paid by the Tenant to the Landlord upon
demand. Prior to the commencement of such work, Landlord shall submit the cost
estimate to Tenant and Tenant shall have the right to approve such estimate and
any amendments thereto. Tenant's approval shall not be unreasonably withheld.
19. Inability to Perform. This Lease and the obligation of Tenant to
--------------------
pay Rent hereunder and to keep, observe and perform all of the other terms,
covenants, conditions, provisions and agreements of this Lease on the part of
Tenant to be kept, observed or performed shall in no way be affected, impaired
or excused because Landlord is unable to fulfill any of its obligations under
this Lease or to supply, or is delayed or curtailed in supplying, any service
expressly or impliedly to be supplied, or is unable to make or is delayed or
curtailed in making repairs, alterations, decorations, additions or
improvements, or is unable to supply, or is delayed or curtailed in supplying,
any equipment or fixtures, if Landlord is prevented, delayed or curtailed from
so doing by reason of any cause beyond Landlord's reasonable control, including,
but not limited to, acts of God, strike or labor troubles, fuel or energy
shortages, governmental preemption or curtailment in connection with a national
emergency or in connection with any rule, order, guideline or regulation of any
department or governmental agency, or by reason of the conditions of supply and
demand which have been or are affected by a war or other emergency. Any such
prevention, delay or curtailment shall be deemed excused and Landlord shall not
be subject to any liability resulting therefrom. However, if the Tenant's
access to the Premises or use thereof is prevented for more than five (5)
working days as a result of any of the above occurrences, then the Rent shall
abate beginning upon the 6th working day until Tenant's access to the Premises
is restored.
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20. Disruption of Services for Repair or Maintenance. Landlord shall
------------------------------------------------
repair and maintain or cause to be repaired and maintained those portions of the
Building outside of the Premises and the structural portions of the Building,
but only those portions of the Building which are not required to be maintained
by Tenant hereunder. Landlord reserves the right to stop service of the
elevator, plumbing, heating, ventilating, air conditioning and electric or other
mechanical systems, or cleaning services, when necessary, by reason of accident
or emergency or for inspection, repairs, alterations, decorations, additions or
improvements which, in the reasonable judgment of Landlord, are desirable or
necessary to be made, until same shall have been completed, and shall further
have no responsibility or liability for failure to supply any of such services
in such instance. Landlord shall use all reasonable efforts to minimize the
inconvenience to Tenant from such disruptions or interruptions of services.
21. Life Safety System. If there now is or shall be installed in the
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Building a sprinkler system, heat or smoke detection system, or any other so
called life safety system, and any such system or any of its appliances shall be
damaged or injured or not in proper working order by reason of any act or
omission of Tenant, Tenant's agents, servants, employees, contractors, visitors
or licensees, Tenant shall forthwith restore the same to good working condition.
If the Insurance Services Offices or any other similar body or any bureau,
department or official of the state, county or city government, or any
governmental authority having jurisdiction, require that any changes,
modifications, alterations or additional equipment be made or supplied in or to
any such system by reason of Tenant's particular business, or the location of
partitions, trade fixtures, or other contents of the Premises, or if any such
changes, modifications, alterations or additional equipment required by reason
of Tenant's particular business or the location of partitions, trade fixtures,
or other contents of the Premises, become necessary to prevent the imposition of
a penalty or charge against the full allowance for any such system in the
insurance rate as fixed by said Office, or by any insurance company, Tenant
shall, at Tenant's expense, promptly make and supply such changes,
modifications, alterations or additional equipment, provided that Tenant's
obligations shall be limited to expenses for such damages, modifications,
alterations or additional equipment made or located within the Premises.
22. Personal Property and Other Taxes and Assessments. The Tenant
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shall pay, before delinquency, any and all taxes levied or assessed and which
become payable during the term hereof upon the Tenant's equipment, furniture,
fixtures and other personal property located in the Premises, including any
carpeting installed by the Tenant, even though said carpeting has become a part
of the Premises. In the event said taxes are charged to or paid or payable by
the Landlord, the Tenant, forthwith upon demand therefor, shall reimburse the
Landlord for all of such taxes paid by the Landlord.
23. Rules and Regulations. The Tenant agrees faithfully to observe
---------------------
and comply with the Rules and Regulations printed on or annexed to this Lease
and all modifications of and additions thereto which the Landlord imposes and
communicates to all tenants of the Building from time to time. The Landlord
shall not be responsible to the Tenant for the nonperformance by any other
tenant or occupant of the Building of any of said Rules and Regulations.
Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other tenant
or tenants, or prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all tenants of the Building. Landlord reserves the
right to adopt other reasonable rules and regulations as may in its judgment be
needed from time to time for safety and security, for care and cleanliness of
the Building and for the preservation of good order therein. Tenant agrees to
abide by such Rules and Regulations and any additional rules and regulations
which are
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adopted.
24. Holding Over. If the Tenant shall retain possession of the
------------
Premises or part thereof after expiration of the term hereof, by lapse of time
or otherwise, then the Tenant agrees to pay the Landlord for each month of such
retention a Minimum Rent equal to one and onehalf (11/2) times the Minimum
Rent payable under this Lease for the last full month period prior to the date
of such expiration, and agrees to indemnify the Landlord against all losses,
costs, claims, liabilities and expenses (including, without limitation,
reasonable attorneys' fees and expenses) sustained by the Landlord by reason of
such retention (including, without limitation, claims for damages by any other
person to wham the Landlord may have leased all or any part of the Premises
effective upon the expiration of the term of this Lease). This provision is in
addition to, and does not affect or waive the Landlord's right of reentry or
any other right or remedy available to the Landlord on account of such holding
over.
25. Subordination of Lease. This Lease shall be subject and subordinate
----------------------
at all times to all ground or underlying leases which may now exist or hereafter
be executed affecting the Property, or any part thereof, and to the lien of any
mortgages or deeds of trust in any amount or amounts whatsoever now or hereafter
placed on or against the Property, or any part thereof, or on or against the
Landlord's interest or estate therein, or on or against any ground or underlying
lease (any of the foregoing being a "Superior Interest"), without the necessity
of having further instruments on the part of the Tenant to effectuate such
subordination. Notwithstanding the foregoing, the Tenant covenants and agrees to
execute and deliver, upon demand, without charge, such further instruments in
form reasonably acceptable to Tenant evidencing such subordination of this Lease
to such ground or underlying leases and to the lien of any such mortgages or
deeds of trust as may be requested by the Landlord. In the event of foreclosure
or exercise of any power of sale under any mortgage or deed of trust superior to
this Lease or to which this Lease is subject or subordinate, the Tenant shall
upon demand attorn to the lessor under said ground or underlying lease, or to
the purchaser at any foreclosure sale or sale pursuant to the exercise of any
power of sale under any mortgage or deed of trust, in which event this Lease
shall not terminate and the Tenant shall automatically be and become the tenant
of said lessor under said ground or underlying lease or of said purchaser,
whichever shall make demand therefor. This Lease shall not be subject or
subordinate to any ground or underlying lease or to any lien, mortgage, deed of
trust, or security interest hereafter affecting the Premises, nor shall Tenant
be required to execute any documents subordinating this Lease, unless the ground
lessor, lender, or other holder of the interest to which this Lease would be
subordinated executes a recognition and nondisturbance agreement which (i)
provides that this Lease shall not be terminated so long as Tenant is not in
material default under this Lease and (ii) recognizes all of Tenant's rights
hereunder.
26. Entry by the Landlord. Upon 24 hour notice to Tenant (except in
---------------------
the case of an emergency where no notice shall be required), the Landlord
reserves and shall at any and all reasonable times have the right to enter the
Premises to inspect the same, to show the Premises to prospective brokers,
agents, purchasers or, during the last six (6) months of the term, tenants, to
post notices of nonresponsibility, sale or other notices, and to alter, improve
or repair the Premises and any portion of the Building without abatement of
rent, and may for those purposes erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed, always providing the entrance to the Premises shall not be blocked
thereby and further providing that the business of the Tenant shall not be
interfered with unreasonably. Landlord's entry shall be subject to Tenant's
reasonable security precautions and Tenant's right to accompany Landlord at all
times. The Tenant hereby waives any claim for damages for any injury, nuisance
or other inconvenience to or interference with the Tenant's business, any loss
of occupancy, business or quiet enjoyment of the Premises, and other loss
occasioned by such entry. For each of the aforesaid purposes, the Tenant agrees
that the
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Landlord shall at all times have and retain a keywith which to unlock all of the
doors in, upon and about the Premises, excluding the Tenant's vaults and safes,
and the Landlord shall have the right to use any and all means which the
Landlord may deem proper to open said doors in an emergency in order to obtain
entry to the Premises, and any entry to the Premises obtained by the Landlord by
any of said means, or otherwise, shall not under any circumstances be construed
or deemed to be a forcible or unlawful entry into or a detainer of the Premises,
or an eviction of the Tenant from the Premises or any portion thereof.
27. Insolvency or Bankruptcy. The Tenant hereby agrees that neither
------------------------
this Lease or any interest herein shall be assignable or transferable by
operation of law, pursuant to any proceedings under the Bankruptcy Code. It is
hereby mutually agreed, covenanted and understood by and between the parties
hereto that in the event any proceedings under the Bankruptcy Code or any
amendment thereto, whether commenced by or against the Tenant (provided that if
such proceeding be involuntary, the Tenant shall have thirty (30) days to
dismiss the same), or in the event the Tenant be adjudged insolvent, or if the
Tenant makes an assignment for the benefit of its creditors, or if a writ of
attachment or execution be levied on the leasehold estate created hereby or the
business of the Tenant operated upon the Premises or the assets of the Tenant
situate thereon and be not released or satisfied within ten (10) days
thereafter, or if any receiver be appointed in any proceeding or action to which
the Tenant is a party, with authority to take possession or control of the
Premises or the business conducted thereon by the Tenant and such receiver not
be dismissed within thirty (30) days after his appointment, this Lease, at the
option of the Landlord (a) shall continue in existence as long as (i) the
payment of all Rent agreed to herein is assured, and (ii) that in the event the
Lease is assigned or assumed, no covenants in the Lease will be breached, or (b)
shall immediately end and terminate and shall in no way be treated as an asset
of the Tenant after the exercise of the aforesaid option; and the Landlord shall
have the right, after the exercise of said option, to forthwith re enter the
Premises as its original estate.
28. Default. The occurrence of any of the following shall constitute a
-------
default by Tenant:
1. Failure to pay Rent when due;
2. Abandonment of the Premises; and
3. Failure to perform any other provision of this Lease.
Notwithstanding anything to the contrary in this Lease, (i) Tenant shall not be
deemed to be in default on account of Tenant' s failure to pay money to
Landlord, unless Tenant's failure to pay continues for five (5) days after
Tenant's receipt of written notice of the delinquency and (ii) Tenant shall not
be in default for failing to perform any covenant of this Lease (other than a
covenant to pay money to Landlord) unless Tenant's failure to perform such
covenant continues for a period of fifteen (15) days after Tenant's receipt of
written notice of such failure, or such longer time as may reasonably be
required to cure the default so long as Tenant commences to cure such failure
within such fifteen (15) day period and diligently prosecutes such cure to
completion.
In the event of any breach or default of this Lease by the Tenant, then
the Landlord, in addition to any other rights and remedies of the Landlord at
law or equity, shall have the right either to terminate the Tenant's right to
possession of the Premises and thereby terminate this Lease or to have this
Lease continue in full force and effect with the Tenant at all times having the
right to possession of the Premises.
Should the Landlord elect to terminate the Tenant's right to possession
of the Premises and terminate this Lease, the Landlord shall have the immediate
right of entry and may remove all persons and property from the Premises. The
Tenant agrees that such property so removed may be stored in a public warehouse
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or elsewhere at the cost and for the account of the Tenant.Upon such
termination, the Landlord shall have all the rights and remedies of a landlord
provided by Article 1951.2 of the Civil Code of the State of California, which
provides that Landlord may recover from Tenant the following: (i) the worth at
the time of the award of the unpaid Rent which had been earned at the time of
termination; (ii) the worth at the time of the award of the amount by which the
unpaid Rent which would have been earned after termination until the time of the
award exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (iii) the worth at the time of the award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; and (iv) any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under the Lease or which in the ordinary course of things would be likely to
result therefrom. The "worth at the time of award" of the amounts referred to in
(i) and (ii) of this subsection shall be computed by allowing interest at the
interest rate set forth in paragraph 45 of this Lease. The "worth at the time of
the award" of the amount referred to in (iii) above shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award plus one percent (1%).
As used herein, the term "time of award" shall mean either the date upon
which the Tenant pays to the Landlord the amount recoverable by the Landlord as
hereinabove set forth or the date of entry of any determination, order or
judgment of any court or other legally constituted body, whichever first occurs.
No act by the Landlord other than giving written notice to the Tenant shall
terminate this Lease; acts of maintenance, efforts to relet the Premises or the
Landlord's appointment of a receiver to protect the Landlord's interest shall
not constitute a termination of the Tenant's right to possession.
Should the Landlord, following any breach or default of this Lease by
the Tenant, elect to keep this Lease in full force and effect, with the Tenant
retaining the right to possession of the Premises (notwithstanding the fact the
Tenant may have abandoned the Premises), then the Landlord, in addition to all
other rights and remedies the Landlord may have at law or equity, shall have the
right to enforce all of the Landlord's rights and remedies under this Lease
including, but not limited to, the right to recover the installments of Rent as
they become due under this Lease.
Notwithstanding any such election to have this Lease remain in full
force and effect, the Landlord may at any time thereafter elect to terminate the
Tenant's right to possession of the Premises and thereby terminate this Lease
for any previous breach or default which remains uncured, or for any subsequent
breach or default.
Any and all sums in addition to the Rent payable by the Tenant to the
Landlord pursuant to the provisions of this Lease or arising from the Tenant's
use and occupancy of the Premises shall be deemed additional rent under this
Lease and default by the Tenant in the payment of any such sums (beyond the
applicable cure period) shall entitle the Landlord to all the same remedies as
would be applicable in the case of nonpayment of Rent hereunder.
29. Damage or Destruction of Premises. If, during the term, the
---------------------------------
Premises or the Building and other improvements in which the Premises are
located are totally or partially destroyed from any cause, rendering the
Premises totally or partially inaccessible or unusable, and at least one (1)
year of the Lease term remains (or, if Tenant exercises its option to extend the
term of this Lease for the full two (2)year period within fifteen (15) days
after the date of the damage), Landlord shall restore the Premises or the
Building and other improvements in which the Premises are located to
substantially the same condition as they were in immediately before destruction,
if the restoration can be made under the existing laws and can be completed
within 120 working days
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after the date of the destruction and if thecost of such repairs does not exceed
the amount of insurance proceeds received by Landlord on account of such damages
(or, if Tenant elects to pay the portion of the cost not covered by insurance
proceeds). Such destruction shall not terminate this Lease.
If the restoration cannot be made in the time stated in this paragraph,
then within 15 days after the Landlord determines that the restoration cannot be
made in the time stated in this paragraph, Tenant can terminate this Lease
immediately] by giving notice to Landlord. If Tenant fails to terminate this
Lease and if restoration is permitted under the existing laws, Landlord, at its
election, can either terminate this Lease or restore the Premises or the
Building and other improvements in which the Premises are located within a
reasonable time and this Lease shall continue in full force and effect. If the
existing laws do not permit the restoration, either party can terminate this
Lease immediately by giving notice to the other party. In the event of the
giving of such notice of termination by the Landlord or the Tenant as provided
herein, this Lease and all interest of the Tenant in the Premises shall
terminate fifteen (15) days after receipt of such notice by the other party.
Except if Landlord receives insurance proceeds from Tenant's insurance
as provided in paragraph 16(c) hereof, the Landlord shall not be required to
repair any injury or damage, by fire or other cause to the property of the
Tenant, or to make repairs or replacements of any panelings, decorations,
railings, floor coverings or any improvements installed on the Premises by or
for the Tenant.
In case of destruction, there shall be an abatement or reduction of
Rent, between the date of destruction and the date of completion of restoration
if restoration takes place, based on the extent to which the destruction
interferes with Tenant's use of the Premises.
The Tenant hereby waives the provisions of Section 1932, Subdivision 2,
and 1933, Subdivision 4, of the Civil Code of California.
30. Eminent Domain. If all or any part of the Building of which the
--------------
Premises are a part shall be taken or appropriated by any public or quasipublic
authority under any power of eminent domain, the Landlord may terminate this
Lease. In such event, the Landlord shall be entitled to, and the Tenant upon
demand of the Landlord shall assign to the Landlord any rights of the Tenant to
any and all income, rent, award, or any interest therein whatsoever which may be
paid or made in connection with such public or quasipublic use or purpose except
to the extent attributable to Tenant' s trade fixtures and moving expenses, and
the Tenant shall have no claim against the Landlord for the value of any
unexpired term of this Lease. If a part of the Premises shall be so taken or
appropriated and the Landlord does not elect to terminate this Lease, the Rent
thereafter to be paid shall be reduced on a pro rata square footage basis.
Tenant shall have the right to terminate this Lease if all or any part of the
Premises is taken such that such taking renders the Premises unsuitable for
Tenant's use, in Tenant's reasonable opinion.
31. Plats and Riders. Clauses, plats and riders, if any, signed by the
----------------
Landlord and the Tenant and endorsed on or affixed to this Lease are a part
hereof and, in the event of variation or discrepancy, the duplicate original
hereof, including such clauses, plats and riders, if any, held by the Landlord
shall control.
32. Sale by the Landlord. In the event of a sale or conveyance by the
--------------------
Landlord of the Building and provided that Landlord delivers the Letter of
Credit or the cash security deposit, as applicable, to the transferee, the same
shall operate to release the Landlord from any future liability upon any of the
covenants or conditions, express or implied, herein contained in favor of the
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Tenant, and in such event the Tenant agrees to look solely to theresponsibility
of the successor in interest of the Landlord in and to this Lease. If any
security is given by the Tenant to secure the faithful performance of all or any
of the covenants of this Lease on the part of the Tenant, the Landlord may
transfer and/or deliver the security, as such, to the successor in interest of
the Landlord, and thereupon the Tenant agrees that the Landlord shall be
discharged from any further liability in reference thereto. Except as set forth
in this paragraph 32, this Lease shall not be affected by any such sale or
conveyance.
33. Estoppel Certificates. At any time and from time to time, upon the
---------------------
request by the Landlord, the Tenant agrees to execute, acknowledge and deliver
to the Landlord a statement certifying the date of commencement of this Lease,
stating that this Lease is unmodified and in full force and effect (or if there
have been modifications) and the dates to which the Rent has been paid, and
setting forth such other matters as may be reasonably requested by the Landlord.
The Landlord and the Tenant intend that any such statement delivered pursuant to
this paragraph may be relied upon by any mortgagee or the beneficiary of any
deed of trust or by any purchaser or prospective purchaser of the Building.
34. Right of the Landlord to Perform. All covenants and agreements to
--------------------------------
be kept or performed by the Tenant under any of the terms of this Lease shall be
performed by the Tenant at the Tenant's sole cost and expense and without any
abatement of Rent. If the Tenant shall fail to pay any sum of money, other than
Rent required to be paid by it hereunder, or shall fail to perform any other act
on its part to be performed hereunder, and such failure shall continue for five
(5) days after notice thereof by the Landlord, the Landlord may, but shall not
be obligated to, and without waiving any default of the Tenant or releasing the
Tenant from any obligations of the Tenant hereunder, make any such payment or
perform any such other act on the Tenant's part to be made or performed as in
this Lease provided. All sums so paid or incurred by the Landlord and all
necessary incidental costs, together with interest thereon at the highest rate
allowed by law from the date of such payment by the Landlord, shall be paid to
the Landlord forthwith on demand, and the Landlord shall have (in addition to
any other right or remedy of the Landlord) the same rights and remedies in the
event of nonpayment thereof by the Tenant as in the case of default by the
Tenant in the payment of Rent.
35. Attorney Fees. If either the Landlord or the Tenant shall obtain
-------------
legal counsel or bring an action against the other by reason of the breach of
any covenant, warranty or condition hereof, or otherwise arising out of this
Lease, the unsuccessful party shall pay to the prevailing party reasonable
attorneys' fees, which shall be payable whether or not any action is prosecuted
to judgment. The term "prevailing party" shall include, without limitation, a
party who obtains legal counsel or brings an action against the other by reason
of the other's breach or default and obtains substantially the relief sought,
whether by compromise, settlement or judgment.
36. Surrender of Premises. The voluntary or other surrender of this
---------------------
Lease by the Tenant or a mutual cancellation thereof shall not work a merger
and, at the option of the Landlord, shall terminate all or any existing
subleases or subtenancies or, at the option of the Landlord, may operate as an
assignment to the Landlord of any or all such subleases of subtenancies.
37. End of Term. Upon the expiration or other termination of the term
-----------
of this Lease, Tenant shall quit and surrender to Landlord the Leased Premises,
broom clean, in as good order, condition and repair as it now is or may
hereafter be placed, ordinary wear and tear and casualty excepted. Tenant shall
remove all property of Tenant, as directed by Landlord. Any property left on
Leased Premises at the expiration or other termination of this Lease, or after
the happening of any of the events of default may, at the option of Landlord,
either be deemed abandoned or be placed in storage at a public warehouse in the
name of and for
22
<PAGE>
the account of and at the expense and risk ofTenant, or otherwise disposed of by
Landlord in the manner provided by law. Tenant expressly releases Landlord of
and from any and all claims and liability for damage to or destruction or loss
of property left by Tenant upon the Premises at the expiration or other
termination of this Lease and Tenant hereby indemnifies Landlord against any and
all claims and liability with respect thereto. If Tenant holds over after the
said term with the consent of Landlord, express or implied, such tenancy shall
be from month to month only and shall not be a renewal hereof, and Tenant shall
pay the Rent and all the other charges at one time and one quarter (1 1/4) the
rate provided in the Lease for such period of holding over and also comply with
all of the terms, covenants, conditions, provisions and agreements of this Lease
for the time during which Tenant holds over. However, Tenant's obligation to
observe or perform all of the terms, covenants, conditions, provisions and
agreements of this paragraph shall survive the expiration or other termination
of this Lease.
38. Quiet Possession. Landlord covenants and agrees with Tenant that,
----------------
upon Tenant's paying said Rent and observing and performing all of the terms,
covenants, conditions, provisions and agreements of this Lease on Tenant ' 5
part to be observed or performed, Tenant shall have quiet possession of the
Premises hereby Leased for the term aforesaid, subject, however, to the terms of
this Lease and of any ground leases, underlying leases, mortgages and deeds of
trust affecting all or any portion of the Building or any of the areas used in
connection with the operation of the Building.
39. Brokerage. Each party warrants and represents to the other that
---------
such party has not retained the services of any real estate broker, finder or
any other person whose services would form the basis for any claim for any
commission or fee in connection with this Lease or the transaction contemplated
hereby except for real estate brokerage services rendered to Landlord by Stubbs,
Collenette and Associates, Inc. ("SCA") and to Tenant by Tory Corporate Real
Estate Advisors, Inc. (dba) The Staubach Company ("Staubach"). The commissions
earned by SCA and Staubach shall be paid by Landlord pursuant to separate
agreement ("Exclusive Listing Agreement") between Landlord and SCA. The
commission owed by Landlord for Tenant leasing the proposed Premises is
$253,386.00. Upon SCA receipt of said commissions from Landlord, SCA shall pay
Staubach pursuant to separate agreement ("Registration Agreement Letter")
between SCA and Staubach for which the commission amount paid to Staubach shall
not exceed $144,792.00. Tenant and Landlord warrant and represent to each other
that Landlord is to have no liability for any such real estate brokerage
services as may have been rendered to Tenant by any other broker or 3rd party.
Each party agrees to save, defend, indemnify and hold the other party free and
harmless from any breach of its warranty and representation as set forth in the
preceding sentence, including the other party's attorneys fees.
40. No Waiver. No delay or omission in the exercise of any right or
---------
remedy of Landlord on any default by Tenant shall impair such a right or remedy
or be construed as a waiver.
The receipt and acceptance by Landlord of delinquent Rent shall not
constitute a waiver of any other default; it shall constitute only a waiver of
timely payment for the particular Rent payment involved.
No act or conduct of Landlord, including, without limitation, the
acceptance of the keys to the Premises, shall constitute an acceptance of the
surrender of the Premises by Tenant before the expiration of the term. only a
written notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish a termination of the Lease.
Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval must be in writing and such consent or approval
shall not be deemed to waive or render unnecessary Landlord's consent to or
approval of any subsequent act by Tenant.
23
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Any waiver by Landlord of any default must also be in writing and shall
not be a waiver of any other default concerning the same or any other provision
of the Lease.
41. Notices. All notices and demands which may or are required to be
-------
given by Landlord to the Tenant hereunder shall be delivered personally or sent
by United States certified or registered mail, postage prepaid, addressed to the
Tenant at the Premises, Attn: Bruce Runyan, V.P. Operations, or to such other
place as the Tenant may from time to time by like notice designate. All notices
and demands by the Tenant to the Landlord shall be sent by United States
certified or registered mail, postage prepaid, addressed to the Landlord at 2101
Market Street, San Francisco, California, 94114 or to such other place as the
Landlord may from time to time by like notice designate, with a copy sent by
United States registered or certified mail to Bernard J. Schoenberg, Esq., One
California Street, Suite 2424, San Francisco, California, 94111.
42. Defined Terms and Marginal Headings. The words "Landlord" and
-----------------------------------
"Tenant" as used herein shall include the plural as well as the singular. Words
used in masculine gender include the feminine and neuter. If there is more than
one Tenant, the obligations hereunder imposed upon the Tenant shall be joint and
several. The marginal headings and titles to the paragraphs of this Lease are
not a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
43. Time and Applicable Law. Time is of the essence of this Lease and
-----------------------
each and all of its provisions. This Lease shall in all respects be governed by
the laws of the State of California.
44. Successors. Except as otherwise provided herein, the covenants
----------
and conditions herein contained shall be binding upon and inure to the benefit
of the heirs, successors, executors, administrators and assigns of the parties
hereto.
45. Late Charge. The Tenant acknowledges that late payment by Tenant
-----------
to Landlord of Rent or other payment required to be made by Tenant to Landlord
under this Lease will cause the Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on the Landlord by the
terms of any encumbrance or note secured by any encumbrance covering the
Premises or Property. Therefore, if any installment of Rent due from the Tenant
or other payment required to be made by Tenant to Landlord is not received by
Landlord when due, the Tenant agrees to pay to Landlord interest at the rate of
10% per annum from the date the Rent or any other payment is due until receipt
by Landlord of the Rent or other payment. The parties agree that this late
charge represents a fair and reasonable estimate of the costs that the Landlord
will incur by reason of late payment by the Tenant. Acceptance of any late
charge shall not constitute a waiver of the Tenant's default with respect to the
overdue amount, nor prevent the Landlord from exercising any of the other rights
and remedies available to the Landlord.
46. Authority. If Tenant is a corporation, partnership, trust,
---------
association or other entity, Tenant and each person executing this Lease on
behalf of Tenant does hereby covenant and warrant that (a) Tenant is duly
incorporated or otherwise established or formed and validly existing under the
laws of its state of incorporation, establishment or formation, (b) Tenant has
and is duly qualified to do business in California, (c) Tenant has full
corporate, partnership, trust, association or other appropriate power and
authority to enter into this Lease and to perform all Tenant's obligations
hereunder, and (d) each person (and all of the persons if more than one signs)
signing this Lease on behalf of Tenant is duly and validly authorized to do so.
24
<PAGE>
47. Name of Building. Tenant shall not use the name of the Building
----------------
without the Landlord's consent. Tenant shall not have or acquire any property
right or interest in the name of the Building.
48. Entire Agreement. This Lease constitutes the entire agreement
----------------
between the Landlord and the Tenant, and no promises or representations, express
or implied, either written or oral, not herein set forth shall be binding upon
or inure to the benefit of the Landlord or the Tenant. This Lease shall not be
modified by any oral agreement, either express or implied, and all modifications
hereof shall be in writing and signed by both the Landlord and the Tenant.
49. No Offer. Submission of this instrument for examination or
--------
signature by Tenant does not constitute a reservation of or option for lease and
it is not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
50. Exhibits and Additional Provisions. The Exhibits designated as A
----------------------------------
("Premises"), B ("Legal Description"), C ("Letter of Credit") & D ("Tenant
Improvement Inventory"), and Rider(s) designated as No. 1 which are attached
hereto and have been signed or initialed by Landlord and Tenant are a part of
this Lease, and are incorporated herein as if set forth in full.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this Lease
the day and year first above written.
LANDLORD:
1155 Market Partners, a
California general partnership
By: /s/ Walter Lembi
---------------------------
Its: Managing Partner
--------------------------
General Partner
TENANT:
Genesys Telecommunications Laboratories, Inc.
By: /s/ Bruce M. Runyan
---------------------------
Its: VP & GM Consulting Services Division
-------------------------------------
25
<PAGE>
RIDER NO. 1
DATED JUNE 20, 1996
BY AND BETWEEN
1155 MARKET STREET PARTNERS ("LANDLORD")
AND
GENESYS TELECOMMUNICATIONS LABORATORIES ("TENANT")
The following paragraphs are made a part of this Lease, and in the
event of any inconsistency between the following paragraphs and any other terms
of this Lease, the following paragraphs shall control:
1. Temporary Space. Commencing on August 1, 1996, Landlord will
---------------
provide tenant with approximately 4,500 rentable square feet of temporary space
on the 6th floor and 1,700 rentable square feet of temporary space on the ground
floor (the "Temporary Space") in the Building. Landlord and Tenant agree that
Tenant may occupy the Temporary Space at no cost to Tenant until the
commencement date for the 11th floor Premises. Tenant shall accept the Temporary
Space broom clean but otherwise in asis condition.
2. Tenant Improvement Allowance. Landlord shall provide Tenant with
----------------------------
an allowance of $1l.25 per rentable square foot for tenant improvement costs
("Allowance") excluding all costs associated with ADA compliance. All costs,
including construction and architectural fees, in excess of the Allowance shall
be paid directly by Tenant prior to commencement of the term of the Lease.
Tenant reserves the right, but not the requirement, to install its own cabling
and related equipment. Such Allowance may be applied to the Temporary Space.
Landlord shall construct the Premises in accordance with the tenant improvement
plans and specifications provided by Tenant for the Premises.
Landlord shall construct the Premises in accordance with the tenant improvement
plans and specifications provided by Tenant for the Premises. Landlord shall
provide its own construction management. Landlord in its role as general
contractor would be entitled to a markup equal to 9% of hard costs to cover
supervision, general conditions and fees. Landlord shall not be entitled to any
additional management fee in connection wit the construction of the Tenant
Improvements. Landlord shall be required to competitively bid to three
subcontractors in each trade. Landlord shall assume responsibility of ensuring
that all construction work is in compliance with applicable building codes,
legal and insurance requirements. Landlord and Tenant agree that Landlord shall
maintain complete control of the construction of tenant improvements in the
Premises and that upon completion of the preliminary space plans and final
working drawings, Landlord shall provide Tenant a line item cost for review and
approval.
Landlord represents that an inventory of reusable building materials exists as
shown on Exhibit D hereto on the 11th floor and that such material shall be made
available to Tenant for use in the Premises at no charge.
Tenant shall provide Landlord with architectural plans and working drawings by
Friday, July 12, 1996 for the 11th floor and September 17, 1996 for the 9th
floor. Landlord warrants to Tenant that the Tenant Improvement shall
beconstructed in a good and workmanlike manner and in compliance with the plans
and specifications approved by Tenant. Landlord further warrants to Tenant
26
<PAGE>
that the Tenant Improvement will be constructed free of defects in materials and
construction. Tenant shall have the benefit of any construction or equipment
warranties existing in favor of Landlord that would assist Tenant in correcting
any defect in the Premises and in discharging its obligation regarding the
repair and maintenance of the Premises.
3. Parking. Landlord shall provide Tenant with five (5) parking stalls in the
-------
Building during the term of the Lease as it may be extended. Tenant agrees to
pay Landlord as additional monthly rent $625.00 per month for the parking stalls
4. Option to Expand. Provided this Lease is in full force and effect and no
----------------
default by Tenant has occurred hereunder, if contiguous office space is or
becomes available and vacant on the 7th or 8th floors ("Expansion Space") in the
Building, following such notice which shall not be given by Landlord to Tenant
prior to November 1, 1996, Tenant shall have a one time option to lease the
Expansion Space with the provisions set forth below. Landlord shall provide
written notice to Tenant that Expansion Space is available. Tenant shall have
until December 31, 1996, to exercise such option. If Tenant does not deliver its
written exercise of this option prior to December 31, 1996, this option shall
disappear. The term of the expansion space shall commence on the date specified
in Landlord's notice and expire on September 30, 2000. Monthly rent for the
Expansion Space shall be equal on a square foot basis to the rent for the 9th,
10 or 11th floors, including a provision for tenant improvements and a new base
year for operating expenses and taxes. All other terms and conditions of the
Lease shall remain in full force and effect. Notwithstanding the above, if space
becomes available and vacant in the building on floors 6, 7 and 8, the Landlord
will notify Tenant and Landlord will make Tenant a 100% of fair market value
proposal to lease. Such aforementioned notice shall not be required for the 6th
floor if Landlord leases the 6th floor for its own use. Tenant will have five
(5) business days to respond to Landlord's proposal.
5. Subleasing and Assignment. Notwithstanding paragraph 14 of the Lease,
-------------------------
Tenant shall have the right to sublease or assign all or part of the Premises.
Tenant shall retain all profits after any and all subleasing commissions and
tenant improvement expenses incurred by Tenant which may arise out of sublet or
assignment of up to 30% of the Premises. If Tenant sublets or assigns more than
30% of the Premises, than all profits after any and all subleasing expenses
received from that time forward attributable to such portion of the Premises
would be shared in a ratio of 50% to Tenant and 50% to Landlord. Landlords
approval of assignment or subletting to Tenant affiliated or wholly owned
companies shall not be unreasonably withheld.
6. Letter of Credit. Tenant shall provide to Landlord an irrevocable Letter
----------------
of Credit ("LOC"), in a form similar to that attached as Exhibit C and from a
federally insured bank acceptable to Landlord in the principal amount equal to
$500,000. The LOC shall be held by Landlord as Lease security during the term of
the Lease months 1 through 30. Notwithstanding the foregoing, after the 12th
month of the Lease term, the LOC shall be reduced to $250,000 and shall be held
by the Landlord through the 30th month. If at any time during the term of the
Lease Tenant becomes a publicly traded company or is acquired by a publicly
traded company such LOC shall not be required, subject to Landlord approval,
which approval shall not be withheld if the publicly traded company shows a
positive net worth in excess of $30 million and has a history of positive
earnings during the past three (3) years. Prior to the expiration of the LOC
term, Tenant shall be required to deposit a security deposit with the Landlord
in accordance with paragraph 5.4 of the Lease.
7. Building Directory Board Signage. Prior to the Commencement Date, Landlord
--------------------------------
shall provide Tenant one (1) designated name strip con the Building main lobby
directory per 2,000 rentable square feet leased by Tenant. Landlord shall also
provide building standard signage in Tenant's elevator lobby.
8. Non-Disturbance Agreement. Tenant agrees to subordinate its lease to the
-------------------------
existing mortgage on the Building in return for the Nondisturbance Agreement in
such form as may be reasonably required by the mortgagor. Any successor to
Landlord shall be bound by such Nondisturbance Agreement or a form similar
thereto.
27
<PAGE>
9. Lease Commencement. Tenant acknowledges that the 9th floor is currently
------------------
occupied by the City and County of San Francisco ("City").. Landlord shall
deliver possession of the 9th floor as soon as the. City vacates the floor. Upon
execution of this Lease, Landlord agrees to use its best efforts to get the City
to vacate the 9th floor.
10. Notwithstanding anything mentioned in this Rider No. 1 and Lease, this
proposed lease shall become null and void if Tenant does not deliver to Landlord
the Minimum Rent check for $40,220 and the LOC from Imperial Bank by 5:00 p.m.,
Friday, July 5, 1996.
LANDLORD:
1155 Market Partners, a
California general partnership
By: /s/ Walter Lembi
---------------------------
Its: Managing Partner
--------------------------
General Partner
TENANT:
Genesys Telecommunications Laboratories, Inc.
By: /s/ Bruce M. Runyan
---------------------------
Its: VP & GM Consulting Services Division
-------------------------------------
28
<PAGE>
RULES AND REGULATIONS FOR 1155 Market Street
ATTACHED TO AND MADE A PART OF THIS LEASE
1. Except as provided, required or permitted by Landlord in
accordance with the building standards, no sign, placard, picture,
advertisement, name or notice shall be inscribed, displayed, printed, painted or
affixed by Tenant on or to any part of the building or exterior of the premises
leased to tenants or to the door or doors thereof without the written consent of
Landlord first obtained as to dimensions, material, content, location and
design, and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant.
2. Except as provided, required or permitted by Landlord in
accordance with building standards, no draperies, curtains, blinds, shades,
screens or other devices shall be hung at or used in connection with any window
or exterior door or doors of the premises.
3. The bulletin board or directory of the building, if any, shall be
used primarily for display of the name and location of tenants and Landlord
reserves the right to exclude any other names therefrom, to limit the number of
names associated with tenants to be placed thereon and to charge for names
associated with tenants to be placed thereon at rates applicable to all tenants.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways of the building shall not be obstructed by tenants or used by them for
any purpose other than for ingress to and egress from their respective premises.
Landlord in all cases reserves the right to control the halls, passages, exits,
entrances, elevators, stairways and balconies of the building and prevent access
thereto by all persons whose presence, in the judgment of Landlord, is or may be
prejudicial to the safety, character, reputation or interests of the building
and its tenants; provided, however, that Landlord shall not prevent such access
to such persons with whom tenants deal in the ordinary course of business,
unless such persons are engaged in illegal activities. No person shall go upon
the roof of the building unless expressly so authorized by Landlord.
5. Tenants shall not alter any lock nor install any new or additional
locks or any bolts on any interior or exterior door of any premises leased to
tenants, except for interior locks which (i) do not interfere with the security
system of the Building, if any, (ii) have been approved by Landlord and a key
thereof has been provided to Landlord, and (iii) comply with all fire and other
governmental requirements.
6. The doors, windows, light fixtures and any lights or skylights
that reflect or admit light into the halls or other places of the building shall
not be covered or obstructed. The toilet rooms, toilets, urinals, wash bowls
and other plumbing facilities shall not be used for any purpose other than that
for which they were constructed and no foreign substance of any kind whatsoever
shall be thrown or placed therein. The expense of any breakage, stoppage or
damage resulting from the violation of this rule shall be borne by the tenant
who, or whose employees or invitees, cause such expense.
7. Tenants shall not mark, drive nails, screw or drill into the
walls, woodwork or plaster of or in any way deface the building or any premises
leased to tenants, except that within their respective premises tenants may
affix to nonsupporting partitions pictures, paintings and other similar solely
decorative items.
8. Furniture, freight, equipment or merchandise of every kind shall
be moved into or out of the building only at such times and in such manner as
Landlord shall designate. Landlord may prescribe and limit the weight, size and
position of all equipment to be used by tenants. Tenant shall not place a load
on any floor exceeding the floor load per square foot which such floor was
designed to carry. Tenant shall not install, operate or maintain any heavy item
or equipment in the Premises, except in such manner as to achieve a proper
distribution of weight. All damage to the building or premises occupied by
tenants caused by moving or maintaining any property of a tenant shall be
repaired at the expense of such tenant.
29
<PAGE>
9. No tenant shall employ any person, other than the janitor provided
by Landlord, for the purpose of cleaning the premises occupied by such tenant
unless otherwise agreed to by Landlord. Except with the written consent of
Landlord, no person shall be permitted to enter the building for the purpose of
cleaning the same. Tenants shall not cause any unnecessary labor by carelessness
or indifference in the preservation of good order and cleanliness. Landlord
shall not be responsible to any tenant for loss of property on the premises,
however occurring, of for any damage to the property of any tenant caused by the
employees or independent contractors of Landlord or by any other person.
Janitor service shall not include shampooing of carpets or rugs, moving of
furniture or other special services. Janitor service will not be furnished when
rooms are occupied during the regular hours when the janitor service is
provided. Window cleaning shall be done only at the regular and customary times
determined by Landlord for such services.
10. No tenant shall sweep or throw or permit to be swept or thrown
any dirt or other substance into any of the corridors, halls or elevators or out
of the doors or stairways of the building; use or keep or permit to be used or
kept any foul or noxious gas or substance; permit or suffer the premises
occupied by such tenant to be occupied or used in a manner offensive or
objectionable to Landlord, other tenants or guests of the Building by reason of
noise, odors or vibrations; use any advertising medium which may be heard or
experienced outside the Premises; interfere in any way with other tenants or
persons having business in the building; or bring or keep or permit to be
brought or kept in the building any animal life form, other than human, except
seeingeye dogs when in the company of their masters.
11. Tenant shall keep the Premises (including interior portions of
all windows, doors and all other glass) in a neat and clean condition, free and
clear from vermin. Tenant shall not permit the accumulation (unless in concealed
metal containers) or burning of any rubbish or garbage in, on or about any part
of the Premises or the Building. Further, Tenant shall permit supplies and
equipment required to operate the Premises and any rubbish or other waste to be
disposed of from the Premises to be transported only through the rear door to
the Premises and to the area designated by the Landlord for trash disposal
service. The designated area is subject to change by the Landlord.
12. No coinor tokenoperated vending machine or similar device for
the sale of any merchandise or services (including, without limitation, pay
lockers, pay toilets, scales, amusement devices and machines for the sale of
beverages, foods, candy, cigarettes or other commodities) may be operated in the
Premises.
13. With the exception of coffee pots and one microwave oven, no
cooking or preparation of food shall be done or permitted by tenants in their
respective premises, nor shall premises occupied by tenants be used for the
storage of merchandise, washing clothes, lodging, or any improper, objectionable
or immoral purposes. Tenant shall not conduct any restaurant, luncheonette or
cafeteria for the sale or service of food or beverages to its employees or to
others.
14. No tenant shall use or keep in the building any kerosene,
gasoline or inflammable or combustible fluid or material.
15. No boring or cutting for telephone, telegraph or electric wires
shall be allowed without the consent of Landlord and any such wires permitted
shall be introduced at the place and in the manner described by Landlord. The
location of telephones, utilities outlets, speakers, fire extinguishers and all
other equipment affixed to premises occupied by tenants shall be subject to the
approval of Landlord. Each tenant shall pay all expenses incurred in connection
with the installation of its equipment, including any telephone, telegraph and
electricity distribution equipment.
16. Upon termination of occupancy of the building, each tenant shall
deliver to Landlord all keys furnished by Landlord, and any reproductions
thereof made by or at the direction of such tenant, and in the event of loss of
any keys so furnished shall pay Landlord therefor.
17. No tenant shall affix any floor covering in any manner except as
approved by the Landlord. The expense of repairing any damage caused by removal
of any such floor covering shall be borne by the tenant by whom, or by whose
30
<PAGE>
contractors, employees or invitees, the damage shall have been caused.
18. No mail, furniture, packages, supplies, equipment, merchandise or
deliveries of any kind will be received in the building or carried up or down in
the elevators except between such hours and in such elevators as shall be
designated by Landlord.
19. Landlord reserves the right to close and keep locked all
entrances and existing doors of the building during hours Landlord may deem
advisable for the adequate protection of the property. Use of the building
daily between 6:00 P.M. and 8:00 A.M. or at any time during Saturdays, Sundays
and legal holidays shall be permissive and subject to the rules and regulations
Landlord may prescribe, including but not limited to issuance of security cards
and requiring a deposit therefore necessary to operate a locking system employed
throughout the building. Tenant, Tenant's employees, agents or associates, or
other persons entering or leaving the building at any time, when it is so
locked, may be required to sign the building register, and the watchman or
Landlord's agent in charge shall have the right to refuse admittance to any
person into the building without satisfactory identification showing such
person's right to access to the building at such time. Landlord assumes no
responsibility and shall not be liable for any loss or damage resulting from the
granting or refusing of admission to any authorized or unauthorized person to
the building. Tenant shall be responsible for the cost of any false discharge of
building security alarm system caused by Tenant, it agents, employees or
invitees.
20. Each tenant shall see that the exterior doors of its premises are
closed and securely locked on Saturdays, Sundays, legal holidays and after 6:00
P.M. daily. Each tenant shall exercise care and caution that all water faucets
or water apparatus are entirely shut off each day before its premises are left
unoccupied and that all electricity or gas shall likewise be carefully shut off
so as to prevent waste or damage to Landlord or to other tenants of the
building.
21. Landlord may exclude or expel from the building any person who,
in the judgment of Landlord, is intoxicated or under the influence of liquor or
drugs, or who shall in any manner do any act in violation of any of the rules
and regulations of the building.
22. The requirements of tenants will be attended to only upon
application to Landlord. Employees of Landlord shall not perform any work
outside of their regular duties unless under special instructions from Landlord,
and no employee of Landlord shall be required to admit any person (tenant or
otherwise) to any premises in the building.
23. Landlord, without notice and without liability to any tenant, at
any time may change the name or the street address of the building.
24. The word "building" as used in these rules and regulations means
the building of which are a part the premises leased pursuant to the Lease to
which these rules and regulations are attached. Each tenant shall be liable to
Landlord and to each other tenant of the building for any loss, cost, expense,
damage or liability, including attorneys fees, caused or occasioned by the
failure of such first named tenant to comply with these rules, but Landlord
shall have no liability for such failure or for failing or being unable to
enforce compliance therewith by any tenant and such failure by Landlord or non
compliance therewith by any other tenant shall not be a ground for termination
of the lease to which these rules and regulations are attached by the tenant
thereunder.
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EXHIBIT B
Commencing at a point on the southeasterly line of Market Street, distant
thereon southwesterly 418 feet and 23/4 inches from the southwesterly line of
7th street; running thence southwesterly along southeasterly line of Market
Street 88 feet to a point distant northeasterly thereon 319 feet from the
northeasterly line of 8th street; thence at a right angle southeasterly 165 feet
and 1 inch to the northwesterly line of Stevenson Street; thence northeasterly
along the northwesterly line of Stevenson Street 88 feet to the intersection of
a line drawn from the point of commencement and perpendicularly to the
southeasterly line of Market Street; thence at a right angle northwesterly 165
feet and 1 inch to the point of commencement.
Being a portion of 100 Vara Block 406.
Block 3702; Lot 54
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LETTER OF CREDIT
Date: __________________
Letter of Credit Number: _______________
_____________________ Bank
_____________________ Address
_____________________ Address
Gentlemen:
We hereby establish in your favor this credit available with Imperial Bank N.A.,
San Francisco, CA by payment of your draft(s) at sight drawn on Imperial Bank
N.A., San Francisco, CA accompanied by:
1. Beneficiary's signed and dated statement worded as follows:
"The undersigned, an authorized representative of 1155 Market Partners,
hereby certifies that there has been a default in periodic lease rental
payments under the terms of the lease between Genesys Telecommunications
Laboratories, Inc. and 1155 Market Partners, with respect to the period
from August 1, 1996 to January 31, 1999 entitling 1155 Market Partners to
draw the amount of the accompanying draft under Imperial Bank.
Letter of Credit Number _________.
Partial Drawings are permitted.
It is a condition of this Letter of Credit that drafts presented to us on or
after August 1, 1997 may not, in the aggregate, exceed $250,000.
If any instructions accompanying a drawing under this Letter of Credit request
that payment is to be made by transfer to an account with us or at another Bank,
we and/or such other Bank may rely on an account number specified in such
instructions even if the number identifies a person or entity different from the
intended payee.
Documents must be presented to us no later than 5:00 P.M.
this is an integral part of Letter of Credit Number ______.
Draft(s) must indicate the number and date of this credit.
Each draft presented hereunder must be accompanied by this original credit for
our endorsement thereon of the amount of such draft.
Documents must be forwarded to us in one parcel and may be mailed to Imperial
Bank, San Francisco, CA 94105-2733. This Letter of Credit is fully transferable
.
This credit is subject to the uniform customs and practice for documentary
credits (1993 revision), International Chamber of Commerce, Publication number
__, and engages us in accordance with the terms thereof.
--------------------
Authorized Signature
Please contact ______________ by telephone at ______________ or by Fax at
_____________ regarding any inquiries.
33
<PAGE>
[NINTH FLOOR FLOORPLAN APPEARS HERE]
34
<PAGE>
[TENTH FLOOR FLOORPLAN APPEARS HERE]
35
<PAGE>
[ELEVENTH FLOOR FLOORPLAN APPEARS HERE]
- --------------------------------------------------------------------------------
1155 Market Street - 11th Floor Existing Space Layout
For Leasing Information, Please call: Michael Kraszulyak
Stubbs, Collenette and Associates
Phone: 415-439-5012
36
<PAGE>
MODIFICATION OF LEASE
This Modification of Lease is made on January 30, 1997 between 1155
----------
Market Partners, a California general partnership ("Landlord") and Genesys
Telecommunications Laboratories, Inc. ("Tenant"), who agree as follows:
RECITALS: This Modification of Lease is made with reference to the
--------
following facts and objectives:
a. Landlord and Tenant entered into a written Lease and Rider No. 1 dated
July 3, 1996 and a Modification of Lease dated January 21, 1997 (collectively
the "Lease"), in which Landlord leased to Tenant, and Tenant leased from
Landlord, approximately 36,198 square feet on Floors 9, 10 and 11 at 1155 Market
Street, City and County of San Francisco, California ("Premises").
b. The parties desire to modify the Lease as set forth herein.
c. It is to the benefit of Landlord and Tenant that Landlord agree to make
such modifications and, therefore, Tenant has executed and delivered this
Modification of Lease.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing facts, Tenant hereby
agrees as follows:
1. Additional Space on Sixth Floor: Commencing on February 1,
-------------------------------
<PAGE>
1997, Tenant shall also lease from landlord approximately 12,180 square feet on
the 6th floor at 1155 Market Street, City and County of San Francisco,
California ("Additional Premises").
2. Rent: Rent for the Additional Premises will begin April 1, 1997 and
----
will be $12,180 for April, 1997; and beginning May 1, 1997, for the balance of
the term of this Lease, will be $21.00 per square foot ($21,315) per month.
3. Term: The term of the Lease for the 6th Floor will be the same as the
----
term of the existing Lease.
4. Deposit: A security deposit of $21,315 will be due on the execution of
-------
this Modification, and will be applied to the last month's rent hereunder for
the Additional Premises.
5. Tenant Improvements: Tenant shall serve as general contractor for the
-------------------
tenant improvements for the 6th floor. Tenant will receive an allowance of
$11.25 per rentable square foot (or $137,025) for tenant improvement costs for
the 6th Floor.
6. Entire Agreement: This Modification contains the complete and exclusive
----------------
expression of the terms provided herein, which terms shall not be contradicted
by proof of prior agreements or contemporaneous oral agreements, nor shall they
explained or supplemented by evidence of consistent additional terms.
<PAGE>
7. Counterparts: This Modification may be executed in one or more
-------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. Modification: The parties to this Modification hereby acknowledge
-------------
that all agreements (and the exhibits thereto) between them are in writing and
that no oral amendment or modification thereto shall be effective unless in
writing and duly executed by the party being bound thereby.
9. Effectiveness of Lease: Except as set forth in this Modification of
----------------------
Lease, all the provisions of the Lease (including Rider No. 1 and the
Modification of Lease dated January 21, 1997) shall remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties have caused this Modification of Lease to
be duly executed and delivered as of the date first written above.
LANDLORD:
1155 Market Partners,
a California general partnership
By: /s/ Frank E. Lembi
-----------------------
Frank E. Lembi,
General Partner
TENANT:
Genesys Telecommunications Laboratories, Inc.
By: /s/ Michael McCloskey
-----------------------
Michael McCloskey
C.F.O.
<PAGE>
MODIFICATION OF LEASE
This Modification of Lease is made on January 21, 1997 between 1155 Market
Partners, a California general partnership ("Landlord") and Genesys
Telecommunications Laboratories, Inc. ("Tenant"), who agree as follows:
RECITALS: This Modification of Lease is made with reference to the following
- --------
facts and objectives:
a. Landlord and Tenant entered into a written Lease and Rider No. 1 dated
July 3, 1996 ("Lease"), in which Landlord leased to Tenant, and Tenant leased
from Landlord, approximately 36,198 square feet on Floors 9, 10 and 11 at 1155
Market Street, City and County of San Francisco) California ("Premises").
b. The parties desire to modify the Lease as set forth herein.
c. It is to the benefit of Landlord and Tenant that Landlord agree to
make such modifications and, therefore, Tenant has executed and delivered this
Modification of Lease.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing facts, Tenant hereby
agrees as follows;
1. Tenant Improvements: Rider No. 1 to the Lease provided that Landlord
-------------------
was to serve as general contractor as set forth therein for the tenant
improvements on floors 9, 10 and 11 of the Premises. Landlord has so served and
the tenant improvements for the 11th floor are now being
<PAGE>
completed. The parties hereby agree that Landlord will no longer serve as
general contractor and Tenant shall hereafter serve as general contractor for
the tenant improvements for floors 9 and 10. Tenant will receive an allowance of
$11.25 per rentable square foot for tenant improvements costs for floors 9 and
10.
2. Entire Agreement: This Modification contains the complete and exclusive
----------------
expression of the terms provided herein, which terms shall not be contradicted
by proof of prior agreements or contemporaneous oral agreements, nor shall they
explained or supplemented by evidence of consistent additional terms.
3 Counterparts: This Modification may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4. Modification: The parties to this Modification hereby acknowledge
------------
that all agreements (and the exhibits thereto) between them are in writing and
that no oral amendment or modification thereto shall be effective unless in
writing and duly executed by the party being bound thereby.
5. Effectiveness of lease: Except as set forth in this Modification
----------------------
of Lease, all the provision of the Lease (including rider No. 1 thereto) shall
remain unchanged and full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Modification of Lease to
be duly executed and delivered as of the date first written above.
LANDLORD;
1155 Market Partners,
a California general partnership
By: /s/ Frank E. Lembi
-------------------
Frank E. Lembi,
General Partner
TENANT:
Genesys Telecommunications Laboratories, Inc.
By: /s/ Michael Sheridan
----------------------
Michael Sheridan
Corporate Controller
<PAGE>
EXHIBIT 10.9
MASTER SOFTWARE LICENSE AGREEMENT
BETWEEN
GENESYS TELECOMMUNICATIONS LABORATORIES
AND
MCI TELECOMMUNICATIONS CORPORATION
January 31, 1996
* Confidential Treatment Requested. Confidential portion has been filed
separately with the Securities and Exchange Commission.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 -- DEFINITIONS.............................. 1
ARTICLE 2 -- APPLICABILITY OF AGREEMENT............... 2
ARTICLE 3 - LICENSE................................... 3
ARTICLE 4 -- PRICE AND PAYMENT........................ 5
ARTICLE 5 -- LIMITED WARRANTY......................... 5
ARTICLE 6 -- DISCLAIMER............................... 6
ARTICLE 7 -- MAINTENANCE SERVICES..................... 7
ARTICLE 8 -- PROPRIETARY RIGHTS....................... 7
ARTICLE 9 -- CONFIDENTIALITY.......................... 7
ARTICLE 10 -- INTELLECTUAL PROPERTY RIGHT INDEMNITY... 9
ARTICLE 11 -- LIMITATION OF LIABILITY AND REMEDIES.... 11
ARTICLE 12 -- SOURCE CODE ESCROW...................... 11
ARTICLE 13 -- TERM AND TERMINATION.................... 12
ARTICLE 14 -- GENERAL................................. 13
</TABLE>
i
<PAGE>
This MASTER SOFTWARE LICENSE AGREEMENT ("Agreement"), dated as of
January 31, 1996 ("Effective Date"), is made and entered into by and between
GENESYS TELECOMMUNICATIONS LABORATORIES, a California corporation with offices
at 1111 Bayhill Drive, Suite 180, San Bruno, CA 94066 ("Genesys") and MCI
TELECOMMUNICATIONS CORPORATION, a Delaware corporation with offices at 1801
Pennsylvania Ave., N.W., Washington, D.C. 20006 ("MCI").
ARTICLE 1 -- DEFINITIONS
1.1 "Affiliate" means, with respect to a named party, any corporation,
partnership, joint venture or other entity controlling, controlled by or under
common control with such party.
1.2 "Applicable Specification" means the functional and operational
characteristics of the Licensed Software as described in Licensor's current
Documentation, published product description and technical manuals, together
with such other performance, scaleability or other operational requirements and
standards agreed to between the parties and set forth in an attachment hereto or
as a part of MCI's purchase order, either of which shall be deemed to be
incorporated as a part hereof.
1.3 "Confidential Information" means information of a party (the "Owner")
which relates, respectively, to the matters contemplated by this Agreement,
including trade secrets, business and technical information and data, or which,
although not related to matters, is nevertheless disclosed to the other party
(the "Recipient") as a result of the relationship between the parties
established by this Agreement and which, in any case, (i) is disclosed by the
Owner to the Recipient in document, electronic media, or other form bearing an
appropriate legend indicating its confidential or proprietary nature, (ii)
which, if initially disclosed orally or visually is identified as confidential
at the time of disclosure and a written summary thereof, also marked with such a
legend, is provided to the Recipient within fifteen (15) days of the initial
disclosure, or (iii) is by its very nature, in the ordinary course of business,
customarily understood to be confidential or proprietary information, including,
but not limited to the object code of the Licensed Software and related
Documentation, product development plans, internal hardware and software systems
architecture, and unannounced business plans.
1.4 "Designated CPU" means a central processing unit or file server
machine as identified by the serial number and location in the Purchase Order
under which a license to Licensed Software is being obtained by MCI:
1.5 "Documentation" means manuals and other documentation which are
generally made available to licensees of the Licensed Software together with
such
<PAGE>
other documentation specifically made available to MCI by Genesys with the
Licensed Software.
1.6 "Licensed Software" means the software programs described in Exhibit A
attached hereto, in object code format, including any accompanying
Documentation, and including all corrections, modifications, enhancements and
upgrades to such software which may be provided to MCI by Genesys hereunder
pursuant to the terms of Article 7 below.
1.7 "Simultaneous Users" means the number of end-users permitted to
concurrently access and use, at the same time, the Licensed Software.
ARTICLE 2 -- APPLICABILITY OF AGREEMENT
2.1 This Agreement establishes the general terms and conditions under
which MCI and its Affiliates (collectively, and individually, "MCI") shall now
or in the future acquire from Genesys its services and a license to use
Genesys's proprietary computer software systems or programs and related
documentation, all of which are referred to in this Agreement as a "Licensed
Software" (whether singular or plural).
2.2 Genesys's current product listing of all Licensed Software is attached
hereto as Exhibit A. Genesys shall, from time to time during the Term, at the
request of MCI, provide MCI with new listing Licensed Software as the same may
come available.
2.3 Genesys shall not be obligated to provide any Licensed Software to MCI
and MCI shall not be obligated to pay for or accept any Licensed Software by
virtue of this Agreement alone without the issuance of a purchase order (herein,
"Purchase Order") by MCI and the written acceptance thereof by Genesys. Any such
Purchase Order shall specifically reference this Agreement. The specified
Licensed Software, term (period of usage) and effective date of the license,
Applicable Specifications, shipping and billing information, payment terms,
delivery date of the Licensed Software, eligible computer site(s), Designated
CPU(s), Simultaneous User restrictions, operating system, license fee,
maintenance services or charges, as may be relevant, and any other matter not
provided for herein, shall be specified in such Purchase Order. The terms and
conditions of this Agreement shall control over any pre-printed words on a
Purchase Order. In the event of any conflict or inconsistency between the terms
and conditions of this Agreement and the terms on any Purchase Order, the terms
of this Agreement shall control unless such Purchase Order terms are approved in
writing by the parties' legal counsel.
2
<PAGE>
ARTICLE 3 -- LICENSE
3.1 Software License. Subject to the terms and conditions of this
----------------
Agreement, for each Purchase Order issued by MCI and accepted by Genesys,
Genesys shall grant MCI a [*] (except as otherwise provided in Section 14.1),
[*] license to use the applicable Licensed Software in [*] solely on the
Designated CPU, [*] for the use by the number of Simultaneous Users for such
Designated CPU specified in the Purchase Order for the purposes of MCI's
business and the business(es) of its Affiliates.
3.2 Delivery and Acceptance.
-----------------------
(A) Upon final acceptance by Genesys of a Purchase Order, MCI shall
pay the license fee referenced and in accordance with the payment schedule
specified in the Purchase Order or an exhibit or schedule thereto ("License
Fee"). The initial installation for the Licensed Software will be performed by
Genesys during MCI's normal working hours and will include the products and
services listed in the Purchase Order, to be provided according to the schedule
specified therein. Genesys will notify MCI when installation of the Licensed
Software has been completed. Genesys agrees to deliver, at the time of such
installation, Documentation in form and substance reasonably satisfactory to
MCI. Following installation, unless otherwise specified in the Purchase Order,
MCI shall have a period of [*] days for inspection and testing of the Licensed
Software to determine conformance with the Applicable Specifications for the
Licensed Software (the "Acceptance Criteria"). The designation in any Purchase
Order of an acceptance period of less than [*] days shall not be effective
unless such Purchase Order is countersigned by an MCI representative of Director
level. If any feature or module of the Licensed Software is found not to
conform, MCI shall, within the inspection period, notify Genesys and provide a
detailed description of such defects. Following confirmation by Genesys of such
defects, Genesys will provide MCI with a corrected version of the Licensed
Software, and if Genesys fails to deliver such corrected version within a
reasonable time (not to exceed [*] days from MCI's notification to Genesys), MCI
will have the option of canceling the Purchase Order within the next [*]
business days. In the event MCI exercises such option, MCI shall return all
copies of the Licensed Software and the Documentation to Genesys; Genesys shall
promptly refund to MCI all amounts paid by MCI to Genesys pursuant to the
applicable Purchase Order, and neither party shall have any future obligations
or liability under that Purchase Order with respect to the relevant Licensed
Software. Such full refund and cancellation shall be MCI's sole and exclusive
remedy for rejection of the Licensed Software.
(B) Upon acceptance by MCI of the Licensed Software pursuant to
Section 3.2(A) or if MCI fails to notify Genesys of any defects within the
inspection period specified therein, the Licensed Software shall be deemed
accepted. MCI's sole remedy for correction of problems after acceptance shall
be under the Limited Warranty set forth in Article 5 below.
3
* Confidential Treatment Requested
<PAGE>
3.3 Archival Copies. MCI may make a reasonable number of copies of
---------------
the Licensed Software for archival purposes; provided, however, that MCI may
make a reasonable number of copies of Documentation for the use of MCI's
employees in their use of the Software. MCI agrees to reproduce and include any
copyright or proprietary notices of Genesys on all copies, in whole or in Part,
of the Licensed Software or Documentation.
3.4 Back-Up Hardware. A single back-up or replacement CPU or file
----------------
server may be used as a substitute for a Designated CPU at any time; provided,
however, that MCI provides Genesys with written notice of such hardware
substitution, including information regarding the replacement hardware as
required for the Designated CPU in Exhibit A, within seven (7) days of such
replacement.
3.5 No Other Rights. This Agreement transfers to MCI neither title
---------------
nor any proprietary or intellectual property rights to the Licensed Software,
Documentation or any copyrights, patents or trademarks embodied or used in
connection therewith, and except for the rights expressly granted herein, MCI
receives no other rights in or to the Licensed Software, Documentation and
intellectual property, either by implication, estoppel or otherwise.
Accordingly, MCI shall have no other rights with respect to the Licensed
Software other than the license expressly set forth herein.
3.6 License Restriction. MCI agrees that it will not itself, or
-------------------
through any parent, subsidiary, Affiliate, agent or other third party:
(A) sell, lease, license or sublicense the Licensed Software or
Documentation (except as otherwise provided in Section 14.1);
(B) decompile, disassemble or reverse engineer the Licensed Software,
in whole or in part, or otherwise attempt to derive source code therefrom;
(C) allow access to the Licensed Software by any Simultaneous User
other than MCI's employees, employees of MCI's customers, dealer and
distributors who use such Licensed Software solely for the purpose of conducting
business with MCI, and independent contractors and consultants who have a need
to access the Licensed Software for the purpose of performing services for or on
behalf of MCI and in accordance with the use restrictions contained herein; or
(D) write or develop any derivative works based upon the Licensed
Software (except as otherwise permitted by Section 12.3) or upon any
Confidential Information of Genesys.
ARTICLE 4 -- PRICE AND PAYMENT
4.1 Price. In consideration for the rights granted MCI hereunder,
-----
MCI
4
<PAGE>
agrees that it shall, upon acceptance by Genesys of an MCI Purchase Order, pay
Genesys the [*], and the [*], if applicable, in accordance with the payment
schedule set forth in the Purchase Order. If the Purchase Order fails to specify
a payment schedule, the [*] shall be due and payable as follows: [*] percent
([*]%) [*] of the [*] and [*] percent ([*]%) [*] of the relevant [*]; and, [*]
fees shall be payable, [*], within [*] business days of [*] for the [*], which
[*] shall submit at the [*] for the relevant [*].
4.2 Payment Terms. Except for the [*] and the [*], all amounts due
-------------
Genesys shall be paid within forty-five (45) days of MCI's
receipt of the relevant invoice from Genesys.
4.3 Taxes. Unless otherwise agreed in writing, MCI shall be
-----
responsible for all taxes, duties or charges of any kind (including withholding
or value added taxes) imposed by any federal, state, or local governmental
entity for products or services provided under this Agreement, excluding only
taxes based solely on Genesys's net income. When Genesys has the legal
obligation to collect such taxes, the appropriate amount shall be invoiced to
MCI unless MCI provides Genesys with a valid tax exemption certificate
authorized by the appropriate taxing authority. MCI shall hold Genesys harmless
from all claims and liability arising from MCI's failure to pay any such taxes,
duties, or charges.
ARTICLE 5 -- LIMITED WARRANTY
5.1 Software Media Warranty. Genesys warrants that the media in
-----------------------
which the Licensed Software is embodied and the media on which any Update (as
defined in the Software Maintenance Agreement entered into between the parties
as of even date herewith ("Maintenance Agreement")) is delivered will be free
from material defects for a period of [*] days from the delivery date of the
Licensed Software or the Update to MCI. [*] and [*] under this warranty will be
to [*] on which such Licensed Software or Update was delivered. Genesys shall
have [*] any [*] media which is not [*] to Genesys within the warranty period or
which has [*] or [*].
5.2 Software Warranty. Genesys warrants that for a period of [*]
-----------------
days from the delivery of the Licensed Software or any subsequent Update, the
Licensed Software and such Update, if used by MCI in accordance with the then-
current Documentation therefor, shall operate in conformity with the Applicable
Specifications. Genesys [*], however, that the Licensed Software will [*] or
that the [*] will be [*] or [*].
5
* Confidential Treatment Requested
<PAGE>
[*], and [*], and [*] and [*], under this limited Software Warranty shall be, at
[*], to [*] to attempt, through reasonable efforts, (i) to [*] any material
nonconformities discovered within the relevant [*]-day warranty period or (ii)
to [*] the nonconforming Licensed Software or subsequent Update [*] which [*].
If Genesys is unable to achieve (i) or (ii) within a reasonable time (not to
exceed [*] days from MCI's notification to Genesys of a material nonconformity),
Genesys shall [*] to MCI all [*] by [*] to [*] pursuant to the relevant Purchase
Order, MCI shall [*] all relevant copies of the Licensed Software and the
Documentation to Genesys, and [*] with respect to such Licensed Software. The
above remedies are available [*] if Genesys is [*], upon discovery of the
nonconformities by MCI, and that the Licensed Software has not been used,
adjusted or installed other than in accordance with this Agreement and the most
recent version of Documentation provided to MCI by Genesys.
5.3 Warranty of Title. Genesys warrants that it owns all rights and
-----------------
interest in and has the marketing and distributing rights to the Licensed
Software as is necessary to provide MCI with the license rights set forth
herein.
5.4 Warranty Regarding Software Viruses. Genesys warrants that it or
-----------------------------------
its employees shall not negligently or knowingly introduce a virus into MCI's
operating environment during the performance of services under this Agreement or
through the provision of Licensed Software. For the purposes of this Agreement,
a "virus" shall mean a computer code which may provide functions outside those
identified for the Licensed Software in the latest Documentation provided by
Genesys to MCI.
ARTICLE 6 -- DISCLAIMER
6.1 EXCEPT FOR THESE EXPRESS LIMITED WARRANTIES, NEITHER GENESYS NOR
ANY OF ITS SUPPLIERS MAKE ANY WARRANTIES EXPRESS, IMPLIED OR STATUTORY WITH
RESPECT TO THE LICENSED SOFTWARE, AND GENESYS AND ITS SUPPLIERS EXPRESSLY
DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
ARTICLE 7 -- MAINTENANCE SERVICES
7.1 Genesys agrees to offer maintenance and support for the Licensed
Software subject to the terms and conditions for such services as described in
the Maintenance Agreement.
ARTICLE 8 -- PROPRIETARY RIGHTS
6
* Confidential Treatment Requested
<PAGE>
8.1 MCI acknowledges that Genesys and its suppliers retain all right,
title and interest in and to the original, and any copies, of the Licensed
Software or Documentation, and ownership of all patent, copyright, trade secret
and other intellectual property rights pertaining thereto, shall be and remain
the sole property of Genesys. MCI shall not be an owner of any copies of, or
any interest in, the Licensed Software, but rather, is licensed pursuant to this
Agreement to use such copies. Genesys represents that it has the authority to
enter into this Agreement and to grant the licenses provided herein.
ARTICLE 9 -- CONFIDENTIALITY
9.1 General. Recipient may use Confidential Information of Owner
-------
only for the purpose of fulfilling its obligations as set forth in this
Agreement and for no other purpose. Recipient shall protect such Confidential
Information from disclosure to others using the same degree of care used to
protect its own confidential or proprietary information of like importance, but
in any case using no less than a reasonable degree of care. Recipient may
disclose Confidential Information received hereunder to (i) its Affiliates who
agree, in advance, in writing, to be bound by this Agreement, and (ii) to its
employees and consultants, and its Affiliates' employees and consultants, who
have a need to know, for the purpose of this Agreement, and who are bound to
protect the received Confidential Information from unauthorized use and
disclosure under the terms of a written agreement no less restrictive than the
terms herein. Confidential Information shall not otherwise be disclosed to any
third party without the prior written consent of the Owner.
9.2 Exceptions.
----------
(A) The restrictions of this Agreement on use and disclosure of
Confidential Information shall not apply to information that:
(1) Was publicly known at the time of Owner's communication
thereof to Recipient;
(2) Becomes publicly known through no fault of Recipient
subsequent to the time of Owner's communication thereof to Recipient;
(3) Was in Recipient's possession free of any obligation of
confidence at the time of Owner's communication thereof to Recipient;
(4) Is developed by Recipient independently of and without
reference to any of Owner's Confidential Information or other
information that Owner disclosed in confidence to any third party;
(5) Is rightfully obtained by Recipient from third parties
7
<PAGE>
authorized to make such disclosure without restriction; or
(6) Is identified by Owner as no longer proprietary or
confidential.
(B) In the event Recipient is required by law, regulation or court
order to disclose any of Owners Confidential Information, Recipient will
promptly notify Owner in writing prior to making any such disclosure in order to
facilitate Owner seeking a protective order or other appropriate remedy from the
proper authority. Recipient agrees to cooperate with Owner in seeking such
order or other remedy. Recipient further agrees that if Owner is not successful
in precluding the requesting legal body from requiring the disclosure of the
Confidential Information, it will furnish only that portion of the Confidential
Information which is legally required and will exercise all reasonable efforts
to obtain reliable assurances that confidential treatment will be accorded the
Confidential Information.
9.3 Return of Confidential Information. All Confidential Information
----------------------------------
disclosed under this Agreement (including information in computer software or
held in electronic storage media) shall be and remain the property of Owner.
All such information in tangible form shall be returned to Owner promptly upon
written request or the termination or expiration of this Agreement, and shall
not thereafter be retained or used in any form by Recipient.
9.4 Terms. The parties agree that the terms and conditions of this
-----
Agreement shall be treated by each party as the Confidential Information of the
other party, and that neither party shall disclose the contents of this
Agreement without the prior written consent of the other party; provided,
however, that the general existence of this Agreement shall not be treated as
Confidential Information and that either party may disclose the terms and
conditions of this Agreement
(A) under the circumstances and subject to the conditions set forth in
Section 9.2;
(B) in confidence, to such party's legal counsel;
(C) in confidence, to such party's accountants; or
(D) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement.
Notwithstanding the foregoing, either party may, without the other party's prior
consent, disclose the aggregate dollar amounts associated with this Agreement
(but no other terms and conditions), in confidence to its banks, proposed
investors and financing sources.
8
<PAGE>
9.5 Remedies. Each party acknowledges that the breach of any of its
--------
obligations under this Article 9 is likely to cause or threaten irreparable harm
to the other party and, accordingly, each party agrees that in such event, the
other party shall be entitled to equitable relief to protect its interests
therein, including but not limited to preliminary and permanent injunctive
relief, as well as money damages.
ARTICLE 10 -- INTELLECTUAL PROPERTY RIGHT INDEMNITY
10.1 Indemnity. [*] agrees, [*], to [*] or, [*], to [*] any
---------
claim or action brought against [*] based on an allegation that [*] of the
Licensed Software within the scope of the license granted hereunder (a) [*]
under the laws of [*] (or, in the event of the expiration or termination of the
treaty, the countries signatory at the time of such expiration or termination),
or (b) [*] of a third party or constitutes [*] of a [*] under the laws of any
country (a claim under either (a) or (b) herein, an "[*]"), and to [*] against
all [*] which may be assessed against [*] under any such claim or action.
Promptly after receipt [*] of notice of any claim or the commencement of any
claim for which indemnification or reimbursement may be sought hereunder, [*]
shall give written notice to [*] thereof, but the failure to so notify [*] shall
[*] it may have [*] hereunder [*] shall be obligated to [*] of such claim, [*],
and shall have [*] and [*] over the [*] or [*] of such claim, provided that [*]
will be required to the extent (i) any such [*] or [*] will impose any
obligation whatsoever [*] that is [*] or [*], or [*] other than the payment of
monies that are readily measurable for purposes of determining the monetary
indemnification or reimbursement obligations [*], or (ii) [*] will not be [*] of
[*] pursuant to such [*] or [*], including the [*] to pay when due [*] to pay
pursuant to such [*] or [*]. [*] shall have the right, [*], to [*] in the
investigation [*] of such claim, [*]. [*] shall otherwise provide reasonable [*]
with respect to such claim, provided that [*] for its [*] with respect thereto.
Moreover, should any of the Licensed Software become, or, in [*], be likely to
become, the subject of a claim of [*], or should [*] use thereof be finally [*],
[*] and [*]:
(A) [*] the right to [*] such material; or
(B) [*] or [*] such material to make it [*] provided
9
* Confidential Treatment Requested
<PAGE>
such [*] or [*] is the functional equivalent of the Licensed Software in light
of the Applicable Specifications, and [*] for any additional [*], and [*] and
caused by any such [*] or [*]; or
(C) If neither of the foregoing can be suitably accomplished, [*] for
all [*] of the [*] paid for the Licensed Software pursuant to this Agreement,
provided that such amounts shall be [*] beginning with the [*] of the Licensed
Software (i.e., a change from version A.x to version B.0) was received [*].
10.2 Exceptions.
----------
(A) Notwithstanding the provisions of Section 10.1 above, [*] for [*]
claims to the extent arising from (i) the [*] of the Licensed Software with
other products [*] and not within the [*] given the use for which the Licensed
Software was designed; (ii) any [*] to the Licensed Software unless such [*] was
made or otherwise authorized [*]; or (iii) any [*] held by [*] derived through
[*] issued by the countries other than [*] .
(B) Notwithstanding anything in Section 10.1 to the contrary, [*] for
[*] or [*] as a [*] (but not including the [*], pursuit of [*], and any other
legal and related [*] claims of [*]), shall be limited to [*] times the amount
of the license fees paid [*] for the [*] Licensed Software for any [*] claim
with respect to [*] of the Licensed Software in a [*], to the extent arising
from (a) the [*] of the Licensed Software with any other product [*], even if
[*] such [*] or, (b) a [*] to the Licensed Software made or [*] for the [*]. It
is understood and acknowledged that the foregoing [*] for certain [*] claims
shall [*], for all such claims in all proceedings in accordance with Section
10.1, subject to the limitations of Section 10.2(A).
10.3 [*]
---
10.4 Limitation. THE FOREGOING PROVISIONS OF THIS ARTICLE 10 STATE
----------
THE ENTIRE LIABILITY AND OBLIGATIONS OF
10
* Confidential Treatment Requested
<PAGE>
GENESYS, AND THE EXCLUSIVE REMEDY OF MCI, WITH RESPECT TO ANY ACTUAL OR ALLEGED
INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL
PROPERTY RIGHT BY THE LICENSED SOFTWARE OR ANY PART THEREOF.
ARTICLE 11 -- LIMITATION OF LIABILITY AND REMEDIES
11.1 THE PARTIES AGREE, [*] UNDER SECTION 5.4, AND 10, AND BOTH
PARTIES CONFIDENTIALITY OBLIGATIONS UNDER SECTION 9 ABOVE, [*] FOR EACH CLAIM
[*] OR THE [*] OF ANY LICENSED SOFTWARE [*] UNDER THE RELEVANT PURCHASE ORDER
AND [*], ARISING IN ANY WAY OUT THIS AGREEMENT UNDER ANY CAUSE OF ACTION, [*].
ARTICLE 12 -- SOURCE CODE ESCROW
12.1 Within thirty days of the signing of this Agreement and from time
to time thereafter, but not more than sixty days following any subsequent Update
of the Licensed Software, to secure MCI's rights hereunder Genesys shall place
copies of its then current source code and documentation (the "Escrow
Materials") for all the Licensed Software with Data Securities International,
Fort Knox Escrow Services, Inc. or another independent escrow agent mutually
satisfactory to MCI and Genesys on the standard terms and conditions of such
agent and in accordance with the following provisions of this Article 12.
12.2 Release of the Escrow Materials to MCI shall be on terms and
conditions (including notice, redeposit and other provisions) to be agreed in
the escrow agreement, but such release shall be granted whenever:
(A) Genesys is unable or unwilling to perform its maintenance and/or
support obligations under this Agreement or any separate agreement between the
Parties with respect to maintenance and support; or
(B) Genesys applies for or consents to the appointment of or the
taking of possession by a receiver, custodian, trustee, or liquidator of itself
or of all or a substantial part of its property; makes a general assignment for
the benefit of creditors;
11
* Confidential Treatment Requested
<PAGE>
commences a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect); or fails to contest in a timely or appropriate manner or
acquiesces in writing to any petition filed against it in an involuntary case
under such Bankruptcy Code or any application for the appointment of a receiver,
custodian, trustee or liquidation of itself or of all or a substantial part of
its property, or its liquidation, reorganization or dissolution.
12.3 MCI is hereby granted a license to use such Materials upon their
release to MCI only to perform and authorize the performance of such maintenance
and/or support, and for no other purpose. Such escrow shall be established and
maintained at the expense and for the sole benefit of MCI. Genesys warrants
that the Escrow Materials will accurately reflect the then current version of
the Licensed Software and will be sufficiently detailed and documented so as to
permit a reasonably competent computer professional conversant in the
languages(s) used by the Licensed Software to understand, maintain and modify
the Licensed Software.
12.4 Any dispute or disagreement between the Parties arising out of
this Article 12 shall be resolved by arbitration in accordance with Section
14.4, provided that if the arbitrator(s) are unable to render an award within
sixty (60) days of the demand for arbitration, through no fault or act of delay
by MCI, the Escrow Materials shall be released to MCI notwithstanding the
pendency of any such arbitration. At all time, the parties shall use their best
efforts to expedite the arbitration proceedings. If the arbitrator(s)
ultimately find that under the terms of this Agreement release of the Escrow
Materials to MCI should not have occurred, MCI shall return the Escrow Materials
to the Escrow Agent.
12.5 The obligations of Genesys under this Article 12 shall remain in
effect until the termination of the maintenance and support obligations of
Genesys.
ARTICLE 13 -- TERM AND TERMINATION
13.1 Term and Termination. MCI may terminate this Agreement or any
--------------------
license obtained hereunder upon ninety (90) days' prior written notice to
Genesys.
13.2 Return of Materials. Upon termination of any license for any
-------------------
reason, MCI shall immediately discontinue use of the relevant Licensed Software
and Documentation and within ten (10) days certify in writing to Genesys that
all copies of the Licensed Software and Documentation, in whole or in part, in
any form, have either been returned to Genesys or destroyed in accordance with
Genesys's instructions. Upon such termination Genesys shall immediately refund
to MCI any related unamortized prepayments made by MCI for maintenance and
support.
13.3 Termination by Genesys. Genesys may terminate a license granted
----------------------
hereunder with respect to any one or more Purchase Orders if MCI commits any
material breach of the license grant set forth in Section 3 or the
confidentiality
12
<PAGE>
obligations in Section 9 above and fails to remedy such breach within thirty
(30) days after written notice by Genesys of such breach and such material
breach causes irreparable damage to Licensor or cannot adequately be remedied by
the payment of monetary damages by Genesys.
13.4 Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the following provisions shall survive: Articles 3 (except to the
extent Genesys terminates this Agreement as a result of MCI's material breach of
the license granted by such Article), 4 (to the extent of any amounts due and
owing as of such termination), 5, 7, 8, 9, 10, 11, 12 and 14. All other rights
and licenses granted hereunder will cease upon termination.
ARTICLE 14 -- GENERAL
14.1 Assignment. Neither party shall have the right to transfer,
----------
assign or otherwise dispose of its rights or obligations hereunder, by operation
of law or otherwise, without the prior written consent of the other party.
Notwithstanding the foregoing, (i) MCI may transfer or assign its rights and
obligations, in whole or in part, to an Affiliate, provided that MCI shall,
however, notify Genesys of such transfer or assignment, and (ii) Genesys may
assign this Agreement as part of the sale of all or substantially all of its
assets or as part of any transaction resulting in a change in control of
Genesys, provided that Genesys shall notify MCI of such assignment and that MCI
shall have the option of terminating (without prejudice to other provisions of
this Agreement) any development obligations then in effect.
14.2 Captions. The captions used in this Agreement are included for
--------
convenience only and shall not be considered part of this Agreement for any
purpose.
14.3 Governing Law. This Agreement shall be governed, construed and
-------------
enforced in accordance with the laws of the state of New York, without reference
to conflict of laws principles.
14.4 Dispute Resolution. Any dispute arising out of or related to
------------------
this Agreement, which cannot be resolved by negotiation, shall be settled by
binding arbitration in accordance with the J.A.M.S/ENDISPUTE arbitration Rules
and Procedures ("Endispute Rules"), as amended by this Agreement. The costs of
arbitration, including the fees and expenses of the arbitrator, shall be shared
equally by the parties unless the arbitration award provides otherwise. Each
party shall bear the cost of preparing and presenting its case. The parties
agree that this provision and the arbitrator's authority to grant relief shall
be subject to the United States Arbitration Act, 9 U.S.C. 1-16 et seq. ("USAA"),
the provisions of the Agreement, and the ABA-AAA Code of Ethics for Arbitrators
in Commercial Disputes. The parties agree that the arbitrator shall have no
power or authority to make awards or issue orders of any kind except as
expressly permitted by this Agreement, and in no event shall the arbitrator
13
<PAGE>
have the authority to make any award that provides for punitive or exemplary
damages. The arbitrator's decision shall follow the plain meaning of the
relevant documents, and shall be final and binding. The award may be confirmed
and enforced in any court of competent jurisdiction. All post-award proceedings
shall be governed by the USAA. The location of such a proceeding shall be
mutually agreed by the parties or if agreement cannot be reached, then the
location chosen by the arbitrator. This provision shall not preclude either
party seeking injunctive relief as permitted hereunder in any court of competent
jurisdiction. Unless the parties otherwise agree, all arbitration proceedings
shall take place in San Francisco, California.
14.5 Jurisdiction. The federal and state courts within San Francisco,
------------
California, shall have exclusive jurisdiction with respect to any action sought
by either party to enforce Section 14.4 above. Each party hereto expressly
consents to the personal jurisdiction of, and venue in, such courts and service
of process being effected upon it by registered mail and sent to the address set
forth at the beginning of this Agreement.
14.6 Independent Contractors. The relationship of Genesys and MCI
-----------------------
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed (i) to give either party the
power to direct or control the day-to-day activities of the other or (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking.
14.7 Severability. If any provision of this Agreement is held to be
------------
invalid by a court of competent jurisdiction, then the remaining provisions
shall nevertheless remain in full force and effect. The parties further agree
to negotiate in good faith a substitute, valid and enforceable provision that
most nearly effects the parties' intent and to be bound by mutually agreed
substitute provision.
14.8 No Waiver. The failure of either party to enforce at any time
---------
any of the provisions of this Agreement shall not be deemed to be a waiver of
the right of such party thereafter to enforce any such provisions.
14.9 Force Majeure. Except for the obligation to make payments,
-------------
nonperformance of either party shall be excused to the extent that performance
is rendered impossible by strike, fire, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control of the nonperforming party.
14.10 Notices. Any required notices hereunder shall be given in
-------
writing at the address of each party set forth above, or to such other in the
manner contemplated herein, and shall be deemed served when delivered or, if
delivery is not accomplished by reason or some fault of the addressee, when
tendered.
14
<PAGE>
14.11 U.S. Government Licensees. Any use of the Licensed Software by
-------------------------
the U.S. Government is conditioned upon the Government agreeing that the
Licensed Software is subject to Restricted Rights as provided under the
provisions set forth in subdivision (c)(1)(ii) of Clause 252.227-7013 of the
Defense Federal Acquisition Regulations Supplement, or the similar acquisition
regulations of other applicable U.S. Government organizations.
14.12 Entire Agreement. This Agreement and Exhibits attached hereto
----------------
and incorporated herein constitute the entire, final, complete and exclusive
agreement between the parties and supersede all previous agreements or
representations, oral or written, relating to this Agreement. This Agreement may
not be modified or amended except in a writing signed by a duly authorized
representative of each party. Both parties acknowledge having read the terms and
conditions set forth in this Agreement and Exhibits attached hereto, understand
all terms and conditions, and agree to be bound thereby.
IN WITNESS WHEREOF, the parties by their duly authorized
representatives have executed this Agreement as of the Effective Date set forth
above.
GENESYS TELECOMMUNICATIONS MCI TELECOMMUNICATIONS
LABORATORIES CORPORATION
/s/ Gregory Shenkman /s/ H.A. Shartel
- --------------------------- -------------------------------------
Signature Signature
Gregory Shenkman, President H.A. Shartel, Sr. Manager Procurement
- --------------------------- -------------------------------------
Printed Name and Title Printed Name and Title
January 31, 1996 February 7, 1996
- --------------------------- -------------------------------------
Date Date
15
<PAGE>
EXHIBIT A
---------
LICENSED SOFTWARE
16
<PAGE>
EXHIBIT A
[*]
*Confidential Treatment Requested
<PAGE>
ADDENDUM TO MASTER LICENSE AGREEMENT
This ADDENDUM ("Addendum") is entered into this 1st day of February, 1996
("Effective Date"), by and between Genesys Telecommunications Laboratories
("Genesys"), a California corporation with offices at 1111 Bayhill Drive, Suite
180, San Bruno, CA 94066 and MCI Telecommunications Corporation ("MCI"), a
Delaware corporation with offices at 1801 Pennsylvania Avenue, N.W., Washington,
D.C. 20006.
In consideration of the promises and conditions of this Addendum, the parties
agree as follows:
BACKGROUND
A. Genesys and MCI have entered into a Master Software License Agreement dated
January 31, 1996 (the "Agreement").
B. The parties desire to amend the Agreement as set forth in this Addendum.
AMENDMENT
1. AMENDMENT OF AGREEMENT. This Addendum hereby amends and revises the
Agreement to incorporate the terms and conditions set forth in this Addendum.
The relationship of the parties shall continue to be governed by the terms of
the Agreement as amended.
2. DEFINITIONS. A used in this Addendum, all capitalized terms shall have the
meanings assigned to such terms in this Addendum, or, if not specified in this
Addendum, the meanings defined elsewhere in the Agreement.
3. ACCEPTANCE OF EXISTING SYSTEMS. MCI agrees to accept prior to December 31,
1995, the Software Licenses provided for the following projects:
(i) The MCI Diamond Center
(ii) The MCI-ICSD Compaq Project
(iii) The MCI NILE Project
4. MODIFICATIONS TO THE AGREEMENT.
4.1 Section 10 of the Agreement is amended by adding the following
subsection.
<PAGE>
10.5 Indemnity Contingent on Purchase of Maintenance.
-----------------------------------------------
[*] contained in this section 10, [*] of any kind with respect
[*] for [*] of any Licensed Software for which [*] at the time
such [*].
5. ENTIRE AGREEMENT. This Addendum and the Agreement constitute the entire
Agreement between the parties in connection with the subject matter of this
Addendum and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties.
IN WITNESS WHEREOF, Genesys and MCI have caused this Addendum to be executed by
their duly authorized representatives, effective as of the Effective Date set
forth above.
AGREED TO AND ACCEPTED BY:
GENESYS TELECOMMUNICATIONS MCI TELECOMMUNICATIONS
LABORATORIES CORPORATION
/s/ Gregory Shenkman /s/ H.A. Shartel
- ------------------------------ --------------------------------
Signature Signature
Gregory Shenkman, President H.A. Shartel Sr Mgr--Procurement
- ------------------------------ --------------------------------
Printed Name and Title Printed Name and Title
February 1, 1996 February 7, 1996
- ------------------------------ --------------------------------
Date Date
*Confidential Treatment Requested
2
<PAGE>
AMENDMENT NUMBER ONE TO MASTER LICENSE AGREEMENT
This AMENDMENT NUMBER ONE (the "Amendment") is entered into this 26th day
of February, 1997 ("Effective Date"), by and between Genesys Telecommunications
Laboratories, Inc. ("Genesys"), a California corporation with a principal place
of business at 1155 Market Street, 11th Floor, San Francisco, CA 94103 and MCI
Telecommunications Corporation ("MCI"), a Delaware corporation with offices at
1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
In consideration of the promises and conditions of this Amendment, the parties
agree as follows:
BACKGROUND
A. Genesys and MCI have entered into a Master Software License Agreement dated
January 31, 1996 (the "Agreement"); and
B. Genesys and MCI have entered into a Master Consulting Agreement as of even
date herewith, pursuant to which Genesys has undertaken to incorporate certain
functionality in the development of an intelligent network call router software
product that will be developed through enhancements and modifications to certain
of Genesys' products; and
C. Genesys and MCI desire to amend the Agreement to reflect agreed upon terms
and conditions under which MCI will license such call router software product
and other Genesys products; and
D. The parties desire to amend the Agreement as set forth in this Amendment
Number One.
AMENDMENT
1. AMENDMENT OF AGREEMENT. This Amendment hereby amends and revises the
Agreement to incorporate the terms and conditions set forth in this Amendment.
The relationship of the parties with respect to the subject matter hereof shall
continue to be governed by the terms of the Agreement as amended.
2. EXHIBITS.
a. Licensed Software and Pricing. Exhibit A to the Agreement is hereby
deleted in its entirety and replaced by a new Exhibit A attached hereto as
Schedule A.
<PAGE>
b. MCI Minimum Purchase Guarantee. A new Exhibit B to the Agreement
attached hereto as Schedule B is hereby incorporated by reference.
3. DEFINITIONS.
As used in this Amendment, all capitalized terms shall have the meanings
assigned to such terms in this Amendment, or, if not specified in this
Amendment, the meanings defined elsewhere in the Agreement.
a. Section 1.2 is modified, in part, to read as follows:
" . . . of the Licensed Software as (i) accepted by MCI pursuant to
the MCA, if applicable, or (ii) described in Genesys' current Documentation,
published product description and technical manuals, together in either case
with such other performance . . . part of MCI's Purchase Order, either . . ."
b. Section 1.4 is modified, in part, to read as follows:
". . . the serial number and location on which the Licensed Software
is deployed as to which MCI shall notify Genesys in a written quarterly report
within thirty (30) days following the end of the calendar quarter during which
the Licensed Software was deployed."
c. The following new sentence is added to the end of Section 1.6:
"The software programs set forth on Exhibit A attached hereto may be
modified by Genesys from time to time; provided, however, that the Licensed
Software designated as Genesys Network Applications in Exhibit A hereto shall at
all times comply with the specifications set forth in Exhibit A-SOW-1 to the MCA
which shall constitute the Applicable Specifications for such Network
Applications unless otherwise mutually agreed to by the parties."
d. Section 1.7 is modified, in part, to read as follows:
" . . . the Licensed Software; provided, however, that this Section
1.7 shall have no application to Network Applications."
e. The following new definitions are added to Article 1 "DEFINITIONS."
"1.8 "Advanced T-Server Functionality" shall have the meaning
specified in Section 4.7(C)."
"1.9 "Basic T-Server Functionality" shall have the meaning specified
in Section 4.7(B)."
-2-
<PAGE>
"1.10 "Customer" shall mean a third party end-user of the Premises
Software and network-based call routing and other related services provided
directly by MCI or an MCI Affiliate which utilize the Licensed Software within
the scope of the licenses granted hereunder."
"1.11 "Eligible Fees" shall mean the aggregate of (i) all [*], but not
including the [*] and [*], and (ii) [*] dollars [*] in fees for (x) [*] provided
under this Agreement and (y) [*] (as defined in the MCA) to the extent such [*]
are provided to ensure that [*], and as to any of the foregoing [*] or by such
[*] in interest [*] of this Amendment."
"1.12 "Initial Network Applications Software" shall mean [*] and [*]
of the Network Applications, provided that if such [*] upon their [*], then [*]
of Network Applications shall be included in the Initial Network Applications
Software until the earlier of (i) [*] of Network Applications are [*] or (ii)
[*] of Network Applications are [*]."
"1.13 "License Fee" shall mean such amount as results from a [*]
percent ([*]) [*] from the [*] for any Licensed Software as set forth on Exhibit
A attached hereto, but subject to the provisions of Section 4.4."
"1.14 "Network License Fee" shall mean the [*] dollar ([*]) payment
paid [*] pursuant to Section 4.6 hereof."
"1.15 "MCA" shall mean the Master Consulting Agreement entered into
by the Parties as of even date herewith."
"1.16 "MCI Competitor" shall have the meaning set forth in the MCA."
"1.17 "Network Applications" shall mean that portion of the Licensed
Software that is identified as Network Applications on Exhibit A hereto and that
is designed to be deployed in a telecommunications carrier's network in order to
provide network-based call routing and related services."
"1.18 "Operating Environment" shall mean a configuration of
substantially similar computer hardware platform(s), computer operating
system(s) and external interfaces to a PBX, IVR and other similar critical
network components."
"1.19 "Premises Software" shall mean Licensed Software that a
Customer obtains in order to benefit from Basic T-Server Functionality and/or
Advanced T-Server Functionality."
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* Confidential Treatment Requested
<PAGE>
"1.20 "SMA" shall mean the Software Maintenance Agreement, as
amended, between Genesys and MCI dated January 31, 1996."
"1.21 "TPS" shall mean the number of transactions per second that can
be supported by Network Applications assuming that the Network Applications
routing strategies are allocated as follows: (i) [*] percent [*] to [*], (ii)
[*] percent [*] to [*], (iii) [*] percent [*] to [*] and (iv) [*] percent [*] to
[*]."
"1.22 "Transaction Fees" shall mean the fees that are payable to
Genesys pursuant to Section 4.7."
4. APPLICABILITY OF AGREEMENT.
a. Section 2.1 is deleted in its entirety and replaced with the
following:
"This Agreement establishes the general terms and conditions under
which MCI and its Affiliates shall now or in the future acquire from Genesys
certain services and a license to use the Licensed Software."
b. The first sentence in Section 2.3 is modified, in part, to read as
follows:
". . . issuance of a purchase order by MCI and the written acceptance
thereof by Genesys (herein referred to as a "Purchase Order"); provided,
however, that a Purchase Order issued hereunder by an MCI Affiliate shall
contain a provision stating that such Purchase Order shall be subject to the
terms and conditions of the Agreement and incorporating this Agreement by
reference modified so as to be made applicable between Genesys and such MCI
Affiliate."
c. The fourth sentence in Section 2.3 is deleted in its entirety and
replaced with the following:
"The pre-printed provisions on or attached to Purchase Orders, Genesys
acknowledgment forms or other similar forms shall be deemed deleted with respect
to the Purchase Orders placed hereunder and of no legal effect."
d. The last sentence in Section 2.3 is modified, in part, to read as
follows:
". . . and the terms (other than pre-printed terms) on any Purchase
Order . . . in writing by Genesys' Chief Financial Officer or his designee and
an MCI Vice President."
5. LICENSE.
a. The following two new sentences are added to the end of Section 3.1 of
the Agreement:
-4-
*Confidential Treatment Requested
<PAGE>
"Genesys hereby grants to MCI the right to grant sublicenses of the
foregoing rights (as well as the rights granted to MCI under Sections 3.3 and
3.4 below) to Customers to use the Premises Software, including without
limitation the use of Documentation related thereto; provided, however, that
such sublicenses shall be granted solely in connection with a Customer's use of
products and/or services that utilize the Network Applications and are provided
by MCI or MCI's Affiliates. Genesys further hereby grants to MCI the right to
reproduce the Network Applications, Premises Software and related Documentation
solely for the purposes of MCI's business and the businesses of its Affiliates;
provided, however, that MCI shall within thirty (30) days following the end of
each calendar quarter provide a quarterly report to Genesys which shall include,
among other things, the Serial number, CPU type and location on which each new
copy of the Network Applications and Premises Software is deployed."
b. The first sentence in Section 3.2(A) is modified, in part, to read as
follows:
". . . of a Purchase Order, Genesys will deliver to MCI an invoice for
the License Fee and MCI shall pay the License Fee in accordance with the payment
schedule specified in the Purchase Order or an exhibit or schedule thereto."
c. The second sentence in Section 3.2(A) is modified, in part, to read as
follows:
"If an applicable Purchase Order provides for installation services to
be performed by Genesys, unless otherwise provided for in such Purchase Order,
the initial installation . . ."
d. The following new sentence is added between the second and third
sentences of Section 3.2 (A):
"Unless otherwise provided in a Purchase Order ordering such services,
MCI agrees to pay to Genesys its then standard rate for installation and
implementation services."
e. The following new sentence is added to the end of Section 3.2(A):
"Notwithstanding anything to the contrary herein, upon acceptance of
the first copy of a specific release of any Licensed Software by MCI or any MCI
Affiliate pursuant to this Section 3.2(A) or to Section 3.2(C) below, additional
copies of the same release of such Licensed Software intended for a
substantially similar Operating Environment shall be deemed accepted upon
delivery to MCI or an MCI Affiliate. Furthermore, in the event any Licensed
Software is deemed not to be accepted upon delivery to MCI pursuant to the
preceding sentence or an applicable Purchase Order, then Section 4.1(ii) shall
provide that [*] percent [*] of the [*] for such [*] shall be payable to Genesys
[*] of such [*]."
f. The following new subsection (C) is added to Section 3.2:
-5-
*Confidential Treatment Requested
<PAGE>
"(C) Where Work (as that term is defined in the MCA) has been accepted
by MCI pursuant to the MCA and is subsequently licensed hereunder as Licensed
Software without being materially modified, such acceptance shall constitute
acceptance of such Licensed Software pursuant to Section 3.2A above. However,
where Work has been accepted by MCI pursuant to the MCA and is subsequently
licensed hereunder as Licensed Software and has been materially modified prior
to being so licensed, such Licensed Software shall be subject to Section 3.2(A)
of this Agreement."
g. Section 3.4 is modified in part to read as follows:
" . . . hardware substitution within thirty (30) days following the
end of each calendar quarter as part of a quarterly report to Genesys which
shall include, among other things, the serial number, CPU type and location on
which each copy of the Licensed Software is deployed."
h. The following new sentence is inserted at the beginning of Section
3.5:
"Genesys acknowledges that to the extent the Licensed Software may,
pursuant to a specific Statement of Work, contain the intellectual property of
MCI or its third party licensors licensed to Genesys pursuant to Section 9.1B(3)
or jointly owned by MCI and Genesys pursuant to Section 9.1C of the MCA and that
except as expressly provided therein, incorporation of such intellectual
property in the Licensed Software shall not limit the ownership rights of MCI or
such licensors in such intellectual property."
i. The last sentence of Section 3.5 is deleted and replaced in its
entirety to read as follows:
"Except as to the underlying rights of MCI or its third party
licensors as referred to in the first sentence of this Section 3.5, MCI shall
have no other rights with respect to the Licensed Software other than the
license expressly set forth herein."
j. Section 3.6(A) is modified, in part, to read as follows:
". . . or Documentation (except as otherwise provided in Sections 3.1
or 14.1);"
k. Section 3.6(C) is modified, in part, to read as follows:
". . . employees of MCI's Customers, dealers and distributors who use
such Licensed Software solely for purposes of conducting business with MCI, and
independent contractors and consultants who have a need to access the Licensed
Software for the purpose of performing services for or on behalf of MCI and in
accordance with the use restrictions contained herein; provided, however,
Customers shall have access to the Premises Software pursuant to MCI's right to
grant and authorize sublicenses under Section 3.1 hereof; or"
-6-
<PAGE>
l. The following new Section 3.7 is added:
"3.7 Enterprise License. Upon the written request of either Party
------------------
after December 31, 1997, the Parties agree to conduct good faith negotiations to
discuss the possibility of entering into an "enterprise license" agreement."
m. The following new Section 3.8 is added:
"3.8 Value Added Reseller Agreement. The parties agree to conduct
------------------------------
good faith negotiations to enter into a value added reseller agreement which
would enable MCI to purchase for value added resale Licensed Software at the
License Fee."
6. PRICE AND PAYMENT; PURCHASE COMMITMENTS.
a. The heading of Article 4 is relabeled to read as follows:
"ARTICLE-4 PRICE AND PAYMENT; PURCHASE COMMITMENTS"
b. The first sentence of Section 4.1 is modified, in part, to read as
follows:
". . . [*], if applicable, unless otherwise agreed to in writing by
the parties hereto, in accordance . . ."
c. The second sentence in Section 4.1 is modified, in part, to read as
follows:
"If the Purchase Order fails to specify a payment schedule, subject to
Section 3.2(A) hereof, the License Fee shall be due and payable as follows: (i)
[*] percent [*] [*] of the [*] and (ii) [*] percent [*] [*] of the relevant [*];
and, [*] fees shall be payable [*] unless otherwise agreed to in writing by the
parties hereto, within [*] days . . ."
d. Section 4.2 is modified, in part, to read as follows:
"Except for [*] and . . . shall be paid within thirty (30) days . . ."
e. The following new Section 4.4 is added:
"4.4 Increases in Licensed Software Prices. The prices set forth on
-------------------------------------
Exhibit A hereto may be [*] from time to time, upon [*] days [*], to [*] for the
[*]. The parties agree that the prices set forth on Exhibit A shall be [*] of
each year [*] for the [*], provided, further, that the prices
to be set forth in Exhibit A for
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[*] that [*] during the calendar year shall [*] of such [*]. Notwithstanding the
foregoing, in the event that [*] and [*] dollars [*] during any calendar year,
then the prices set forth on Exhibit A as of [*] of that calendar year (as [*]
pursuant to this Section 4.4) as well as the [*] to Exhibit A during such
calendar year shall remain in effect for the entire calendar year. In the event
that [*] during a calendar year in which [*] and [*] dollars [*] and [*] such
[*] subject to such [*], then [*] equal to the [*] for such [*] as of [*] of
such calendar year [*] to Exhibit A during such calendar year) and the [*]."
f. The following new Section 4.5 is added:
"4.5 Minimum Purchase Guarantee.
--------------------------
(A) Commitment. [*] agrees to (i) issue to Genesys no later than [*],
----------
Purchase Orders for Licensed Software which provide for the payment of
License Fees that are [*] a total of [*] dollars [*] and (ii) [*] in
accordance with the [*] and [*] set forth in Schedule B ("Minimum Purchase
Commitment"). In the event that [*] as set forth in Schedule B hereto, then
[*] an amount equal to the [*] and the [*] as of such date (a "[*]") within
[*] days after such date. Any [*] paid to [*] shall be [*] future Purchase
Orders for Licensed Software or services, to the extent of the [*] set
forth in Section 1.11(ii). In consideration of the foregoing minimum
purchase guarantee, [*] Licensed Software at the [*].
(B) Limitations. MCI's obligations under Section 4.5(A) are subject to the
-----------
following limitations:
(i) If [*] Licensed Software pursuant to Section 3.2(A), its
obligations under Section 4.5(A) shall be [*] of the Purchase
Order to which such [*] Licensed Software relates.
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(ii) If [*] pursuant to Section 5.2 or 10.1(D) of the Agreement, the
[*] Purchase Order to which such [*] relates will nonetheless be
[*] under Section 4.5(A).
(iii) If [*] this Agreement to an [*] under Section 4.5(A).
(iv) If [*] this Agreement pursuant to Section 13.1 hereof [*] under
Section 4.5(A)."
g. The following new Section 4.6 is added:
"4.6 Network Applications Software Licenses. On the Effective Date of
--------------------------------------
Amendment Number One to this Agreement, MCI shall issue a Purchase Order to
Genesys in the amount of [*] dollars ("[*]") (the "[*]") and to pay to Genesys
the Network License Fee within thirty (30) days of receipt of an invoice from
Genesys for such Network License Fee, and Genesys agrees to license hereunder to
MCI in consideration for such Network License Fee the Initial Network
Applications Software. [*].
h. The following new Section 4.7 is added:
"4.7 Transactional Pricing. For the first [*] receiving services from
---------------------
[*] as set forth in the following pricing model; provided, however, that such
model shall be [*] to the extent necessary for [*] that includes the [*];
provided, further, that such pricing shall continue to apply [*] unless one
party notifies the other Party in writing within [*] days following [*] of the
applicable [*].
(A) Consultation Regarding Pricing of Services. [*] concerning the [*] or
------------------------------------------
[*] to be paid by [*] for [*] and related services offered by [*] that
utilize Premises Software; provided, however, that such [*] shall in [*] be
interpreted to grant to [*] or otherwise [*] for such services.
(B) Sites Employing Basic T-Server Functionality. Where a site employs
--------------------------------------------
[*] to support Network Applications [*] only ("[*]"), in consideration for
such use, [*] the following amounts:
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(i) [*] percent ([*]%) of the [*] received by [*] as a result of
offering network-based [*] and related services that utilize [*]
over the [*] a given Customer for its [*], including charges for
queuing calls in the network. For example, [*] per call for
network-based [*] and related services utilizing [*] over the [*]
to such Customer for its [*], including charges for queuing calls
in the network, then [*];
(ii) notwithstanding the foregoing, [*] any Customer an [*] per call
for network-based [*] and related services that utilize [*] over
the [*] that [*] a given Customer for its [*], including charges
for queuing calls in the network, [*] and an [*] that employs [*]
to support [*]; provided, however, that if the Customer at such
site has [*] and [*] and has continuously maintained such
products by [*] at least up to the date that [*]
(C) Sites Employing Advanced T-Server Functionality. Where a site
-----------------------------------------------
employs [*] to support Network Applications [*], in consideration for such
use, [*] the following amounts:
(i) [*] percent ([*]%) of the [*] received by [*] as a result of
offering network-based [*] and related services that utilize [*]
over the [*] a given Customer for its [*], including charges for
queuing calls in the network. For example, [*] per call for
network-based [*] and related services utilizing [*] over the [*]
to such Customer for its [*], including charges for queuing calls
in the network, then [*]
(ii) notwithstanding the foregoing, if [*] an [*] per call, for
network-based [*] and related services that utilize [*] over the
[*]
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that [*] a given Customer for its [*], including charges for
queuing calls in the network, [*] and an [*] that employs [*];
provided, however, that if the Customer at such site has [*] and
[*] and continuously maintained such products by [*] at least up
to the date that [*].
(D) Statements and Payment. Within [*] days after of the end of each
----------------------
calendar [*] a statement calculating the [*] pursuant to Sections 4.6(B)
and (C) above along with [*] of such [*].
(E) Books and Records; Audit Rights. MCI and its Affiliates agree to make
-------------------------------
and maintain for a period of [*] years after the applicable payment under
Section 4.6(D) is due, such books, records and accounts regarding MCI's and
its Affiliates' network-based call routing or related services that utilize
either Basic or Advanced T-Server Functionality as reasonably required in
order to calculate and confirm MCI's payment obligations hereunder. [*] If
any such examination discloses a shortfall in payment to Genesys, [*] such
amounts to Genesys ([*]), and, in addition, where such examination
discloses a shortfall of [*] for any calendar year, [*].
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7. WARRANTY.
a. The third sentence in Section 5.2 is modified, in part, to read as
follows:
". . . and [*] and [*] under this limited Software Warranty (including
Sections 5.5 and 5.6) shall be, at [*], (i) to [*] to attempt, through
reasonable efforts, to [*] any material nonconformities discovered during the
relevant [*] day warranty period (or at any time with respect to material
nonconformities under Sections 5.5 and 5.6) or (ii) . . . the [*] or otherwise
complies with the warranties in Sections 5.5 and 5.6, as applicable."
b. The fourth sentence in Section 5.2 is modified, in part, to read as
follows:
". . . nonconformity), upon receipt by Genesys of a written request
from MCI, Genesys shall . . ."
c. The fifth sentence in Section 5.2 is modified, in part, to read as
follows:
". . . of the nonconformities by MCI and that in Genesys' reasonable
judgment such nonconformities do not result from the Licensed Software having
been used, adjusted . . ."
d. The second sentence in Section 5.4 is modified, in part, to read as
follows:
". . . a "virus" shall mean Object Code (as defined in the MCA) that
is designed to cause and does cause Licensed Software to fail to comply with the
Applicable Specifications."
e. The following new Section 5.5 is added:
"5.5 Warranty Regarding Processing of Dates/Data Dependent Data. The
----------------------------------------------------------
Licensed Software will provide [*] (including, but not limited to, [*] and
otherwise [*] and that upon request [*] through adequate testing of the Licensed
Software or otherwise [*] with this warranty."
f. The following new Section 5.6 is added:
"5.6 Warranty Regarding Time Bombs. No material portion of the Work is or
-----------------------------
will be intended, other than under the documented control of MCI:
(i) at some specific time or on a specific instruction or occurrence
of a given event, to stop, limit or interfere with the operation of
the Licensed Software in conformity with the Applicable
Specifications;
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(ii) to damage or materially alter or render inaccessible the Licensed
Software, or any other hardware, software or data which the Licensed
Software is designed to process or use, or any other hardware,
programs or data attached to, resident on, or accessible to the system
on which the Licensed Software may be executed or stored;
(iii) to contain any feature which would impair in any way the
operation of the Licensed Software including, but not limited to,
software locks or drop-dead devices, date/time expiration codes, or
serial number dependent passwords; or
(iv) to otherwise be impaired in its operation now or in the future in
any way by Genesys.
Genesys shall be responsible for, indemnify and hold MCI harmless from
any damages, costs, liabilities, and/or expenses (including without
limitation reasonable attorneys' fees), arising out of the breach of
this Section 5.6."
8. PROPRIETARY RIGHTS.
a. The following new sentence is inserted at the beginning of Section
8.1:
"Genesys acknowledges that to the extent the Licensed Software may,
pursuant to a specific Statement of Work, contain the intellectual property of
MCI or its third party licensors licensed to Genesys pursuant to Section 9.1B(3)
or jointly owned by MCI and Genesys pursuant to Section 9.1C of the MCA and that
except as expressly provided therein, incorporation of such intellectual
property in the Licensed Software shall not limit the ownership rights of MCI or
such licensors in such intellectual property."
b. The second sentence of Section 8.1 is modified, in part, to read as
follows:
"Subject to the foregoing sentence, MCI acknowledges that Genesys and
its licensors . . . remain the sole property of Genesys and its licensors."
c. The third sentence in Section 8.1 is modified, in part, to read as
follows:
"Subject to the provisions of this Section 8.1, MCI shall not be an
owner . . ."
9. INTELLECTUAL PROPERTY RIGHT INDEMNITY.
a. Section 10.1 is deleted in its entirety and replaced with the
following:
"10.1 Indemnity for Infringement of Intellectual Property Rights. [*]
----------------------------------------------------------
agrees, [*] to [*] or, [*], to [*], any claim or action brought against [*], or
[*], or [*] (collectively, the "Indemnified Parties" and individually an
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"Indemnified Party") based on an allegation that the [*] of the Licensed
Software within the scope of the license granted hereunder, which includes use
of the Licensed Software as a part of a service, (a) [*] under the laws of the
[*] (the "Indemnified Countries") or (b) [*] of a third party (other than [*]),
or constitutes [*] of a [*] under the laws of any country (a claim under either
(a) or (b) herein, an "[*]"), and [*] against all [*] which may be assessed
against or incurred by any of such [*] under any such claim or action. Promptly
after receipt [*], as applicable, of notice of any claim or action or the
commencement of any claim or action for which indemnification or reimbursement
may be sought hereunder, [*] shall give written notice to [*] thereof, but the
failure to so notify [*] shall [*] of any liability it may have to [*] hereunder
[*] shall be obligated to [*] of such claim or action, [*], and shall have the
[*] and [*] over the [*] or [*] of such claim or action, provided that the [*]
will be required to the extent any such [*] or [*] will impose any obligation
whatsoever on [*] that is [*] or, [*] or [*], other than the payment of monies
that are readily measurable for purposes of determining the monetary
indemnification or reimbursement obligations [*]. The [*] shall have the right,
[*] to [*] in the investigation [*] of such claim or action; [*]; provided,
however, that notwithstanding the foregoing, [*] to a complaint for equitable
relief in connection with a claim of [*] and upon notification [*] shall be [*]
for its [*] until such time as [*]. The [*] shall otherwise provide reasonable
[*] with respect to such claim or action, provided that [*] for its [*] with
respect thereto. Moreover, should the Licensed Software, or any use of the
Licensed Software within the reasonable scope of its intended use, become, or in
[*], be likely to become, the subject of a claim or action of [*], or should [*]
use thereof be finally enjoined, [*]:
(A) [*] the right to [*] such Licensed Software; or
(B) [*] or [*] such Licensed Software to make it [*] provided such [*] or [*]
is the functional equivalent of the Licensed Software in light of the
Applicable Specifications, and [*] for any additional [*] and caused by any
such [*] or [*]; or
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(C) If neither of the foregoing Subitems (A) and (B) can be reasonably
accomplished, [*], to undertake to [*] or [*] the Licensed Software
provided that (i) such [*] or [*] shall be treated as [*] as defined in the
Master Consulting Agreement, (ii) [*] of such [*] or [*], and (iii) the
undertaking of such [*] shall [*] of this Agreement; or
(D) [*] its right to act under Subsection (C) above or if [*] (C) can not
be reasonably accomplished, [*], as applicable, for all [*] of the [*] for
the Licensed Software, provided that such amounts shall be [*] beginning
with the [*] of the Licensed Software (i.e., a change from version A.x to
version B.0) was delivered to [*]."
b. Section 10.2 is deleted in its entirety and replaced with the
following:
"10.2. Exceptions.
----------
(A) Notwithstanding the provisions of Section 10.1 above, [*] for [*]
claims to the extent (i) the Licensed Software is not or ceases to be an
element of the alleged [*], (ii) the alleged [*] is based upon a [*] to the
Licensed Software [*], or (iii) the alleged [*] results from the [*] of the
Licensed Software with any products not [*] (a "Combination") where the
Combination is [*] of the Licensed Software. If an alleged [*] is based
upon a Combination and at the time of such claim or thereafter products are
[*] that could result in a [*] Combination, then the Parties will meet to
discuss the option of [*].
(B) Notwithstanding anything in Section 10.1 to the contrary, where the
Licensed Software is being [*] in its [*] or [*] as a [*] (but not
including the [*], pursuit of [*], and any other legal and related expenses
[*] claims of [*]), shall be limited to [*] times the amount of the License
Fees paid [*] for the [*] Licensed Software for any [*] claim with respect
to [*] of the Licensed Software in a [*], to the extent arising from (a)
the [*] of the Licensed Software with any other product [*], even if [*]
such [*] or, (b) a [*] to the Licensed Software made or [*] for the [*].
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It is understood and acknowledged that the foregoing [*] for certain
[*] claims shall [*], for all such claims in all proceedings in
accordance with Section 10.1, subject to the limitation of Section
10.2 (A).
(C) Notwithstanding anything in Section 10.1 or 10.2 B to the
contrary, where the Network Applications and Premises Software is
being utilized to provide [*] to Customers, [*], including without
limitation [*] or [*] as a [*] (collectively, "Liability") for any
[*] claim with respect to such use of the Licensed Software in a [*],
to the extent such Liability arose out of or resulted from a [*],
shall [*] percent ([*]%) of such Liability. It is understood and
acknowledged that the foregoing [*] claims shall [*] in all
proceedings in accordance with Section 10.1 [*] but subject to the
[*] of this Section 10.2(C). At such time as [*] under Section 10.1 as
to a claim subject to this Section 10.2 C, then the [*] of this
Section and the [*]."
c. Section 10.4 is deleted in its entirety and replaced with the
following:
"10.4 Limitation. THE FOREGOING PROVISIONS OF THIS ARTICLE 10 STATE THE
----------
ENTIRE LIABILITY AND OBLIGATIONS OF GENESYS, AND THE EXCLUSIVE REMEDY OF ALL
INDEMNIFIED PARTIES, WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY
PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHT BY THE
LICENSED SOFTWARE OR ANY PART THEREOF OR ANY WARRANTY OR REPRESENTATION RELATED
THERETO."
d. The following new Section 10.6 is added:
"10.6 Licensed Software. "Licensed Software" for purposes of this Article
-----------------
10 only, shall include, without limitation, [*] pursuant to the MCA to the
extent [*] are used within the scope specified in Section 14.1 thereof, even if
any of [*] are intended to be subsequently licensed by MCI or such MCI Affiliate
pursuant to this Agreement as Licensed Software."
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10. LIMITATION OF LIABILITY AND REMEDIES.
a. Section 11.1 is modified, in part, to read as follows:
". . . UNDER THE RELEVANT PURCHASE ORDER. [*] . . . "
11. TERM AND TERMINATION. Section 13.1 is modified, in part, to read as
follows:
". . . upon one hundred eighty (180) days prior written . . ."
12. ASSIGNMENT.
a. The first sentence in Section 14.1 is modified, in part, to read as
follows:
". . . consent of the other party, which consent shall not be
unreasonably withheld or delayed."
b. The second sentence in Section 14.1 is modified, in part, to read as
follows:
". . . transfer or assignment, and (ii) either party may assign this
Agreement as part of the sale of all or substantially all of the business assets
to which this Agreement relates or as part of any transaction resulting in a
merger, consolidation or other change in control of the assigning party,
provided that the assigning party shall notify the non-assigning party of such
assignment."
13. DISPUTE RESOLUTION. The sixth sentence in Section 14.4 is modified, in
part, to read as follows:
"The arbitrator's decision shall be final and binding."
14. ENTIRE AGREEMENT. This Amendment and the Agreement, and to the extent
referenced herein or in the Agreement, the MCA, constitute the entire Agreement
between the parties in connection with the subject matter of this Amendment and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the parties.
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IN WITNESS WHEREOF, Genesys and MCI have caused this Amendment Number One to be
executed by their duly authorized representatives, effective as of the Effective
Date set forth above.
AGREED TO AND ACCEPTED BY:
GENESYS TELECOMMUNICATIONS MCI TELECOMMUNICATIONS
LABORATORIES, INC. CORPORATION
/s/ Gregory Shenkman /s/ John W. Gerdelman
- -------------------------- -----------------------------
Signature Signature
Gregory Shenkman John W. Gerdelman
President and Chief
Executive Officer
- -------------------------- -----------------------------
Printed Name and Title Printed Name and Title
February 26, 1997 February 26, 1997
- -------------------------- -----------------------------
Date Date
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SCHEDULE A
EXHIBIT A
LICENSED SOFTWARE AND PRICING
-----------------------------
[*]
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SCHEDULE B
EXHIBIT B
MINIMUM PURCHASE COMMITMENT
---------------------------
[*]
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EXHIBIT 10.10
SOFTWARE MAINTENANCE AGREEMENT
THIS AGREEMENT, dated and effective as of January 31, 1996, is entered
into by and between Genesys Telecommunications Laboratories, Inc. ("Genesys"), a
California corporation with principle offices at 1111 Bayhill Drive, Suite 180,
San Bruno, California 94066 and MCI Telecommunications Corporation ("MCI"), a
Delaware corporation with offices at 1801 Pennsylvania Avenue, N.W., Washington,
D.C. 20006.
NOW THEREFORE, in consideration of the foregoing and mutual covenants
and consideration set forth herein, the parties hereby agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Any capitalized term used in this Agreement and not herein
defined shall have the meaning set forth in the License Agreement (as
hereinafter defined).
1.2 "Extended Hours" means telephone assistance service twenty-four
(24) hours a day, seven (7) days a week.
1.3 "License Agreement" means the agreement dated January 31, 1996,
pursuant to which the Licensed Software was licensed to MCI and all terms and
conditions contained therein.
1.4 "Maintenance and Support" means the services described in
Article 2 hereof.
1.5 "Standard Hours" means Monday through Friday, 9:00 a.m. to
5:00 p.m. California time, excluding holidays.
1.6 "Updates" means a release or version of the Licensed Software
containing functional enhancements, modifications, extensions, error corrections
or bug fixes. The content of all Updates shall be decided upon by Genesys in
its sole discretion and will generally include changes that correct defects as
well as upgrade the Licensed Software to the most current release or version of
the Licensed Software then being generally marketed by Genesys.
ARTICLE 2 - MAINTENANCE AND SUPPORT PROVIDED BY GENESYS
2.1 For so long as MCI is current in the payment of all fees set
forth in Article 6 of this Agreement, MCI is entitled to Maintenance and Support
as specified in this Article 2.
2.2 Maintenance and Support Services. "Maintenance and Support"
--------------------------------
means that Genesys will provide:
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(A) Updates, if any, and appropriate Documentation;
(B) telephone assistance with respect to the Licensed Software
within the hours of service as elected by MCI, such assistance to be
provided in accordance with the escalation, procedures and response time
targets set forth in Schedule B attached hereto and to otherwise include
(i) clarification of functions and features of the Licensed Software, (ii)
clarification of Documentation pertaining to the Licensed Software, (iii)
guidance in the operation of the Licensed Software, and (iv) error
verification, analysis and code corrections, as necessary, to cause the
Licensed Software to perform in accordance with the Applicable
Specifications and the most current Documentation as updated by Licensor
from time to time, to the extent possible (except for code corrections) by
telephone;
(C) access to an electronic bulletin board on which MCI may leave
messages for Genesys support engineers and receive Updates notifications
and other end-user information, and from which MCI may download Updates;
and
(D) remote dial-in diagnosis of and assistance in connection with
a reported error or bug by Genesys directly to the Designated CPU upon
which the Licensed Software is operating.
During the term of this Agreement, Genesys shall use its reasonable efforts to
correct any reproducible programming error in the Licensed Software attributable
to Genesys with a level of effort commensurate with the severity of the error,
provided that Genesys shall have no obligation to correct all errors in the
Licensed Software. Upon identification of any programming error, MCI shall
notify Genesys of such error and provide Genesys with enough information to
locate the error. MCI may obtain Updates either through delivery of a machine
readable copy pursuant to instructions contained in the Update notification or
by downloading the Update from Genesys' electronic customer service bulletin
board.
2.3 Hours of Telephone Assistance. Telephone assistance shall be
-----------------------------
provided to MCI by Genesys during Genesys' Standard Hours or, as MCI may elect
under each purchase order with respect to ordered Licensed Software, such
services may be provided for Extended Hours. Fees for Maintenance and Support
under this Agreement shall depend on the election by Customer between either
Standard Hours or Extended Hours of telephone assistance as set forth in Section
6 hereof.
2.4 Annual Account Review. Genesys shall provide MCI with one (1)
---------------------
day of free consulting at MCI's facility each year to review the status of the
Licensed Software, assess MCI's ongoing and future use of the Licensed Software,
solicit input from MCI on future development and direction of the Licensed
Software, and to make recommendations regarding MCI's use of the Licensed
Software.
2.5 Social Services. Genesys agrees to use reasonable efforts to
---------------
respond
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to any requests by MCI for maintenance and support services not specifically
provided for above. MCI acknowledges that all such services provided by Genesys
shall be at Genesys' then current terms and conditions for such services.
ARTICLE 3 - ADDITIONS
3.1 The annual Maintenance and Support fees shall be adjusted to
reflect any increases in MCI's license fee that are attributable to MCI's
licensing, from time to time, additional software from Genesys pursuant to the
License Agreement. Such adjustment shall be equal to the percentage of the full
purchase price of such additional software corresponding to the maintenance plan
selected by MCI under the Purchase Order. Additionally, notwithstanding
anything herein to the contrary, continuation of Maintenance and Support to MCI
after any such increase in the license fee shall be subject to payment of a fee
equal to the difference between the Annual Maintenance Fee before and after
increase such adjustment, prorated for the remaining term of the then current
twelve (12) month term of this Agreement, as measured from the date of such
change.
ARTICLE 4 - EXCLUSIONS
4.1 Eligible Software. Genesys shall not be responsible for
-----------------
correcting any errors not attributable to Genesys. Genesys is not required to
provide any Maintenance or Support services relating to problems arising out of
(i) MCI's failure to implement all Updates which are issued under this
Agreement; (ii) changes to the operating system or environment which adversely
affect the Licensed Software; (iii) any alterations of or additions to the
Licensed Software performed by parties other than Genesys or not at the
direction of Genesys; (iv) use of the Licensed Software in a manner for which it
was not designed; (v) operation outside of environmental specifications; (vi)
interconnection of the Licensed Software with other software products not
supported by Genesys unless the intended interconnection with such other
software was known to or reasonably should have been anticipated by Genesys
given the use for which the Licensed Software was designed, or (vii) use of the
Licensed Software on equipment other than the equipment for which such software
was designed for and licensed for use on.
4.2 Prior Software Versions. Except as otherwise provided in Section
-----------------------
6.1
(A) Maintenance and Support is provided with respect to versions
of the Licensed Software that, in accordance with Genesys policy, are then
being supported by Genesys; and
(B) Genesys shall only be obligated to support the then current
production version of the Licensed Software and the immediately prior
release for a period of twelve (12) months after the release of the then
current production version, provided that MCI has received and had
sufficient time to implement Updates upgrading its Licensed Software to the
then current production version
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thereof.
4.3 Additional Services. Support for any earlier versions or for
-------------------
other problems not covered under this Agreement may be obtained at Genesys' then
current rates for special technical services, subject to the reasonable
availability of Genesys staff.
ARTICLE 5 - MCI RESPONSIBILITIES
5.1 Responsibility. In consideration for Genesys' obligations to
--------------
provide Maintenance and Support, MCI agrees to the following:
(A) MCI shall, during normal business hours, provide Genesys with
reasonable access either telephonically or on a remote basis to MCI's
personnel and equipment upon which the Licensed Software is loaded or
operating. This access shall include, when applicable, the ability to
dial-in to equipment on which the Licensed Software is operating when
applicable and subject to Licensee's security requirements. Genesys will
inform MCI of the specifications of the modem equipment needed, and MCI
will be responsible for the costs and use of said equipment at the MCI's
location.
(B) MCI shall provide supervision, control and management of the
use of the Licensed Software. In addition, MCI shall implement procedures
for the protection of information and the implementation of backup
procedures in the event of errors or malfunction of the Licensed Software
or equipment upon which the Licensed Software is loaded or operating.
(C) MCI shall document and promptly report all errors or
malfunctions of the Licensed Software to Genesys. MCI shall take all steps
necessary to carry out procedures for the rectification of such errors or
malfunctions within a reasonable time after such procedures have been
provided by Genesys.
(D) MCI shall maintain a current backup copy of all programs and
data.
(E) MCI shall properly train its personnel in the use and
application of the Licensed Software and the equipment on which the
Licensed Software is loaded or operating.
5.2 Contact People. For each major department or organization
--------------
issuing a purchase order for Licensed Software, MCI shall appoint up to two (2)
individuals within MCI's organization to serve as primary contacts between MCI
and Genesys and to receive support through Genesys' telephone support center.
All of MCI's support inquiries for the relevant Licensed Software shall be
initiated through these contacts.
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ARTICLE 6 - FEES AND PAYMENT
6.1 Fees. Maintenance and Support are offered on an annual basis.
The initial Maintenance and Support period shall begin upon the Effective Date
and end one year from such date. For the initial year of this Agreement, if [*]
under a Purchase Order to acquire [*] Maintenance and Support Services, the
price of maintenance shall be equal to [*]% of the [*] for the relevant
software; if [*] under a Purchase Order to acquire [*] Maintenance and Support
Services, the price of maintenance shall be equal to a [*]% of the [*] for the
relevant software ([*]). The fees shall be paid as provided in Section 3.1 of
the License Agreement. For each subsequent year, [*] the Maintenance and Support
fee rates; provided, however, that [*] of this Agreement, [*] shall the
Maintenance and Support fees [*] over the Base Maintenance Rates (i.e., an [*]
on average, for the [*]), excluding increases attributable to the license of
additional software, as further provided in Section 3.1. Notwithstanding
anything herein contained to the contrary, [*] and [*] of the Licensed Software,
and appropriate Documentation ("New Version Support") will be provided as part
of Maintenance and Support, [*], through the [*]. If [*] additional licenses for
any of the Licensed Software, and, if, as a result of [*] is required to pay
additional license fees, then the Maintenance and Support fee for the [*] as
appropriate. Beginning with the [*], Maintenance and Support fees and New
Version Support fees shall be separately priced as follows: The [*] Maintenance
and Support fee shall be [*] under the Purchase Order; and the [*] New Version
Support fee shall be [*] New Version Support fee that [*]. Notwithstanding the
foregoing, if, at any time, Genesys offers New Version Support on a [*] to a
[*], then [*] to receive such support at the [*]. [*] that if a Maintenance and
Support fee and/or New Version Support fee [*], or, [*], then [*] in writing,
and the fees stated herein shall be [*] by written amendment. Notwithstanding
anything herein contained to the contrary, if at anytime after the [*] New
Version Support then [*] to provide Maintenance and Support for the latest
version of the Licensed Software delivered to [*] for a period of [*] from the
date of [*]. [*] Maintenance and Support upon [*] days prior written notice.
Annual Maintenance and Support Fees shall be invoiced [*].
6.2 Time of Payment. Except as otherwise provided in this Agreement
---------------
all amounts due Genesys shall be paid within forty-five (45) days of MCI's
receipt of the
5
* Confidential Treatment Requested
<PAGE>
relevant invoice from Genesys.
6.3 Taxes. Unless otherwise agreed in writing, all charges under
-----
this Agreement do not include any taxes, duties or charges of any kind
(including withholding or value added taxes) imposed by any federal, state, or
local governmental entity for products or services provided under this
Agreement, excluding only taxes based solely on Genesys's net income. When
Genesys has the legal obligation to collect such taxes, the appropriate amount
shall be invoiced to MCI unless MCI provides Genesys with a valid tax exemption
certificate authorized by the appropriate taxing authority. MCI shall hold
Genesys harmless from all claims and liability arising from MCI's failure to pay
any such taxes, duties, or charges.
ARTICLE 7 - TERM AND TERMINATION
7.1 Term. This Agreement shall take effect on the Effective Date and
----
shall remain in effect for an initial term of one (1) year. This Agreement
shall automatically renew at the end of the initial term and each subsequent
term for a renewal term of one (1) year. Notwithstanding the foregoing, any MCI
organization obtaining Support and Maintenance services hereunder may, without
penalty to MCI, terminate the services being provided under this Agreement in
whole or in part upon forty-five (45) days' written notice to Genesys. In the
event of such termination, Genesys, within fortyfive (45) days of its receipt of
such notice, shall deliver to MCI a pro-rated refund of the Maintenance and
Support fee for the then current Maintenance Year.
7.2 Termination. This Agreement shall terminate upon (i) termination
-----------
of the License Agreement or (ii) with respect to any MCI organization acquiring
support hereunder, upon thirty (30) days notice of material breach of a party's
obligations hereunder if such breach, if capable of being cured, is not cured
within thirty (30) days of notice of such breach. Upon such termination, all
earned and unpaid fees and other charges payable under this Agreement shall
become immediately due and payable.
7.3 Survival. Termination of Maintenance and Support upon failure to
--------
renew will not affect the license of the Licensed Software. The provisions of
Articles 8, 9 and 10 shall survive any termination or expiration of this
Agreement.
ARTICLE 8 - OWNERSHIP AND USE
8.1 Title. All Updates and other changes, improvements, bug fixes or
-----
other modifications to the Licensed Software provided under this Agreement shall
be deemed to be included within the Licensed Software and will be subject to the
terms and conditions of the License Agreement.
ARTICLE 9 - WARRANTY DISCLAIMER
6
<PAGE>
Nothing in this Agreement shall be construed as expanding or adding to any
warranty in the License Agreement. Genesys will use all reasonable commercial
efforts to provide the support requested by MCI under this Agreement in a
professional and workmanlike manner, but Genesys cannot guaranty that every
question or problem raised by MCI will be resolved. GENESYS MAKES, AND MCI
RECEIVES, NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, ARISING IN
ANY WAY OUT OF, RELATED TO, OR UNDER THIS AGREEMENT OR THE PROVISION OF
MATERIALS OR SERVICES THEREUNDER, AND GENESYS SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 10 - LIMITATION OF LIABILITY
[*] that, other than for any [*] with respect to software viruses, which is
incorporated by reference herein from the License Agreement, [*] under this
Agreement is [*] the [*]. [*] HAVE ANY [*] FOR ANY [*] INCLUDING, [*] OR
SERVICES, ARISING IN ANY WAY OUT OF THIS AGREEMENT UNDER ANY CAUSE OF ACTION,
[*].
ARTICLE 11 - GENERAL PROVISIONS
11.1 Confidentiality. The parties agree that the terms and
---------------
conditions of this Agreement shall be treated by each party as the Confidential
Information of the other party, and that neither party shall disclose the
contents of this Agreement without the prior written consent of the other party;
provided, however, that the general existence of this Agreement shall not be
treated as Confidential Information and that either party may disclose the terms
and conditions of this Agreement
(A) under the circumstances and subject to the conditions set
forth in Section ? of the License Agreement;
(B) in confidence, to such party's legal counsel;
(C) in confidence, to such party's accountants; or
(D) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement.
Notwithstanding the foregoing, either party may, without the other party's prior
consent
7
* Confidential Treatment Requested
<PAGE>
disclose the aggregate dollar amounts associated with this Agreement (but no
other terms and conditions), in confidence to its banks, proposed investors and
financing sources.
11.2 Assignment. Neither party shall have the right to transfer,
----------
assign or otherwise dispose of its rights or obligations hereunder, by operation
of law or otherwise, without the prior written consent of the other party.
Notwithstanding the foregoing, (i) MCI may transfer or assign its rights and
obligations, in whole or in part, to an Affiliate, provided that MCI shall,
however, notify Genesys of such transfer or assignment, and (ii) Genesys may
assign this Agreement as part of the sale of all or substantially all of its
assets or as part of any transaction resulting in a change in control of
Genesys, provided that Genesys shall notify MCI of such assignment and that MCI
shall have the option of terminating (without prejudice to other provisions of
this Agreement) any development obligations then in effect.
11.3 Captions. The captions used in this Agreement are included for
--------
convenience only and shall not be considered part of this Agreement for any
purpose.
11.4 Governing Law. This Agreement shall be governed, construed and
-------------
enforced in accordance with the laws of the state of New York, without reference
to conflict of laws principles.
11.5 Dispute Resolution and Jurisdiction. Any dispute arising out of
-----------------------------------
or related to this Agreement, which cannot be resolved by negotiation, shall be
settled in accordance with the provisions set forth for dispute resolution and
jurisdiction in the License Agreement.
11.6 Independent Contractors. The relationship of Genesys and
-----------------------
Contractor established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed (i) to give either party
the power to direct or control the day-to-day activities of the other or (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking.
11.7 Severability. If any provision of this Agreement is held to be
------------
invalid by a court of competent jurisdiction, then the remaining provisions
shall nevertheless remain in full force and effect. The parties further agree
to negotiate in good faith a substitute, valid and enforceable provision that
most nearly effects the parties' intent and to be bound by mutually agreed
substitute provision.
11.8 No Waiver. The failure of either party to enforce at any time
---------
any of the provisions of this Agreement shall not be deemed to be a waiver of
the right of such party thereafter to enforce any such provisions.
11.9 Force Majeure. Except for the obligation to make payments,
-------------
nonperformance of either party shall be excused to the extent that performance
is rendered
8
<PAGE>
impossible by strike, fire, flood, governmental acts or orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
reasonable control of the non-performing party.
11.10 Notices. Any required notices hereunder shall be given in
-------
writing at the address of each party set forth above, or to such other in the
manner contemplated herein, and shall be deemed served when delivered or, if
delivery is not accomplished by reason or some fault of the addressee, when
tendered.
11.11 Entire Agreement. This Agreement and Schedules attached hereto
----------------
and incorporated herein constitute the entire, final, complete and exclusive
agreement between the parties and supersede all previous agreements or
representations, oral or written, relating to this Agreement. This Agreement
may not be modified or amended except in a writing signed by a duly authorized
representative of each party. Both parties acknowledge having read the terms
and conditions set forth in this Agreement and Schedules attached hereto,
understand all terms and conditions, and agree to be bound thereby.
This Agreement is accepted and made effective as of the date first
written above.
Genesys Telecommunications MCI Telecommunications
Laboratories Corporation
By: /s/ Gregory Shenkman By: /s/ H. A. Shartel
---------------------------- -------------------------
Name: Gregory Shenkman Name: H. A. Shartel
-------------------------- -----------------------
Title: President Title: Sr. Manager
------------------------- ----------------------
Date: January 31, 1996 Date: January 31, 1996
-------------------------- -----------------------
9
<PAGE>
SCHEDULE B
----------
Escalation Procedures and Response Time Targets
1. Technical Support Availability:
------------------------------
Genesys will provide [*]. [*] may be achieved through [*].
2. Problem Severity Identification:
-------------------------------
[*]
Severity 1 - [*]
Severity 2 - [*]
Severity 3 - [*]
Severity 4 - [*]
3. Problem Acknowledgment:
----------------------
Severity 1 - Genesys shall [*] and [*]. Weekend and holiday status updates
will be provided [*], unless the End-User, MCI and Genesys have agreed to
[*] until the [*] .
Severity 2 - Genesys shall [*] and provide [*].
Severity 3 - Genesys shall [*] and provide [*].
Severity 4 - Genesys shall [*] and provide [*].
* Confidential Treatment Requested
<PAGE>
4. Problem Resolution Targets (applicable to both workstation and host
-------------------------------------------------------------------
software problems):
------------------
<TABLE>
<CAPTION>
Severity 1 Severity 2 Severity 3
<S> <C> <C> <C>
[*] of Problems Resolved In: [*] [*] [*]
[*] of Problems Resolved In: [*] [*] [*]
[*] of Problems Resolved In: [*] [*] [*]
[*] of Problems Resolved In: [*] [*] [*]
[*] of Problems Resolved In: [*] [*] [*]
</TABLE>
2.
* Confidential Treatment Requested
<PAGE>
AMENDMENT NUMBER ONE TO SOFTWARE MAINTENANCE AGREEMENT
THIS AMENDMENT NUMBER ONE (the "Amendment") to the Software Maintenance
Agreement by and between Genesys Telecommunications Laboratories, Inc.
("Genesys"), a California corporation with a principal place of business at 1155
Market Street, 11th Floor, San Francisco, Ca 94103 and MCI Telecommunications
Corporation ("MCI"), a Delaware corporation with offices at 1801 Pennsylvania
Avenue, N.W., Washington, D.C. 20006 dated January 31, 1996 (the "Agreement") is
entered into this 26th day of February, 1997 (the "Effective Date").
In consideration of the promises and conditions set forth below, the parties
agree as follows:
BACKGROUND
A. Genesys and MCI have entered into a Master Consulting Agreement as of even
date herewith pursuant to which Genesys has undertaken, among other things, the
development of an intelligent network call router software product which Genesys
intends to productize as a new software product;
B. Genesys and MCI have previously entered into a Master Software License
Agreement dated January 31, 1996 (the "License Agreement"), and have entered
into an amendment to the License Agreement as of even date herewith pursuant to
which, among other things, MCI is licensing such intelligent network call router
software product;
C. Genesys and MCI desire to amend the Agreement as set forth in this
Amendment Number One to reflect the licensing by MCI of such new software
product as Licensed Software pursuant to the License Agreement and to make other
mutually agreed to amendments to the Agreement;
AMENDMENT
1. AMENDMENT OF AGREEMENT. This Amendment hereby amends and revises the
Agreement to incorporate the terms and conditions set forth in this Amendment.
The relationship of the parties shall continue to be governed by the terms of
the Agreement as amended.
2. DEFINITIONS. As used in this Amendment, all capitalized terms shall have
the meanings assigned to such terms in this Amendment, or, if not specified in
this Amendment, the meanings defined elsewhere in the Agreement.
<PAGE>
3. ARTICLE 1 - DEFINITIONS.
a. Section 1.5 is modified by replacing "9:00 a.m. to 5:00 p.m." with
"9:00 a.m. to 5:30 p.m."
b. The following definitions are added to this article 1:
1.7 "CUSTOMER" shall have the meaning set forth in Section 1.10 of the
MSLA.
1.8 "EFFECTIVE DATE" means the effective date of Amendment Number One to
this Software Maintenance Agreement.
1.9 "LICENSE FEE" shall have the meaning set forth in Section 1.13 of the
MSLA.
1.10 "NETWORK APPLICATIONS" shall have the meaning set forth in Section
1.17 of the MSLA."
4. ARTICLE 2 - MAINTENANCE AND SUPPORT PROVIDED BY GENESYS.
a. Section 2.1 is deleted and replaced with the following:
"For so long as MCI or a specific MCI Affiliate is current in the
payment of all fees set forth in Article 6 of this Agreement, then MCI
or such specific MCI Affiliate, as applicable, is entitled to
Maintenance and Support as specified in this Article 2."
b. Subsection D. of Section 2.2 ("Maintenance and Support Services") is
modified, in part, to read as follows:
"...upon which the Licensed Software is operating; provided, however,
that such access shall be subject to MCI's prior consent and will be
provided by MCI solely for the purpose of, and only during such time
as required for, such diagnosis and assistance in connection with the
reported error or bug."
c. In the first sentence of the last paragraph of Section 2.2, such
sentence commencing with the words "During the term of this Agreement...",
the clause "provided that Genesys shall have no obligation to correct all
errors in the Licensed Software" is deleted.
d. The following sentences are added to the last paragraph of Section 2.2
at the end of the second sentence.
"In such event, Genesys shall together with other applicable
participants use its commercially reasonable efforts to isolate the
error and determine whether or not it is attributable to the Licensed
Software. Once any such problem is identified not to be attributable
to the Licensed Software, MCI agrees to pay for any additional Genesys
support services under Section 2.5."
-2-
<PAGE>
5. ARTICLE 3 ADDITIONS. This Article is deleted in its entirety.
6. ARTICLE 5 - MCI RESPONSIBILITIES
a. The second sentence of Subsection (A) of Section 5.1 ("Responsibilities
of MCI"), such second sentence commencing with the words "This access shall
include..." is modified, in part, to read as follows:
"...subject to Licensee's security requirements; provided, however,
that such dial-in access, including as referred to in the immediately
preceding sentence, shall be subject to MCI's prior consent and will
be provided by MCI solely for the purpose of, and only during such
time as required for, the particular specified Genesys maintenance
activity."
7. ARTICLE 6 - FEES AND PAYMENT
a. Subsection 6.1 is deleted and replaced in its entirety, as follows:
"6.1 Fees.
----
(A) Maintenance and Support are offered on an annual basis. The cost
of [*] Maintenance and Support for [*] shall be equal to [*] of the
[*] of the applicable Licensed Software effective as of the date of
the Purchase Order for such Maintenance and Support; and the cost of
[*] Maintenance and Support Services for [*] shall be equal to [*] of
the License Fees for the applicable Licensed Software effective as of
the date of the Purchase Order for such Maintenance and Support (such
foregoing applicable Maintenance and Support fees are referred to
herein collectively as "[*]"). Notwithstanding the foregoing, (i)
maintenance fees [*] of Network Applications [*] under the MSLA shall
be [*] dollars [*] during the [*] and [*] dollars (following such [*],
the maintenance fees for Network Applications shall be the [*] and
(ii) all maintenance fees for Premises Software shall be [*]
(B) The [*] maintenance fees for Licensed Software (other than the
[*], shall be payable, one year in advance, within thirty (30) days
following [*] of an invoice [*] for such maintenance fees or, for
Network Applications, the [*] or (ii) the [*] for the relevant
Licensed Software. The maintenance fees for Network Applications [*]
shall be payable within thirty (30) days following [*] of an invoice
[*] for such fees or (y) [*]
-3-
*Confidential Treatment Requested
<PAGE>
[*] of the Network Applications. For each year [*] the applicable
maintenance fees for the applicable Licensed Software, the [*] shall
be the [*], payable, one year in advance, within thirty (30) days
following [*] of an invoice [*] for such [*]. To the extent [*]
Licensed Software, [*], the Maintenance Rates for such [*] Licensed
Software may be [*] for [*] or [*] a full year to cause the [*]
maintenance periods for such [*] Licensed Software to have [*] with
previously Licensed Software licensed hereunder. [*] maintenance fees
shall be invoiced each year [*]."
b. SECTION 6.2. ("TIME OF PAYMENT") is modified, in part, to read as
follows:
"...shall be paid within thirty (30) days..."
8. ARTICLE 7 - TERM AND TERMINATION.
a. The first sentence of Section 7.1 ("Term") is deleted and replaced with
the following:
"This Agreement shall take effect on the Effective Date of this
Amendment Number One and shall remain in effect for an initial term of
two (2) years."
b. The second sentence of Section 7.3 is modified, in part, to read as
follows:
"...Articles 8, 9, 10 and 11 shall survive any termination..."
9. ARTICLE 9 - WARRANTY DISCLAIMER. The first sentence of Article 9 is
modified, in part, to read as follows:
"...shall be construed to modify any warranty..."
10. ARTICLE 11 - GENERAL PROVISIONS
a. Subsection A of Section 11.1 ("Confidentiality"), is modified to read,
in part, as follows:
"...the conditions set forth in Section 9.2 of the MSLA."
b. The following new paragraph is added to the end of Section 11.1:
"Information disclosed by one Party to the other or otherwise obtained
by one Party in the performance of this Agreement shall be subject to
the provisions of Article 9 of the MSLA modified so as to be
applicable to this Agreement."
-4-
*Confidential Treatment Requested
<PAGE>
c. The first sentence of Section 11.2 is modified, in part, to read
as follows:
"... consent of the other party, which consent shall not be
unreasonably withheld or delayed."
d. The second sentence in Section 11.2 is modified, in part, to read as
follows:
"... transfer or assignment, and (ii) either party may assign this
Agreement as part of the sale of all or substantially all of the
business assets to which this Agreement relates or as part of any
transaction resulting in a merger, consolidation or other change in
control of the assigning party, provided that the assigning party
shall notify the non-assigning party of such assignment."
e. The first sentence of Section 11.11 ("Entire Agreement") is modified to
read, in part, as follows:
"This Agreement and the Schedules attached hereto and incorporated
herein, along with any provisions of the MSLA expressly incorporated
herein by reference, constitute the entire..."
11. SCHEDULE B ("ESCALATION PROCEDURES AND RESPONSE TIMES TARGETS")
1. TECHNICAL SUPPORT AVAILABILITY. This section is deleted and replaced
in its entirety with the following:
"Genesys will provide [*] for both [*]. [*] may be [*] through [*]."
3. PROBLEM ACKNOWLEDGMENT. This section is deleted and replaced in its
entirety with the following:
"Unless otherwise [*] to by [*] on a [*], the currently stated [*] for
[*], are modified to the following:
SEVERITY 1 - Genesys shall [*] of notice thereof and [*], including on
[*] unless for such [*] have agreed to [*] until the [*].
SEVERITY 2 - Genesys shall [*] of notice thereof and [*], including
on [*] unless for such [*] have agreed to [*] until the next [*].
SEVERITY 3 - Genesys shall [*] of notice thereof and [*], excluding
[*].
SEVERITY 4 - Genesys shall [*] of receipt of notice thereof and [*].
-5-
*Confidential Treatment Requested
<PAGE>
4. PROBLEMS RESOLUTION TARGETS. The current section is deleted and
replaced, in is entirety, with the following:
"The following problem resolution targets are applicable to both
workstation and host software problems:
<TABLE>
<CAPTION>
SEVERITY 1 SEVERITY 2 SEVERITY 3
---------- ---------- ----------
<S> <C> <C> <C>
[*] of problems [*] [*] [*]
resolved in:
[*] of problems [*] [*] [*]
resolved in:
[*] of problems [*] [*] [*]
resolved in:
[*] of problems [*] [*] [*]
resolved in:
[*] of problems [*] [*] [*]
solved in:
</TABLE>
12. ENTIRE AGREEMENT. This Amendment and the Agreement, and the MSLA to the
extent incorporated herein by reference, constitute the entire Agreement between
the parties in connection with the subject matter of this Amendment and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the parties.
-6-
* Confidential Treatment Requested
<PAGE>
IN WITNESS WHEREOF, Genesys and MCI have caused this Amendment Number One
to the Software Maintenance Agreement to be executed by their duly authorized
representatives, effective as of the Effective Date set forth above.
AGREED AND ACCEPTED BY:
Genesys Telecommunications MCI Telecommunications
Laboratories, Inc. Corporation
/s/ Gregory Shenkman /s/ John W. Gerdelman
----------------------------- ------------------------------
Signature Signature
Gregory Shenkman John W. Gerdelman
----------------------------- ------------------------------
Print Name Print Name
President and Chief Executive
Officer Executive Vice President
----------------------------- ------------------------------
Title Title
February 26, 1997 February 26, 1997
----------------------------- ------------------------------
Date Date
-7-
<PAGE>
EXHIBIT 11.1
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
COMPUTATION OF PRO FORMA NET LOSS PER SHARE
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
YEAR ENDED ------------------
JUNE 30, 1996 1995 1996
------------- -------- --------
<S> <C> <C> <C>
Net loss.................................... $(3,327) $ (1,525) $ (23)
======= ======== ========
PRO FORMA NET LOSS PER SHARE
Shares used in calculating pro forma net
loss per share:
Weighted average common shares outstanding.. 9,969 9,032 11,496
SAB 83 shares--
Convertible preferred stock............... 2,752 2,752 2,752
Common stock issuances.................... 1,989 1,989 1,989
Options for common stock.................. 3,630 3,683 3,613
Warrants.................................. 304 304 304
------- -------- --------
Total................................... 18,644 17,760 20,154
======= ======== ========
Pro forma net loss per share................ $ (0.18) $ (0.09) $ --
======= ======== ========
</TABLE>
<PAGE>
Exhibit 16.1
[LETTERHEAD OF COOPERS & LYBRAND]
March 31, 1997
Mr. Michael J. Sheridan
Corporate Controller
Genesys Telecommunications Laboratories
1155 Market Street
11th Floor
San Francisco, CA 94103
Re: "Change in Independent Auditor's" paragraph for S-1 filing
Dear Mr. Sheridan:
We have read the wording of the "Change in Independent Auditors" paragraph for
the Genesys Telecommunications Laboratories filing on Form S-1. We agree with
all statements made therein with respect to Coopers & Lybrand L.L.P. in its
capacity as the predecessor auditors for the Company.
Please contact us if we can be of further assistance.
Very truly your,
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
<PAGE>
EXHIBIT 21.1
Subsidiaries and Affiliates.
- ---------------------------
1. The Company has the following subsidiaries and affiliates:
a. Genesys Telecommunications Laboratories - Europe Limited, a UK
corporation;
b. Genesys Russia, Inc., a California corporation; and
c. Genesys Laboratories Canada Inc., a New Brunswick business
corporation
d. Genesys Vladivostok, a Russian corporation.
e. Genesys Moscow (status of entity undetermined);
f. Genesys Telecommunications France (registration in process); and
g. Genesys Laboratories Australasia PTY Limited.
<PAGE>
EXHIBIT 23.3
CONSENT OF COUNSEL
We consent to the use of our name in the paragraph under "Experts" (and
elsewhere in the Registration Statement, as described in "Experts") in the
Registration Statement on Form S-1 originally filed by Genesys
Telecommunications Laboratories, Inc. with the Securities and Exchange
Commission on April 3, 1997, as thereafter amended or supplemented (the
"Registration Statement"), including the prospectus constituting a part
thereof, and in any amendment and supplement thereto.
Blakely Sokoloff Taylor & Zafman
Sunnyvale, California
April 3, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR AND SIX MONTHS ENDED JUNE 30, 1996 AND
DECEMBER 31, 1996, RESPECTIVELY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1997
<PERIOD-START> JUL-01-1995 JUL-01-1996
<PERIOD-END> JUN-30-1996 DEC-31-1996
<CASH> 5,926 1,816
<SECURITIES> 0 0
<RECEIVABLES> 4,607 10,905
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 173 324
<PP&E> 1,550 3,455
<DEPRECIATION> (326) (648)
<TOTAL-ASSETS> 11,961 16,201
<CURRENT-LIABILITIES> 6,101 9,934
<BONDS> 0 0
0 0
8,995 8,995
<COMMON> 150 330
<OTHER-SE> (3,689) (3,508)
<TOTAL-LIABILITY-AND-EQUITY> 11,961 16,201
<SALES> 9,319 11,804
<TOTAL-REVENUES> 9,319 11,804
<CGS> 2,876 2,037
<TOTAL-COSTS> 2,876 2,037
<OTHER-EXPENSES> 9,682 10,005
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (3,327) (23)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,327) (23)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> $(0.18) $ (0)
</TABLE>
