<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- -------
COMMISSION FILE NUMBER 000-22605
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
CALIFORNIA 94-3120525
(State or other jurisdiction of (IRS EmployerIdentification No.)
incorporation or organization)
1155 MARKET STREET, SAN FRANCISCO, CALIFORNIA 94103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 437-1100
</TABLE>
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
TITLE OF EACH CLASS OUTSTANDING AT DECEMBER 31, 1998
Common Stock, no par value 23,399,551 Shares
<PAGE>
Genesys Telecommunications Laboratories, Inc.
FISCAL SECOND QUARTER 1999 FORM 10-Q
TABLE OF CONTENTS
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PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
ITEM 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 15
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of
Security Holders 16
ITEM 5. Other Information 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
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<S> <C> <C>
ITEM 1. Financial Statements
Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1998
and June 30, 1998 4
Condensed Consolidated Statements of Operations for the
three and six months ended December 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
</TABLE>
<PAGE>
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------- ----------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 42,469 $ 30,256
Short-term investments 14,816 16,985
Accounts receivable, net 33,744 28,007
Prepaid expenses and other 9,649 8,314
-------- --------
Total current assets 100,678 83,562
PROPERTY AND EQUIPMENT, net 17,697 14,675
OTHER ASSETS 6,829 6,463
-------- --------
$125,204 $104,700
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 62 $ 243
Current portion of long-term obligations 33 33
Accounts payable 4,147 4,520
Accrued payroll and related benefits 11,069 3,702
Other accrued liabilities 8,971 5,674
Deferred revenues 18,864 16,805
-------- --------
Total current liabilities 43,146 30,977
-------- --------
LONG-TERM OBLIGATIONS 85 102
-------- --------
SHAREHOLDERS' EQUITY:
Common stock 87,022 72,356
Shareholder notes receivable (316) (440)
Cumulative translation adjustment 17 (188)
Retained earnings (Accumulated deficit) (4,750) 1,893
-------- --------
Total shareholders' equity 81,973 73,621
-------- --------
$125,204 $104,700
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
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GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
License $ 26,030 $ 15,677 $ 49,692 $ 28,944
Service 6,188 3,472 11,534 6,445
--------- -------- -------- --------
Total revenues 32,218 19,149 61,226 35,389
--------- -------- -------- --------
COST OF REVENUES:
License 1,163 831 2,215 1,502
Service 4,506 2,229 8,561 4,050
--------- -------- -------- --------
Total cost of revenues 5,669 3,060 10,776 5,552
--------- -------- -------- --------
GROSS MARGIN 26,549 16,089 50,450 29,837
--------- -------- -------- --------
OPERATING EXPENSES:
Research and development 6,144 3,667 11,548 6,726
Sales and marketing 11,103 8,445 21,505 15,395
General and administrative 2,510 2,019 5,212 3,881
Merger costs - 905 - 905
Non-recurring charges 15,488 - 15,488 -
--------- -------- -------- --------
Total operating expenses 35,245 15,036 53,753 26,907
--------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS (8,696) 1,053 (3,303) 2,930
INTEREST AND OTHER INCOME (EXPENSE), NET 400 394 884 729
--------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (8,296) 1,447 (2,419) 3,659
PROVISION FOR INCOME TAXES 2,167 294 4,224 1,110
--------- -------- -------- --------
NET INCOME (LOSS) $ (10,463) $ 1,153 $ (6,643) $ 2,549
========= ======== ======== ========
BASIC NET INCOME (LOSS) PER SHARE $ (0.45) $ 0.06 $ (0.29) $ 0.12
========= ======== ======== ========
DILUTED NET INCOME (LOSS) PER SHARE $ (0.45) $ 0.04 $ (0.29) $ 0.09
========= ======== ======== ========
BASIC WEIGHTED AVERAGE COMMON SHARES 23,200 20,800 22,900 20,800
========= ======== ======== ========
DILUTED WEIGHTED AVERAGE COMMON SHARES 23,200 26,800 22,900 26,900
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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<CAPTION>
For the Six Months
Ended December 31,
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (6,643) $ 2,549
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Deferred stock compensation expense 238 238
Depreciation and amortization 4,337 1,759
Provision for doubtful accounts 200 579
Non-cash portion of Non-recurring charges 9,426 --
Changes in operating assets and liabilities:
Accounts receivable (5,937) (1,811)
Prepaid expenses and other (1,335) (755)
Accounts payable (373) (266)
Accrued payroll and related benefits 7,367 164
Other accrued liabilities 3,297 1,383
Deferred revenues 2,059 2,795
-------- --------
Net cash provided by operating activities 12,636 6,635
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (14,436) (23,840)
Sales of short-term investments 16,605 --
Purchases of property and equipment (6,199) (4,878)
(Increase) decrease in other assets (939) (303)
-------- --------
Net cash used in investing activities (4,969) (29,021)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note payable -- (241)
Principal payments on capital lease obligations (181) (35)
Repayments of long-term obligations (17) (209)
Proceeds from sales of common stock 4,744 244
-------- --------
Net cash provided by used in financing activities 4,546 (241)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,213 (22,627)
CASH AND CASH EQUIVALENTS:
Beginning of Period 30,256 47,160
-------- --------
End of Period $ 42,469 $ 24,533
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
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GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been prepared
by Genesys Telecommunications Laboratories, Inc. (the Company) without audit and
reflect all adjustments which are, in the opinion of management, necessary for a
fair presentation of the financial position and the results of operations of the
Company for the interim periods. The statements have been prepared in accordance
with the regulations of the Securities and Exchange Commission (SEC).
Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles. The results of operations for the
three and six months ended December 31, 1998 are not necessarily indicative of
the operating results to be expected for the full fiscal year or future
operating periods. The information included in this report should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the fiscal year ended June 30, 1998 and the risk factors as set forth in the
Company's Annual Report on Form 10-K, including, without limitation, risks
relating to limited operating history, potential fluctuations in quarterly
operating results, lengthy sales cycle, lengthy implementation cycle, dependence
on third party consultants, dependence on new products, rapid technological
change, competition, product concentration, management of growth, dependence on
third-party resellers, customer concentration, dependence on emerging CTI
market, risks associated with international sales and operations, dependence on
key personnel, government regulation of immigration, dependence on ability to
integrate with third-party technology, product liability, protection of
intellectual property, concentration of stock ownership, possible volatility of
stock price, shares eligible for future sale, registration rights, effect of
certain charter provisions, anti-takeover effects of provisions of the by-laws
and uncertainty as to use of proceeds. Any party interested in reviewing these
publicly available documents should write to the SEC or the Chief Financial
Officer of the Company.
2. CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All intercompany accounts and transactions have
been eliminated.
7
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3. NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which
was adopted by the Company in the quarter ended December 31, 1997, and in
accordance with this standard all prior periods presented have been restated to
conform to its provisions. Under the new requirements for calculating earnings
per share, the dilutive effect of potential common shares is excluded from basic
net income (loss) per share. Diluted net income (loss) per share is computed
using the weighted average number of common and potential common shares
outstanding during the period. Potential common shares consist of preferred
stock (using the "if converted" method) and stock options and warrants (using
the treasury stock method). Potential common shares are excluded from the
dilutive computation only if their effect is anti-dilutive. In February 1998,
the Securities and Exchange Commission issued Staff Accounting Bulletin 98,
which included SEC requirements related to the adoption of SFAS 128. The Company
applied these provisions to the calculation of basic and diluted weighted
average shares outstanding for all periods presented in the accompanying
statements of operations.
Basic and Diluted Weighted Average Common and Potential Common Shares presented
in the accompanying statements of operations (as rounded) are comprised of the
following (in thousands):
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<CAPTION>
Quarter
Ended
December 31,
---------------
1998 1997
------ ------
<S> <C> <C>
Weighted average common shares outstanding 23,200 19,948
Shares issued in acquisition of Forte - 667
------ ------
BASIC WEIGHTED AVERAGE COMMON SHARES 23,200 20,615
====== ======
Weighted average options and warrants for common stock - 6,180
------ ------
DILUTED WEIGHTED AVERAGE COMMON SHARES 23,200 26,795
====== ======
</TABLE>
Potential weighted average common shares totaling 3.6 million and 3.3 million
have been excluded from diluted weighted average common shares for the three
and six months ended December 31, 1998, respectively, as their inclusion would
be anti-dilutive.
4. NON-RECURRING CHARGES
Executive Management Additions and Acquisition of Plato Software
----------------------------------------------------------------
Corporation
-----------
In December 1998, the Company hired Ori Sasson as its Chief Executive Officer
and elected him as a member of the Board of Directors of Genesys. In connection
with the hiring of Mr. Sasson, the Company also completed the acquisition of
Plato Software Corporation, a Delaware corporation ("Plato"), a company in which
Mr. Sasson was a principal shareholder. The merger was completed pursuant to an
Agreement and Plan of Reorganization ("Merger Agreement") dated as of December
9, 1998. As Plato did not have significant operations or revenue prior to the
acquisition, the Company has treated the purchase as the acquisition of an
asset.
Pursuant to the Merger Agreement, the Company issued 202,500 shares of its
Common Stock in exchange for all outstanding shares of Plato Common Stock, and
issued options to purchase 47,500 shares of Genesys Common Stock in exchange
for all outstanding Plato Stock options. A total of 50,000 shares have been
placed into an escrow subject to the satisfaction of all representations and
warranties under the terms and conditions of the Merger Agreement. The Company
recorded the fair value of net
8
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assets purchased from Plato, which consisted of certain technology to be
incorporated into the Genesys products, totaling $382,000 as of December 31,
1998.
As the acquisition of Plato was consummated in connection with the election of
Ori Sasson as Chief Executive Officer and a member of the Board of Directors of
the Company, the Company recorded as expense the portion of the shares and
options issued that represented compensation to Mr. Sasson and other Plato
employees. Deferred compensation totaling $800,000 related to unvested options
will be amortized over the remaining vesting period of the options of
approximately 4 years. In addition, the Company recorded as expense its
reimbursement to Mr. Sasson of the tax liabilities associated with this
compensation. The total amount of compensation expense and related tax
reimbursements associated with this transaction was approximately $12.4 million,
and was reflected as part of a non-recurring charge in the Company's financial
statements.
Compensation to Former President and Chief Financial Officer
------------------------------------------------------------
The Company recorded $3.1 million of non-recurring charges related to an
employment and severance agreement dated December 11, 1998 with its former
President and Chief Financial Officer.
4. LITIGATION
In November 1998, GeoTel Communications Corporation ("GeoTel") and the Company
settled the litigation between them concerning GeoTel's United States Patent No.
5,546,452 on terms which both companies believe not to be material to their
financial results. Pursuant to the settlement, GeoTel will receive license fees
from Genesys for ongoing revenues generated from certain products in exchange
for a nonexclusive, irrevocable license to use the technology covered by
GeoTel's 452 Patent or any related patent in all present and future Genesys
products which incorporate such technology.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position 97-2 "Software Revenue Recognition" ("SOP 97-2"), which
was adopted by the Company in its first fiscal quarter of 1999. SOP 97-2
clarifies and amends certain provisions of Statement of Position 91-1, "Software
Revenue Recognition". The adoption of the provisions of SOP 97-2 did not have a
material impact on the Company's financial position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which was adopted by the Company in its first quarter of fiscal 1999.
Accordingly, the Company is required to disclose, in financial statement format,
all non-owner changes in equity. Such changes include, for example, cumulative
foreign currency translation adjustments, certain minimum pension liabilities
and unrealized gains and losses on available-for-sale securities. The Company's
only reconciling item to comprehensive income from net income is cumulative
translation adjustments resulting from foreign currency exchange rates, the net
effect of which is immaterial to the Company's financial statements for the
periods presented.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which establishes standards
for reporting information about operating segments in annual financial
statements and interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. As defined in SFAS 131, operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. The Company will adopt SFAS 131 for the year ended June 30, 1999. The
Company believes the adoption of SFAS 131 will not have a material impact on its
financial statements.
9
<PAGE>
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") which establishes accounting and reporting
standards for derivative instruments and hedging activities. The Company does
not expect the adoption of SFAS 133, required beginning the first fiscal quarter
of 2000, to have a material effect on its consolidated financial statements.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Genesys Telecommunications Laboratories, Inc (''Genesys'' or the ''Company'') is
a leading provider of enterprise-wide customer interaction, computer telephony
and e-mail software solutions. 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. To accomplish this, Genesys' software-based solutions integrate and
extend the capabilities of an organization's computer, telecommunications and
database systems, bringing together what were once disparate technologies. The
Company believes that as customer interactions are increasingly viewed as
strategic to an organization's mission, call center capabilities will be
extended beyond traditional agent, site and switch boundaries, transforming the
entire enterprise into a customer interaction network.
EXECUTIVE MANAGEMENT ADDITIONS AND ACQUISITION OF PLATO SOFTWARE CORPORATION
In December 1998, the Company appointed Ori Sasson as its Chief Executive
Officer and elected him as a member of the Board of Directors of Genesys. In
connection with the hiring of Mr. Sasson, the Company also completed the
acquisition of Plato Software Corporation, a Delaware corporation ("Plato"), a
company in which Mr. Sasson was a principal shareholder. The merger was
completed pursuant to an Agreement and Plan of Reorganization ("Merger
Agreement") dated as of December 9, 1998. As Plato did not have significant
operations or revenue prior to the acquisition, the Company has treated the
purchase as the acquisition of an asset.
Pursuant to the Merger Agreement, the Company issued 202,500 shares of its
Common Stock in exchange for all outstanding shares of Plato Common Stock, and
issued options to purchase 47,500 shares of Genesys Common Stock in exchange
for all outstanding Plato stock options. A total of 50,000 shares have been
placed into an escrow subject to the satisfaction of all representations and
warranties under the terms and conditions of the Merger Agreement. The Company
recorded the fair value of net assets purchased from Plato, which consisted of
certain technology to be incorporated into the Genesys products, totaling
$382,000 as of December 31, 1998.
As the acquisition of Plato was consummated in connection with the election of
Ori Sasson as Chief Executive Officer and a member of the Board of Directors of
the Company, the Company recorded as expense the portion of the shares and
options issued that represented compensation to Mr. Sasson and other Plato
employees. Deferred compensation totaling $800,000 related to unvested options
will be amortized over the remaining vesting period of the options of
approximately 4 years. In addition, the Company recorded as expense its
reimbursement to Mr. Sasson of the tax liabilities associated with this
compensation. The total amount of compensation expense and related tax
reimbursements associated with this transaction was approximately $12.4 million,
and was reflected as part of a non-recurring charge in the Company's financial
statements.
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>
Three Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
License 80.8% 81.9% 81.2% 81.8%
Service 19.2 18.1 18.8 18.2
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
COST OF REVENUES:
License 3.6 4.4 3.6 4.2
Service 14.0 11.6 14.0 11.5
----- ----- ----- -----
Total cost of revenues 17.6 16.0 17.6 15.7
----- ----- ----- -----
GROSS MARGIN 82.4 84.0 82.4 84.3
----- ----- ----- -----
OPERATING EXPENSES:
Research and development 19.1 19.2 18.9 19.0
Sales and marketing 34.5 44.1 35.1 43.5
General and administrative 7.8 10.5 8.5 11.0
Merger-related costs 0.0 4.7 0.0 2.5
Non-recurring charges 48.1 0.0 25.3 0.0
----- ----- ----- -----
Total operating expenses 109.5 78.5 87.8 76.0
----- ----- ----- -----
INCOME (LOSS) FROM OPEARATIONS -27.1 5.5 -5.4 8.3
OTHER INCOME (EXPENSE), NET 1.2 2.1 1.4 2.1
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES -25.9 7.6 -4.0 10.3
PROVISION FOR INCOME TAXES 6.7 1.5 6.9 3.1
----- ----- ----- -----
NET INCOME (LOSS) -32.6% 6.0% -10.9% 7.2%
===== ===== ===== =====
</TABLE>
11
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Revenues
License. License revenues increased by 66% from $15.7 million in the three
months ended December 31, 1997 to $26.0 million in the three months ended
December 31, 1998. License revenues increased by 71.7% from $28.9 million in
the first six months of fiscal 1998 to $49.7 million in the first six months of
fiscal 1999. This increase resulted from 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. 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 increased
by 78.2% from $3.5 million in the three months ended December 31, 1997 to $6.2
million in the three months ended December 31, 1998. Service revenues increased
by 79.0% from $6.4 million in the first six months of fiscal 1998 to $11.5
million in the first six months of fiscal 1999. The Company's software license
agreements often provide for maintenance, consulting and training. Accordingly,
increases in licensing activity have resulted in increases in revenues from
services related to maintenance, consulting and training.
Service revenues are largely dependent upon the extent to which product
implementations are performed by internal professional services personnel versus
third party organizations such as systems integrators. To the extent that the
Company utilizes more internal resources to perform product implementations,
service revenues could increase as a percentage of total revenues. Conversely,
if the Company utilizes to a greater extent third-party organizations such as
systems integrators to implement the Company's products, service revenues may
decrease as a percentage of total revenues. Maintenance revenues as a
percentage of total revenues are expected to increase due to continued expansion
of the Company's installed base. 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 $1.2 million and $0.8 million in the three months ended December
31, 1998 and 1997, respectively, and $2.2 million and $1.5 million in the six
months ended December 31, 1998 and 1997, respectively. The increase in absolute
dollar amounts relates primarily to an increase in the volume of products
shipped by the Company, and the resulting increase in documentation material
costs and personnel necessary to assemble and ship the products. Also included
in cost of license revenues is amortization of capitalized software costs
amounting to approximately $132,000 and $37,000 for the three months ended
December 31, 1998 and 1997, respectively, and $411,000 and $100,000 for the six
months ended December 31, 1998 and 1997, respectively.
Service. Cost of service revenues are primarily comprised of employee-related
costs incurred in providing consulting, post-contract support and training
services. Cost of service revenues were $4.5 million and $2.3 million in the
three months ended December 31, 1998 and 1997, respectively, and $8.6 million
and $4.1 million in the six months ended December 31, 1998 and 1997,
respectively. The increase in absolute dollars was due primarily to increases in
consulting, support and training personnel, and increases in overhead costs
associated with travel, computer equipment and facilities. 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
For the three months ended December 31, 1998 and 1997, the Company's operating
expenses were $35.2 million and $15.0 million, or 109.5% and 78.5% of total
revenues, respectively. For the six months ended December 31, 1998 and 1997,
operating expenses were $53.7 million and $26.9 million, or 87.8% and 76.0% of
total revenues, respectively.
12
<PAGE>
Research and Development. Research and development expenses were $6.1 million
and $3.7 million, or 19.1% and 19.2% of total revenues in the three months ended
December 31, 1998 and 1997, respectively, and $11.5 million and $6.7 million, or
18.9% and 19.0% of total revenues in the six months ended December 31, 1998 and
1997, 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, the Company capitalized approximately $100,000 and $150,000 of software
development costs incurred in the three months ended December 31, 1998 and
1997, respectively, and $500,000 and $450,000 in the six months ended December
31, 1998 and 1997, respectively, related to the development of its product
suite.
Sales and Marketing. Sales and marketing expenses were $11.1 million and $8.4
million, representing 34.5% and 44.1% of total revenues in the three months
ended December 31, 1998 and 1997, respectively, and $21.5 million and $15.4
million, or 35.1% and 43.5% of total revenues in the six months ended December
31, 1998 and 1997, respectively. These expenses increased in absolute dollars
primarily due to the Company's continuing investment in building a direct sales
force to support the increasing demand for its products, and the Company's
investment in expanding its channel sales force in North America, Europe and the
Asia Pacific. In addition, the Company incurred increased marketing expenses
associated with the Company's expanding product line, including trade shows and
promotional expenses. The Company has recently hired several senior sales and
marketing executives, including a Vice President of Worldwide Field Operations,
a Vice President of North American Direct Sales, and a Vice President of North
American Channel Sales. The Company expects to hire additional personnel in the
near future, including a Vice President of Marketing. The Company expects an
increase in expenses related to the hiring of these and other new personnel.
The Company expects to continue to expand its direct sales and marketing
efforts, and therefore, anticipates sales and marketing expenditures will
continue to increase significantly in absolute dollars.
General and Administrative. General and administrative expenses were $2.5
million and $2.0 million, or 7.8% and 10.5% of total revenues in the three
months ended December 31, 1998 and 1997, respectively, and $5.2 million and $3.9
million, or 8.5% and 11.0% of total revenues in the six months ended December
31, 1998 and 1997, 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, the Company has incurred higher legal costs
associated primarily with general corporate matters, trademark matters and
patent filings. The Company plans to hire a new Chief Financial Officer in the
near future. 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. General and administrative
expenses as a percentage of total revenues have decreased from 10.5% in the
second quarter of fiscal 1998 to 7.8% in the second quarter of fiscal 1999,
due principally to the significant investments made by the Company in 1998
relative to total revenues in anticipation of significant growth during fiscal
1998 and 1999. The Company expects to continue to increase general and
administrative expenses in absolute dollars, but expects that these expenses
as a percentage of total revenues will stabilize.
Merger Costs. The Company incurred $905,000 of merger costs in connection with
the merger of Forte Advanced Management Software, Inc. during the three and six
months ended December 31, 1997. The costs consisted primarily of legal and
accounting fees.
Non-recurring Charges. In connection with the hiring of Ori Sasson as the
Company's Chief Executive Officer, the Company recorded non-recurring charges
totaling $11.6 million related to compensation and tax reimbursements paid or
accrued to Mr. Sasson, and an additional $802,000 of compensation paid or
accrued to certain employees of Plato. In addition, the Company recorded $3.1
million of non-recurring charges related to an employment and severance
agreement dated December 11, 1998 with its former President and Chief Financial
Officer.
13
<PAGE>
Provision for Income Taxes
Excluding the effect of the non-recurring charges recorded during the quarter,
the Company's effective tax rate for the three months ended December 31, 1998
was 35%, which the Company estimates will be the effective tax rate for the
remainder of fiscal 1999. Due to permanent limitations on the deductibility for
tax purposes of executive compensation, the Company did not record any tax
benefit related to the non-recurring charges recorded during the quarter, which
resulted in a tax provision of $2.2 million even though the Company incurred a
pre-tax loss of $8.3 million. The Company's effective tax rate for the year
ended June 30, 1998 was 34%.
Year 2000
Many computer systems experience problems handling dates beyond the year 1999.
Therefore, some computer hardware and software will need to be modified prior to
the year 2000 in order to remain functional. The Company is assessing both the
internal readiness of its computer systems and the compliance of its computer
products and software sold to customers for handling the year 2000. The Company
has designed and tested current versions of its products to be year 2000 ready.
Some of the Company's customers might be running older product versions that
might not be year 2000 ready. It is possible that the Company may experience
increased expenses in addressing migration issues for these customers. In
addition, there can be no assurances that the Company's current products do not
contain undetected errors or defects associated with year 2000 date functions
that may result in material costs to the Company. Some commentators have stated
that a significant amount of litigation will arise out of year 2000 compliance
issues. Because of the unprecedented nature of such litigation, it is uncertain
whether or to what extent the Company may be affected by it. Although the
Company does not believe that it will incur any material costs or experience
material disruptions in its business associated with preparing its internal
systems for the year 2000, there can be no assurance that the Company will not
experience serious unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in its internal
systems, which are composed predominantly of third party software and hardware
technology with embedded software, and the Company's own software products.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company's primary sources of liquidity included
cash and cash equivalents of $42.5 million and short-term investments of $14.8
million.
The Company generated cash from operating activities of $12.6 million in the six
months ended December 31, 1998 related primarily to an increase in net income,
accrued liabilities and deferred revenues, which was offset in part by an
increase in accounts receivable. The Company generated cash from operating
activities of $6.6 million in the six months ended December 31, 1997 related
primarily to an increase in net income and deferred revenues, offset in part
by an increase in accounts receivable.
The Company generated cash from the net maturity of $2.2 million of short-term
investments in the six months ended December 31, 1998. The Company used cash of
$6.2 million for the purchase of property and equipment in the six months ended
December 31, 1998. The Company used cash to purchase $23.8 million of short-
term investments and $4.9 million of property and equipment in the six months
ended December 31, 1997.
The Company has established subsidiaries in foreign countries, including the
United Kingdom, France, Germany, Sweden, Canada, Russia, Japan, Singapore and
Australia, which function primarily as sales offices in those locations. The
Company expects to establish offices in other foreign countries as it continues
to expand its international operations. The capital expenditures necessary to
establish a foreign office are not significant, and, accordingly, the Company
does not expect that the establishment of these subsidiaries will have a
material adverse effect on its liquidity and capital resources.
The Company believes that its existing sources of liquidity will satisfy the
Company's projected working capital and capital requirements for at least the
next twelve months.
14
<PAGE>
QUARTERLY RESULTS OF OPERATIONS AND FORWARD LOOKING STATEMENTS
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; competition; the size, timing and recognition of revenue from
significant orders; the Company's ability to develop and market new products and
product enhancements; new product releases by the Company and its competitors
and the timing of such releases; the length of sales and implementation cycles;
the Company's ability to integrate acquired business; 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
delay or deferral of significant revenues until acceptance of software required
by an individual license transaction; technological changes in the market for
the Company's products; 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.
While the Company generally operates with limited backlog, from time to time it
receives orders from customers that are for project development over an extended
period of time. 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 and
other resources by a customer. The Company's typical order size ranges from
$200,000 to $400,000; however, several orders during the three months ended
December 31, 1998 exceeded $500,000 each. 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 meaningful degree
of certainty. Product revenues are also difficult to forecast because the
market for the Company's 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 expectations as to future revenues.
Consequently, if future revenue levels were 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 generally 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 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.
Certain statements contained in this Quarterly Report on Form 10-Q, including,
without limitation, statements containing the words "believes," "anticipates,"
"estimates," "expects," and words of similar import, constitute "forward looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934 regarding events, conditions and financial trends that may affect the
Company's future plans, business strategy, results of operations and
15
<PAGE>
financial position. Readers are referred to the "Risk Factors" section of the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission, which identify important risk factors that could cause actual
results to differ from those contained in the forward-looking statements.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In November 1998, GeoTel Communications Corporation ("GeoTel") and the Company
settled the litigation between them concerning GeoTel's United States Patent No.
5,546,452 on terms which both companies believe not to be material to their
financial results. Pursuant to the settlement, GeoTel will receive license fees
from Genesys for ongoing revenues generated from certain products in exchange
for a nonexclusive, irrevocable license to use the technology covered by
GeoTel's 452 Patent or any related patent in all present and future Genesys
products which incorporate such technology.
17
<PAGE>
ITEM 2. Changes in Securities and Use of Proceeds
During the period covered by this report, there were no changes in the rights of
holders of any class of securities of the Company and no unregistered sales of
equity securities.
On June 16, 1997, the Company's registration statement on Form S-1 (SEC File No.
333-24479) was declared effective. The registration statement registered for
offer and sale 2,500,000 (2,875,000 shares including over-allotments) of the
Company's Common Stock, no par value, for an aggregate price of $45 million
($51.75 million including over-allotments) (the "Offering"). Pursuant to the
Offering, which was completed in June 1997, the Company sold 2,375,000 shares,
including over-allotments, of Common Stock and certain shareholders of the
Company sold 500,000 shares of Common Stock. The shares in the Offering were
sold in a firm commitment underwriting that was co-managed by Goldman Sachs &
Company, Lehman Brothers and Robertson, Stephens & Company (now known as
BancBoston Robertson Stephens). The amount of underwriting expenses incurred by
the Company in connection with the Offering were approximately $1,990,500,
resulting in net proceeds to the Company in the amount of $37,137,000.
As of December 31, 1998, none of the net proceeds from the Offering have been
used by the Company, and the net proceeds are held in cash or high-grade short-
term investments. The Company's planned use of proceeds is as described in the
registration statement.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Information
In December 1998, Ori Sasson was elected as Chief Executive Officer and
appointed to the Board of Directors of the Company, filling the seat vacated
by the resignation of James Jordan. Greg Shenkman, a Director and the former
Chief Executive Officer of the Company, was appointed Chairman of the Board.
Also in December 1998, the Company entered into a employment and separation
agreement with Michael McCloskey, under which Mr. McCloskey would continue to
provide services to the Company for up to a six-month period. In January 1999,
the Company hired several new officers, including a Vice President of
Worldwide Field Operations, a Vice President of Worldwide Professional
Services, a Vice President of North American Direct Sales and a Vice President
of North American Channel Sales. The Company expects to make other key
management hires in the next several months, including a Vice President of
Marketing and a Chief Financial Officer.
It will be critical to the Company's success that the new management team, as
well future management hires, are successfully integrated into the Company's
operations. The Company's ability to effectively implement its business
strategy is highly dependent on the distributions of the members of its
management team. There can be no assurance that the Company will be able to
retain its existing management personnel, or be successful in filling
additional positions in the next several months. The loss of any of member of
the new management team or the failure to attract or retain other key
management personnel, could have a material adverse effect of the Company's
business, results of operations and financial condition.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
------- -------
18
<PAGE>
3.1 Amended and Restated Bylaws
10.1 Mutual Executive Separation and Independent Consulting Agreement by
and between the Company and Gregory Shenkman, dated October 27, 1998
10.2 Mutual Separation and Independent Consulting Agreement by and
between the Company and John Metcalfe, dated September 11, 1998
10.3 Employment Offer Letter by and between the Company and Ori Sasson,
dated December 9, 1998
10.4 Employment and Severance and Independent Consulting Agreement by and
between the Company and Michael McCloskey, dated December 11, 1998
27.1 Financial Data Schedule
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
Date: February 16, 1999 By: /s/ Michael J. Sheridan
----------------------------------
Michael J. Sheridan
Vice President, Finance
20
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
BYLAWS
OF
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
---------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I OFFICES............................................................... 1
Section 1. PRINCIPAL OFFICES..................................................... 1
Section 2. OTHER OFFICES......................................................... 1
ARTICLE II MEETINGS OF SHAREHOLDERS.............................................. 1
Section 1. PLACE OF MEETINGS..................................................... 1
Section 2. ANNUAL MEETING........................................................ 1
Section 3. SPECIAL MEETING....................................................... 1
Section 4. NOTICE OF SHAREHOLDERS' MEETINGS...................................... 2
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......................... 2
Section 6. QUORUM................................................................ 3
Section 7. ADJOURNED MEETING; NOTICE............................................. 3
Section 8. VOTING................................................................ 3
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT
SHAREHOLDERS.......................................................... 4
Section 10. SHAREHOLDER ACTION.................................................... 4
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING,
AND GIVING CONSENTS................................................... 5
Section 12. PROXIES............................................................... 5
Section 13. INSPECTORS OF ELECTION................................................ 5
ARTICLE III DIRECTORS............................................................. 6
Section 1. POWERS................................................................ 6
Section 2. NUMBER OF DIRECTORS................................................... 7
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS.............................. 7
Section 4. VACANCIES............................................................. 7
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE........................... 8
Section 6. ANNUAL MEETING........................................................ 8
Section 7. OTHER REGULAR MEETINGS................................................ 8
Section 8. SPECIAL MEETINGS...................................................... 8
Section 9. QUORUM................................................................ 9
Section 10. WAIVER OF NOTICE...................................................... 9
Section 11. ADJOURNMENT........................................................... 9
Section 12. NOTICE OF ADJOURNMENT................................................. 9
Section 13. ACTION WITHOUT MEETING................................................ 9
Section 14. FEES AND COMPENSATION OF DIRECTORS.................................... 10
ARTICLE IV COMMITTEES............................................................ 10
Section 1. COMMITTEES OF DIRECTORS............................................... 10
</TABLE>
i.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 2. MEETINGS AND ACTION OF COMMITTEES..................................... 10
ARTICLE V OFFICERS.............................................................. 11
Section 1. OFFICERS.............................................................. 11
Section 2. ELECTION OF OFFICERS.................................................. 11
Section 3. SUBORDINATE OFFICERS.................................................. 11
Section 4. REMOVAL AND RESIGNATION OF OFFICERS................................... 11
Section 5. VACANCIES IN OFFICES.................................................. 12
Section 6. CHAIRMAN OF THE BOARD................................................. 12
Section 7. PRESIDENT............................................................. 12
Section 8. VICE PRESIDENTS....................................................... 12
Section 9. SECRETARY............................................................. 12
Section 10. CHIEF FINANCIAL OFFICER............................................... 13
Section 11. APPROVAL OF LOANS TO OFFICERS......................................... 13
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS........................................ 14
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES..................................... 14
Section 2. INDEMNIFICATION....................................................... 14
Section 3. ADVANCE OF EXPENSES................................................... 14
Section 4. OTHER CONTRACTUAL RIGHTS.............................................. 14
Section 5. INSURANCE............................................................. 14
ARTICLE VII GENERAL CORPORATE MATTERS............................................. 15
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE
AND VOTING............................................................ 15
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS............................. 15
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED.............................................................. 15
Section 4. CERTIFICATES FOR SHARES............................................... 15
Section 5. LOST CERTIFICATES..................................................... 16
Section 6. REPRESENTATION OF SHARES OF OTHER
CORPORATIONS.......................................................... 16
Section 7. CONSTRUCTION AND DEFINITIONS.......................................... 16
ARTICLE VIII AMENDMENTS............................................................ 16
Section 1. AMENDMENT BY SHAREHOLDERS............................................. 16
Section 2. AMENDMENT BY DIRECTORS................................................ 17
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED 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 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
<PAGE>
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 communication.
2
<PAGE>
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).
3
<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 shareholder 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 California
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
4
<PAGE>
be effected at a duly called annual or special meeting of such holders and may
not be effected by any consent in writing.
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
5
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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 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
6
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Articles of Incorporation, and with these Bylaws; fix their compensation; and
require from them security for faithful service.
(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 seven (7), 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.
7
<PAGE>
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 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 two Directors. The secretary may call such
meeting at the request of any of the foregoing authorized persons.
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
8
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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 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
9
<PAGE>
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.
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
10
<PAGE>
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
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. Except such officers as may be
--------------------
appointed in accordance with the provisions of Section 3 or Section 5 of this
Article V, the officers of the corporation 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 or the
--------------------
President may 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
or President 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 or the
President, except in case of the President and any other officer whose removal
the Board of Directors specifically reserves to the Board, whose removal shall
require the approval of 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
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<PAGE>
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
--------------------
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
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<PAGE>
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 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,
---------------------------------------
- -------------------
/*/ 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.
13
<PAGE>
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, 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.
14
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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 shareholder. Any
or all of the signatures on the certificate may be
15
<PAGE>
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.
16
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Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
----------------------
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.
17
<PAGE>
EXHIBIT 10.1
MUTUAL EXECUTIVE SEPARATION AGREEMENT
This Mutual Executive Separation Agreement ("Agreement") is made between Genesys
Telecommunications Laboratories, Inc. ("Genesys") and Gregory Shenkman
("Executive").
RECITALS
--------
WHEREAS, Executive's employment, status and responsibility as
President and Chief Executive Officer for Genesys ceases effective close of
business, July 24, 1998;
WHEREAS, Executive's status and responsibility as a member of the
Board of Directors ("the Board") remains unaffected by the cessation of
Executive's employment with Genesys; and
WHEREAS, Executive and Genesys wish to conclude Executive's
employment, status and responsibility as President and Chief Executive Officer
for Genesys in such a manner as to resolve any and all disputes that exist and
may exist between them arising from facts or events occurring on and before July
24, 1998, and to preserve the existing goodwill between them;
WHEREAS, nothing contained in or regarding this Agreement alters in
any way Genesys' decision to continue to provide Executive with a defense,
through the law firm of Brobeck, Phleger & Harrison LLP, in the lawsuit,
Fereshteh Wadia v. Genesys Telecommunications Laboratories, Inc., Gregory
Shenkman and Alec Miloslavsky, San Francisco Superior Court Case No. 995775
("Wadia litigation"); and
THEREFORE, in consideration for the promises and benefits described
below, Genesys and Executive agree as follows:
AGREEMENTS
----------
I. Agreements of Genesys
---------------------
A. Genesys accepts Executive's resignation from employment and as an
officer of Genesys, effective close of business, July 24, 1998.
B. Genesys grants Executive ownership of the two (2) laptop computers
and one (1) computer monitor provided to Executive for his use during his
employment.
C. To the extent that Executive and/or his eligible dependents elect
to continue, after July 31, 1998, medical coverages pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), Genesys shall
pay the monthly COBRA continuation premiums for such coverages for up to six (6)
months in an amount not to exceed $522.01 per month.
1 of 7
<PAGE>
D. Genesys shall engage Executive as an Independent Consultant for six
(6) calendar months commencing July 25, 1998, pursuant to the terms of the
Independent Consulting Agreement which is Exhibit 1 hereto, provided that this
Agreement becomes effective.
E. Release and Waiver of all Claims
--------------------------------
1. Genesys agrees that it forever discharges, waives and releases any
and all claims and causes of action of any kind, known and unknown, that it has
or may have against Executive arising out of or relating in any way to
Executive's employment status and responsibility as President and Chief
Executive Officer of Genesys and any and all acts or omissions occurring on or
before July 24, 1998.
2. Genesys agrees that it fully and forever waives any and all rights
and benefits conferred by the provisions of Section 1542 of the Civil Code of
the State of California, which states as follows:
A general release does not extend to claims which the creditor [Genesys]
does not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor [Executive].
Genesys agrees and understands that if, hereafter, it discovers facts different
from or in addition to those which it now knows or believes to be true, that the
waivers of this Agreement shall be and remain effective in all respects
notwithstanding such different or additional facts or the discovery thereof.
II. Agreements of Executive
-----------------------
A. Association with Genesys
------------------------
1. Executive understands that because his employment with Genesys
ceases on July 24, 1998, Executive will not be eligible to participate
thereafter in any benefits provided by Genesys to its employees except that
Executive may elect to continue medical coverages for himself and his eligible
dependents after July 31, 1998, pursuant to COBRA.
2. Executive understands that, his status as a shareholder and member
of the Board of Directors aside, his association with Genesys as of July 25,
1998 can only be that of an Independent Consultant pursuant to the terms of the
Independent Consulting Agreement attached hereto as Exhibit 1, and shall not be
that of an employee, agent, joint venturer or partner of Genesys.
B. Release and Waiver of All Claims
--------------------------------
1. Executive agrees that he fully and forever discharges, waives and
releases any and all claims and causes of action of any kind, known and unknown,
that he has or may have against Genesys, including any of its officers,
directors, agents, employees, affiliates, representatives, predecessors,
successors and assigns, arising out of or relating in any way to his employment,
status and responsibility as President and Chief Executive Officer of Genesys
the termination thereof, and any and all acts or omissions occurring on or
before July 24, 1998,
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<PAGE>
including but not limited to claims of wrongful discharge, breach
of contract, breach of the covenant of good faith and fair dealing, violation of
public policy, defamation, personal injury, infliction of emotional distress,
claims under Title VII of the 1964 Civil Rights Act, as amended, the California
Fair Employment and Housing Act, the Equal Pay Act of 1963, the California Labor
Code, including Section 1197.5 thereof, age discrimination under the Age
Discrimination in Employment Act of 1967, as amended, the Americans with
Disabilities Act, the Civil Rights Act of 1866, the Employee Retirement Income
Security Act of 1974, as amended, and any other local, state and federal laws
and regulations relating to employment.
2. Executive agrees that he fully and forever waives any and all
rights and benefits conferred upon him by the provisions of Section 1542 of the
Civil Code of the State of California, which states as follows:
A general release does not extend to claims which the creditor [Executive]
does not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor [Genesys].
Executive agrees and understands that if, hereafter, he discovers facts
different from or in addition to those which he now knows or believes to be
true, that the waivers of this Agreement shall be and remain effective in all
respects notwithstanding such different or additional facts or the discovery
thereof.
3. The only exceptions to the releases and waivers of sections II.B.1.
and II.B.2., above, are the following:
a. claims Executive may have for indemnification, defense, advances or
reimbursements under California Labor Code section 2802 or other applicable law,
under the Indemnification Agreement of April 15, 1995, attached hereto as
Exhibit 2, under any other pre-existing contractual indemnification agreement
between Executive and Genesys, and under Genesys' by-laws or certificate of
incorporation;
b. claims Executive may have for unemployment insurance benefits and
for workers' compensation insurance benefits; and
c. claims under the stock option agreements and stock purchase
agreements, described in section III.A., below.
C. Confidential Information & Genesys Employees and Consultants
------------------------------------------------------------
1. Executive shall, at all times in the future, remain bound by the
Genesys Telecommunications Laboratories Confidential Information and Invention
Assignment Agreement signed by Executive on March 3, 1995, attached hereto as
Exhibit 3.
2. Executive hereby agrees that he will not, without compulsion of
legal process or as required by law, disclose to any third party the fact of
this Agreement or any of the terms of this Agreement. Executive further agrees
that prior to making any such disclosure, he shall provide to Genesys, through
its President or Director of Legal Affairs, written notice of the intended
disclosure not less than three (3) business days prior to making the disclosure.
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<PAGE>
Executive understands that nothing contained herein shall preclude him from
disclosing the Independent Consulting Agreement or acknowledging that he is
serving as a Consultant to Genesys.
3. Executive agrees and understands that the promises and agreements
of section II.C of this Agreement are a material inducement to Genesys to engage
Executive as a Consultant as of July 25, 1998, and to provide Executive with the
benefits provided by this Agreement and that, for the breach thereof, Genesys
will be entitled to pursue its legal and equitable remedies against Executive.
D. Genesys Property Used by Executive
----------------------------------
Executive agrees and understands that after July 31, 1998, Genesys will no
longer provide for Executive's use at Genesys' expense, the items described in
Exhibit 4 hereto. Executive further agrees to do all things requested by
Genesys necessary to transfer legal and financial responsibility of these items
to Executive effective August 1, 1998 and, if Executive does not wish to assume
ongoing legal and financial responsibility for any of these items thereafter, to
return all such items no later than August 28, 1998.
E. Personal Expenses of Executive
------------------------------
Executive agrees that he shall pay to Genesys, no later than December 31,
1998, the total sum of thirty thousand dollars and no cents ($ 30,000.00), which
sum shall be paid by Executive as full reimbursement for amounts previously
charged to Genesys for the personal items, services and expenses of Executive
described in Exhibit 5 hereto, except for the $41,250.00 for Personal Tax and
Planning Services billed to Genesys on April 22, 1998.
III. Mutual Acknowledgements and Agreements
--------------------------------------
A. Stock Matters
-------------
1. As of July 25, 1998, the status of Executive's outstanding options
(the "Options") to purchase shares of Genesys common stock (the "Common Stock")
and Executive's restricted stock purchases (the "Restricted Shares") of Common
Stock is as follows:
<TABLE>
<CAPTION>
Shares Shares Shares
Date of Subject to Exercise/Purchase Vested as of Vested
Number Grant/Issue Type* Grant/Issue Price ($) 7/24/98 as of 1/25/99
------ ----------- ---------- ----------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
333 02/28/97 NQO 134,000 7.50 44,667 61,417
413 02/28/97 NQO 16,000 7.50 5,333 7,333
457 04/15/95 RS 1,206,000 0.0167 1,130,625 1,206,000
</TABLE>
*NQO=Non-QualifiedStockOption
**RS=RestrictedStock
Pursuant to the terms of the existing stock option agreements ("Option
Agreements") evidencing the Options, each of the Options may be exercised at any
time within
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<PAGE>
thirty (30) days following the date on which Executive ceases to
render services to Genesys, either in Executive's capacity as an employee or as
a Consultant pursuant to the Independent Consulting Agreement, with respect to
the number of vested shares of Common Stock for which such Option is, at the
time of Executive's cessation of service, exercisable. The above table
illustrates the maximum number of shares of Common Stock in which Executive will
be vested under each Option as of January 25, 1999 in the event he remains in
service pursuant to the Independent Consulting Agreement through such date.
Each Option is a non-qualified stock option and accordingly, the exercise of
those options will be subject to Executive's satisfaction of all tax withholding
requirements applicable to compensation income Executive will recognize at the
time of each such exercise. The Options will terminate and cease to be
exercisable with respect to any option shares which are unvested as of the
effective date of Executive's cessation of services pursuant to the Independent
Consulting Agreement (including an accelerated or extended date of cessation
pursuant to Section 11 thereof).
Pursuant to the terms of the stock purchase agreement evidencing the
Restricted Shares (the "Purchase Agreement"), the Restricted Shares are subject
to repurchase by Genesys, at the purchase price paid per share, in the event of
Executive's cessation of services with Genesys, either in Executive's capacity
as an employee or as a Consultant pursuant to the Independent Consulting
Agreement prior to vesting in the Restricted Shares. The table above
illustrates the number of Restricted Shares in which Executive is vested as of
July 24, 1998. Provided that Executive continues to provide services to Genesys
for six (6) months as a Consultant pursuant to the Independent Consultant
Agreement, Executive will continue to vest in the Restricted Shares in
accordance with the provisions of the Purchase Agreement and will be fully
vested in the Restricted Shares on October 15, 1998. In accordance with the
Purchase Agreement, Genesys may exercise, within ninety (90) days of the date
Executive ceases providing services to Genesys as a Consultant pursuant to the
Independent Consulting Agreement, its right to repurchase such Restricted Shares
that are unvested as of such date.
2. On Executive's July 24, 1998 termination date as an employee,
Executive immediately ceased to participate in the Genesys Employee Stock
Purchase Plan ("ESPP"). Executive will receive a refund of the amount, if any,
Executive has contributed to the ESPP during the current purchase period and
Executive will not be entitled to purchase any more stock through the ESPP.
3. The only stock rights that Executive has with Genesys are the
rights to acquire or retain the shares of stock as set forth in section III.A.
1., above, of this Agreement.
B. No Disparagement or Admission
-----------------------------
1. Executive and Genesys each hereby agrees that he/it will not make
any negative or disparaging statements or comments about the other, either as
fact or as opinion, to any third party except as required by law. Executive
further agrees that he will not make any negative or disparaging statements or
comments to any third party about Genesys' business, technologies, market
position, employees, performance, services and other similar information
concerning Genesys, either as fact or as opinion, except as requried by law.
Genesys further agrees that it will respond to inquiries about Executive from
prospective employers of Executive
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<PAGE>
consistent with its policies then in effect and shall provide no additional
information without express written consent of Executive.
2. The parties to this Agreement agree that neither the fact nor
any aspect of this Agreement is intended, should be deemed, or should be
construed at any time to be an admission of liability or wrongdoing by either
Executive or by Genesys.
C. Severability
------------
The parties to this Agreement agree that if any provision, or portion
of a provision, of this Agreement is, for any reason, held to be unenforceable,
that such unenforceability will not affect any other provision, or portion of a
provision, of this Agreement and that this Agreement shall be construed as if
such unenforceable provision or portion thereof never had been contained herein.
D. Dispute Resolution
------------------
The parties to this Agreement agree that any and all disputes arising
under or regarding this Agreement shall be settled by final and binding
arbitration in San Francisco, California, in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association then in effect, and judgment upon the award rendered may be entered
in any court with jurisdiction thereof. 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 attorneys' fees and costs, in addition to
any other relief to which the party may be entitled.
E. Effective Date of Agreement
---------------------------
Once signed by the parties, this Agreement shall become enforceable in
all respects; however, the effective date of this Agreement shall be July 25,
1998.
F. Entire Agreement
----------------
The parties to this Agreement agree that it contains the entire
agreement between them with respect to any matters referred to in this
Agreement, and supersedes any and all previous oral or written agreements. Other
than payment of Executive's salary earned through July 24, 1998, no further
payments, benefits or other form of compensation is owed to Executive by Genesys
except as provided pursuant to this Agreement and pursuant to the Independent
Consulting Agreement. The parties to this Agreement further agree that this
Agreement may not be modified or changed, in whole or part, except by another
written agreement signed by Executive and the Chairman of Genesys' Board of
Directors.
G. Attachments to Agreement
------------------------
Genesys and Executive acknowledge that attached to this Agreement as
Exhibits are the following documents:
1. Independent Consulting Agreement;
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<PAGE>
2. Indemnification Agreement, dated April 15, 1995;
3. Genesys Telecommunications Laboratories Confidential Information
and Invention Assignment Agreement signed by Executive on March 3, 1995;
4. List of Property Previously Used by Executive; and
5. List of Personal Items, Services and Expenses of Executive.
Dated: 10/27, 1998 Executive:
/s/ Gregory Shenkman
_____________________________________________
Gregory Shenkman
Dated: 10/21, 1998 Genesys Telecommunications Laboratories, Inc.:
By: /s/ James Jordan
__________________________________________
James Jordan
Chairman, Board of Directors
7 of 7
<PAGE>
EXHIBIT 4
---------
(Property Previously Used by Executive)
1. An office at Genesys' San Francisco headquarters at 1155 Market
Street;
2. A reserved parking place at Genesys' San Francisco headquarters at
1155 Market Street;
3. A telephone number with voice mail at Genesys' San Francisco
headquarters at 1155 Market Street;
4. One (1) pager; and
5. Four (4) cellular telephone(s).
<PAGE>
ANNEX A
INDEPENDENT CONSULTING AGREEMENT
--------------------------------
The following confirms the agreement ("IC Agreement") between Gregory
Shenkman ("Consultant") and Genesys, Incorporated and any successors thereto
("Genesys") with respect to the provision of consulting services by Consultant
to Genesys.
1. Term of Agreement. The term of this IC Agreement shall be six
-----------------
(6) months ("Consulting Period"). The Consulting Period shall commence on July
25, 1998 ("Effective Date"). This IC Agreement shall terminate on January 25,
1999, or an earlier date pursuant to section 10 of this IC Agreement
("Termination Date").
2. Independent Contractor Status. It is the express intention of
-----------------------------
the parties to this IC Agreement that the Consultant is an independent
contractor, and is not an employee, agent, joint venturer or partner of Genesys.
Nothing in this IC Agreement shall be interpreted or construed as creating or
establishing an employment relationship between Genesys and the Consultant.
3. Services. Consultant agrees to provide consulting services
--------
("Services") to Genesys during the Consulting Period which shall be those that
Genesys requests of Consultant from time-to-time by and through Genesys'
President, Board of Directors ("the Board") or by a member of senior management.
Consultant shall be available to perform such Services for up to an average of
twenty (20) hours per week during the Consulting Period. The Services to be
provided by Consultant will include:
a. Doing all things necessary and requested to effect a smooth
transition of all business related matters to the President;
b. Providing advice and guidance with respect to sales,
marketing and strategic matters as requested by the President, the Board and/or
by senior management;
c. Being available during the term of this IC Agreement and
assisting, as requested thereafter, with Genesys' defense in the litigation with
Fereshteh Wadia, with reasonable expenses incurred by Consultant to be paid by
Genesys, until such date as Consultant is dismissed as a defendant from that
litigation; and
d. Being available during the term of this IC Agreement and
assisting, as requested thereafter, in Genesys' litigation with GeoTel
Communications Corporation, with reasonable expenses incurred by Consultant to
be paid by Genesys, until such date as that litigation is fully and completely
resolved.
4. Compensation. For the duration of the consulting period,
------------
Consultant shall be paid fifteen thousand dollars and no cents ($15,000.00) per
month and shall be permitted to continue vesting in non-qualified stock options
that were granted, and in restricted shares that were purchased by Consultant,
in connection with his former employment with Genesys which terminated on July
24, 1998. The foregoing is Consultant's sole compensation for rendering
Services to Genesys and for reserving up to twenty (20) hours per week to render
Services to Genesys. The parties agree that Genesys is not responsible to
reimburse any costs or expenses incurred by Consultant in performing the
Services, except in connection with the GeoTel and Wadia litigations.
5. Services to other Persons/Entities. The parties to this IC
----------------------------------
Agreement understand and agree that the Consultant may, and probably will,
perform consulting services for other persons or entities during the Consulting
Period. However, Consultant agrees that he will not provide services to another
person or entity if such services will interfere with Consultant's ability to
provide Services to Genesys pursuant to this IC Agreement, and Consultant's
obligations as a
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<PAGE>
director of Genesys notwithstanding, or if such services are directly related to
the business in which Genesys is now involved or becomes involved during the
Consulting Period.
6. Employment of Assistants. Should the Consultant, in his sole
------------------------
discretion, deem it necessary to employ assistants to aid him in the performance
of the Services, the parties agree that Genesys will not direct, supervise, or
control in any way such assistants to the Consultant in their performance of
Services. The parties further agree that such assistants are employed solely by
the Consultant, and that he alone is responsible for providing workers'
compensation insurance for his employees, for paying the salaries and wages of
his employees, and for ensuring that all required tax withholdings are made.
Consultant further agrees and warrants that he shall maintain workers'
compensation insurance coverage for his employees and acknowledges that he alone
has responsibility for such coverage.
7. Obligations of the Consultant. Consultant will be responsible
-----------------------------
for any and all taxes due on all payments and benefits provided to him by
Genesys under this IC Agreement, including state, federal and local taxes and
mandatory contributions to government benefit programs.
8. Reporting to Genesys' Facilities. Consultant is not required to
--------------------------------
report to work at any facility of Genesys or during any particular work hours.
Rather, Consultant is free to report or not report to any of Genesys' facilities
as he sees fit and only as necessary to provide Services to Genesys. Except
while Consultant is also a director of Genesys, when Consultant does visit any
of Genesys' facilities in his capacity as a Consultant, he will be required to
sign in and be issued a temporary identification badge like any other non-
employee visitor to a Genesys facility.
9. Obligations re: Confidential Information, Inventions and Non-
------------------------------------------------------------
Solicitation
- ------------
The Confidential Information and Inventions Assignment Agreement,
signed by Consultant in his capacity as a Genesys employee on March 3, 1995, is
hereby renewed by Consultant and shall have the same force and effect as if
executed by Consultant contemporaneous with execution of this IC Agreement; and
for the purpose of this IC Agreement, every reference to employment with Genesys
made in the Confidential Information and Inventions Assignment Agreement shall
be interpreted and construed to mean and refer to the consulting relationship
between Executive and Genesys established by this IC Agreement.
10. Earlier Termination of IC Agreement. This IC Agreement may be
-----------------------------------
terminated:
a. by the Consultant at any time prior to the Termination Date
by giving thirty (30) days' written notice of termination which may be given at
any time for any reason, with or without cause; or
b. by Genesys at any time prior to the Termination Date for the
breach by Consultant of any obligation of sections 5, 6, 7 or 9 of this IC
Agreement.
11. Enforceability of IC Agreement. Consultant agrees that any
------------------------------
dispute in the meaning, effect, or validity of this IC Agreement shall be
resolved in accordance with the laws of the State of California without regard
to the conflict of laws provisions thereof. Consultant further agrees that if
one or more provisions of this IC Agreement are held to be unenforceable under
applicable California law, such provision(s) shall be excluded from this IC
Agreement and the balance of the IC Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
12. Assignment. This IC Agreement shall not be assignable by either
----------
the Consultant or Genesys without the express written consent of the other
party.
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<PAGE>
13. Dispute Resolution. Any controversy between the parties hereto
------------------
involving the construction or application of any terms, covenants, or conditions
of this IC Agreement or any claim arising out of or relating to this IC
Agreement will be submitted to and be settled by final and binding arbitration
in San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. If any
action at law or in equity is necessary to enforce or interpret the terms of
this IC Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and costs in addition to any other relief to which the party may
be entitled.
14. Entire Agreements. This IC Agreement contains the entire
-----------------
understandings and agreements of the parties regarding its subject matters and
can only be modified by a subsequent written agreement executed by the
Consultant and Genesys' Chair of its Board of Directors.
15. Notices. All notices required or given pursuant to this IC
-------
Agreement shall be addressed to Genesys or Consultant at the designated
addresses shown below by registered mail, special delivery, or by courier
service:
a. To Genesys:
----------
Genesys Telecommunications Laboratories, Inc.
1155 Market Street, 11th Floor
San Francisco, CA 94103
Attn: Franklin P. Huang, Director of Legal Affairs
b. To Consultant:
-------------
Gregory Shenkman
65-A Appian Way
South San Francisco, CA 94080
IN WITNESS, the parties have executed this Independent Consulting Agreement to
be effective as of the date set forth above.
CONSULTANT:
Dated: _________, 1998. ------------------------------
Gregory Shenkman
Genesys Telecommunications Laboratories, Inc.:
Dated: __________, 1998 By:
---------------------------
. James Jordan
Chairman, Board of Directors
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<PAGE>
EXHIBIT 10.2
MUTUAL SEPARATION AGREEMENT
---------------------------
This Mutual Separation Agreement ("Agreement") is made between Genesys
Telecommunications Laboratories, Inc. ("Genesys") and John Metcalfe
("Employee").
RECITALS
--------
WHEREAS, Employee's status as an employee of the Company shall cease as of
October 14, 1998 (the "Separation Date"); and
WHEREAS, Employee and Genesys wish to conclude their employment
relationship in such a manner as to resolve any and all disputes that may exist
between them arising from facts or events occurring on or before the Separation
Date; and to preserve the existing goodwill between them; and
THEREFORE, in consideration for the promises and benefits described below,
Genesys and Employee agree as follows:
AGREEMENTS
----------
I. Agreements of Genesys
---------------------
A. Genesys shall engage Employee as an Independent Consultant for six (6)
calendar months commencing on the Separation Date pursuant to the terms of the
Independent Consulting Agreement attached hereto as Exhibit A, provided that
such engagement shall not take effect until this Agreement becomes effective
pursuant to Section III.G., below.
II. Agreement of Employee
---------------------
A. Association with Genesys
------------------------
1. Employee understands that because his employment with Genesys shall
cease on the Separation Date, Employee will not be eligible to participate
thereafter in any benefits provided by Genesys to its employees except that
Employee may elect to continue medical coverage for himself and his eligible
dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"). employee may continue coverage for the time period
available after the Separation Date, pursuant to COBRA.
2. Employee understands that his association with Genesys after the
Separation Date can only be as an Independent Consultant pursuant to the terms
of the Independent Consulting Agreement attached hereto as Exhibit A, and shall
not be that of an employee, agent, joint venturer or partner of Genesys.
1
<PAGE>
B. Release and Waiver of All Claims
--------------------------------
1. Employee agrees that he fully and forever discharges, waives and
releases any and all claims and causes of action of any kind that he now knows
he has or may in the future have against Genesys, including any of its officers,
directors, agents, employees, affiliates, representatives, predecessors,
successors and assigns, arising out of or relating in any way to his employment
with Genesys and the termination thereof, including but not limited to claims of
wrongful discharge, breach of contract, breach of the covenant of good faith and
fair dealing, violation of public policy, defamation, personal injury,
infliction of emotional distress, claims under Title VII of the 1964 Civil
Rights Act, as amended, the California Fair Employment and Housing Act, the
Equal Pay Act of 1963, the California Labor Code including Section 1197.5
thereof, the Age Discrimination in Employment Act of 1967, as amended, the
Americans with Disabilities Act, the Civil Rights Act of 1866, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any other
local, state and federal laws and regulations relating to employment, except any
claims Employee may have for unemployment and workers' compensation insurance
benefits.
Notwithstanding anything above, Employee does not waive his right to
indemnification from Genesys for conduct taken in the course and scope of his
employment to the fullest extent provided for in the California Labor Code, or
other indemnification agreement between Employee and Genesys. For the purposes
of determining the course and scope of employment, Employee will be deemed to
have been an employee until October 14, 1998. As a condition precedent to
maintaining any action against Employee arising from or relating to any event
occurring on, or before October 14, 1998, Genesys, and/or its directors,
officers and agents shall advance all attorneys fees and costs Employee requests
for the purpose of litigating/arbitrating Employee's case against Genesys,
and/or its directors, officers or agents. Genesys shall have a right to recover
the advanced fees and costs in the event a trier of fact determines Employee's
alleged conduct was not in the course and scope of his employment.
2. Employee agrees that the fully and forever waives any and all
rights and benefits conferred upon them by the provisions of Section 1542 of the
Civil Code of the State of California, which states as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
Employee agrees and understands that if, hereafter, he discovers facts different
from or in addition to those which he now knows or believes to be true, that the
waivers of this Agreement shall be and remain effective in all respects
notwithstanding such different or additional facts or the discovery thereof.
C. Confidential Information & Genesys Employees
--------------------------------------------
1. Employees shall remain bound by, and as set forth in, the Genesys
Telecommunications Laboratories Confidential Information and Invention
Assignment Agreement
2
<PAGE>
signed by Employee on June 9, 1997, a true and correct copy of which is attached
as Exhibit B hereto. The non-solicitation provision, however, is superseded by
IIC3 below.
2. Employee shall return to Genesys on the Separation Date, all Company
Information, including but not limited to customer lists and other customer
information, notebooks, notes, manuals, memoranda, records, diagrams,
blueprints, bulletins, formulas, reports, business and operating plans, computer
programs, or other data or memorializations of any kind, as well as any Genesys
property or equipment (including, without limitation, security badges,
[computers, ] phones, charge cards, etc.), that Employee has in his possession
or under his control. Employee further agrees and understands that Employee is
not entitled or authorized to keep any portions, summaries or copies of Company
Information, and that Employee is under a continuing obligation to keep all
Company Information confidential and not to disclose it to any third party in
the future. Employee understands that the term "Company Information" includes,
but is not limited, the following:
. Trade secret, information, matter or thing of a confidential, private
or secret nature, connected with the actual or anticipated products,
research, development, financials, operation or business of Genesys or
its customers, including information received from third parties under
confidential conditions; and
. Other technical, scientific, marketing, business, product development
or financial information, the use or disclosure of which might
reasonably be determined to be contrary to the interests of Genesys.
3. During the term of the Independent Consulting Agreement, and for one
year thereafter, Employee shall not solicit any employee to leave Genesys'
employ.
4. Employee hereby agrees that he will not, without compulsion of legal
process, disclose to any third party the fact of this Agreement or any the terms
of this Agreement, including the amounts referred to herein, either by specific
dollar amounts or by number of "figures" or otherwise, except that he may
disclose such information to his spouse and to his attorneys or accountants but
with respect to the latter, only to the extent such disclosure is necessary to
effect the purposes for which Employee has consulted such attorneys or
accountants. Employee agrees that in connection with any disclosure permitted
hereunder, Employee shall cause such third party to whom disclosure has been
made, including his spouse, to agree to comply with this covenant of
confidentiality and non-disclosure, such breach shall be deemed to have been
committed by Employee. Employee understands that nothing contained herein shall
preclude him from acknowledging that he is serving as a Consultant to Genesys.
5. Employee agrees and understands that the promises and agreements of
Section II.C of this Agreement are a material inducement to Genesys to engage
Employee as a Consultant after the Separation Date, and to provide Employee with
the benefits provided by this Agreement and that, for the breach thereof,
Genesys will be entitled to pursue its legal and equitable remedies against
Employee, including, without limitation, the right to terminate the Independent
Consulting Agreement and benefits provided thereunder as well as the benefits
provided by this Agreement and/or seek injunctive relief, provided, however,
this Agreement will
3
<PAGE>
remain in full force and effect. In the event Genesys terminates the benefits
set forth in this Agreement pursuant to this paragraph, and a trier of fact
thereafter determines that Employee did not breach this Agreement, then Genesys
shall pay Consultant three times the expenses, damages, and attorneys fees
incurred while defending himself, in addition to whatever other relief the trier
of fact awards.
II. Mutual Acknowledgments and Agreements
-------------------------------------
A. Stock Matters
-------------
1. As of the Separation Date, the status of Employee's outstanding
stock options to purchase shares of Genesys common stock (the "Options") is as
follows:
<TABLE>
<CAPTION>
Shares Vested and Shares Vested and
Date of Shares Subject Exercisable as of Exercisable as of
Grant Type* to Grant Exercise Price October 14, 1998 April 14, 1999
----------- ---------- --------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
6/13/97 ISO 26,664 15.00 (less $2.00 5,925 8,888
bonus per share on
exercise)
6/13/97 NQ 223,336 Same as above 77,408 105,695
</TABLE>
* ISO = Incentive Stock Option
NQ = Non-Qualified Stock Option
Pursuant to the terms of the existing stock option agreements ("Option
Agreements") for the Options and the provisions of the Genesys 1997 Stock
Incentive Plan (the "Plan") to which Employee's Options are subject, and
Employee's offer letter, each of the Options may be exercised at any time within
thirty (30) days following the date on which Employee ceases to render services
to Genesys, either in Employee's capacity as an employee or as a consultant
pursuant to the Independent Consulting Agreement, with respect to the number of
shares for which such Option is, at the time of Employee's cessation of service,
exercisable and vested, including, without limitation, the $2.00 exercise bonus
awarded at the time Employee exercises his options. The above table illustrates
the maximum number of shares of Common Stock in which Employee will be vested as
of April 14, 1999 in the event he/she remains in service pursuant to the
Independent Consulting Agreement through such date. However, to the extent the
Options are incentive stock options within the meaning of Section 422 of the
Internal Revenue Code, such options will cease to qualify for favorable tax
treatment as incentive stock options if they are exercised on a date later than
three (3) months following the Separation Date. Accordingly, to the extent
Employee's incentive stock options are not exercised on or before January 14,
1999, the incentive stock options will be treated as non-qualified or non-
statutory stock options after such date, and the exercise of those options will
be subject to Employee's satisfaction of all tax withholding requirements
applicable to compensation income employee will recognize at the time of each
such post-January 14, 1999 exercise. The Options will terminate and cease to be
exercisable with respect to any option shares which are unvested as of the
effective date of Employee's cessation of service pursuant to the Independent
Consulting Agreement. Employee's stock option agreements shall continue to
remain in effect while
4
<PAGE>
Employee continues to be an employee of Genesys and during the term of the
Independent Consulting Agreement attached as Exhibit A to this Agreement.
2. On the date of business of Employee's October 14, 1998
termination date as an employee, Employee immediately shall cease to participate
in the Genesys Employee Stock Purchase Plan ("ESPP"). Employee will receive a
refund of the amount, if any, Employee has contributed to the ESPP during the
current purchase period and Employee will not be entitled to purchase any more
stock through the ESPP.
3. Employee shall be permitted to purchase from Genesys at Genesys'
cost, and at Employee's sole discretion, Employee's phone and personal computer.
B. Entire Agreement
----------------
The parties to this Agreement agree that it contains the entire
agreement between them with respect to any matters referred to in this
Agreement, and supersedes any and all previous oral or written agreements. The
parties to this Agreement further agree that the Agreement may not be modified
or changed, in whole or part, except by another written agreement signed by
Employee and Genesys' President.
C. No Disparagement or Admission
-----------------------------
1. Employee and Genesys each hereby agree that they will not make any
negative or disparaging statements or comments about the other. Notwithstanding
anything written above, this provision shall not hinder Employee's duties and
responsibilities to Employee's future employers. Genesys further agrees that it
will respond to inquiries about Employee from prospective employers of Employee
consistent with its policies then in effect and shall provide no additional
information without express written consent of Employee. Employee consents until
further notice to have all inquiries directed to Genesys board of director Greg
Shenkman.
2. The parties to this Agreement agree that neither the fact nor any
aspect of this Agreement is intended, should be deemed, or should be construed
at any time to be an admission of liability or wrongdoing by either the Employee
or Genesys.
D. Severability
------------
The parties to this Agreement agree that if any provision, or portion
of a provision, of this Agreement is, for any reason, held to be unenforceable,
that such unenforceability will not affect any other provision, or portion of a
provision, of this Agreement and that this Agreement shall be construed as if
such unenforceable provision or portion had never been contained herein.
E. Dispute Resolution
------------------
The parties to this Agreement agree that any and all disputes arising
under or regarding this Agreement and/or the Plan (to the extent such dispute
arising under the Plan cannot otherwise be resolved through the use of the
claims procedure set forth in the Plan) shall
5
<PAGE>
be settled by final and binding arbitration in San Francisco, California, in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association then in effect, and judgment upon the award
rendered may be entered in any court with jurisdiction thereof. 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 attorneys' fees
and costs, in addition to any other relief to which the party may be entitled.
F. Time to Consider & Sign Agreement
---------------------------------
The parties to this Agreement agree that Employee may have twenty-one
(21) days after receipt of this Agreement within which to review and consider,
discuss with an attorney of his own choosing, and decide whether or not to sign
this Agreement. However, none of the benefits provided by this Agreement will
be provided to Employee until this Agreement becomes effective pursuant to
Section III.G., below; and no Independent Consulting Agreement shall become
effective until this Agreement becomes effective pursuant to Section III.G.,
below.
G. Opportunity to Revoke & Effective Date of Agreement
---------------------------------------------------
The parties to this Agreement agree that it will not become effective
until expiration of the seventh (7th) day after Employee signs it, provided that
Employee does not revoke it during those seven (7) days; and that for a period
of seven (7) days after Employee signs this Agreement, he may revoke it.
Employee agrees and understands that if he decides to revoke this Agreement
after he signs it, he can do so only by delivering a written notification of his
revocation, no later than the seventh day after he signed this Agreement, to:
Genesys Telecommunications Laboratories, Inc.
1155 Market Street, 11th Floor
San Francisco, CA 94013
Attn: Director of Legal Affairs
If Employee does not sign this Agreement, or if he signs it and then chooses to
revoke it within seven (7) days after he signed it, he will not be entitled to
not be provided any of benefits of this Agreement. Employee understands that
the benefits provided by this Agreement will not be received by Employee until
this Agreement becomes effective.
H. Attachments to Agreement
------------------------
Genesys and Employee Acknowledge that attached to this Agreement are
the following documents:
1. Independent Consulting Agreement as Exhibit A.
2. Employee Agreement: Proprietary Information and Inventions signed
by Employee as Exhibit B.
6
<PAGE>
I. Fax Signatures & Counterparts
-----------------------------
Fax signatures to this Agreement shall be considered binding original
signatures, and this Agreement may be executed in counterparts, each of which
shall be considered together as one original.
IN WITNESS, the parties have executed this Manual Separation Agreement as
of the date set forth below.
Date: September 11, 1998 Employee:
/s/ John Metcalfe
_____________________________________
John Metcalfe
Date: September 11, 1998 Genesys Telecommunications Laboratories, Inc.:
By: /s/ Michael J. McCloskey
__________________________________
Michael J. McCloskey
President
7
<PAGE>
EXHIBIT A
INDEPENDENT CONSULTING AGREEMENT
--------------------------------
The following confirms the agreement ("IC Agreement") between John Metcalfe
("Consultant") and Genesys Telecommunications Laboratories, Inc. ("Genesys")
with respect to the provision of consulting services by Consultant to Genesys.
1. Term of Agreement. The term of this IC Agreement shall be six
-----------------
(6) calendar months ("Consulting Period"). The Consulting Period shall commence
on October 15, 1998 ("Effective Date"), provided that a Mutual Separation
Agreement between Genesys and Consultant is effective. This IC Agreement shall
terminate on the close of business on April 14, 1999 or an earlier date pursuant
to Section 11 of this IC Agreement ("Termination Date").
2. Independent Contractor Status. It is the express intention of the
-----------------------------
parties to this IC Agreement that the Consultant is an independent contractor,
and is not an employee, agent, joint venturer or partner of Genesys. Nothing in
this IC Agreement shall be interpreted or construed as creating or establishing
an employment relationship between Genesys and the Consultant.
3. Services. Consultant agrees to provide consulting services
--------
("Services") to Genesys during the Consulting Period which shall be those that
Genesys requests of Consultant from time-to-time by and through Genesys'
President or his designees. Consultant shall be available to perform such
Services for up to twenty-four (24) hours per week during the Consulting Period.
The time and dates in which Consultant's services are provided are at the
reasonable discretion of the Employee. The Services to be provided by Consultant
will consist of working closely with the President to transition all matters
previously handled by Consultant, providing advice on marketing and strategic
matters. Such services include:
. That you effect a smooth transition of all business related
matters to your manager or replacement, as designated by
Genesys;
. That you be available to provide Services in person, rather
than only by telephone or written correspondence, for the first
month of this IC Agreement;
. That you be available via telephone for the entire term of this
IC Agreement.
4. Services to other Persons/Entities. The parties to this IC
----------------------------------
Agreement understand and agree that the Consultant may, and probably will,
perform services for other persons or entities during the Consulting Period.
However, Consultant agrees that during the term of this IC Agreement he will not
provide to GeoTel Communications Corporation, Northern Telecom, Nabnasset
Corporation or Melita Corporation without the prior written consent of Genesys,
which consent will not be unreasonably withheld.
1
<PAGE>
5. Employment of Assistants. Should the Consultant, in his sole
------------------------
discretion, deem it necessary to employ assistants to aid him in the performance
of the Services, the parties agree that Genesys will not direct, supervise, or
control in any way such assistants to the Consultant in their performance of
Services. The parties further agree that such assistants are employed solely by
the Consultant, and that he alone is responsible for providing workers'
compensation insurance for his employees, for paying the salaries and wages of
his employees, and for ensuring that all required tax withholdings are made.
Consultant further agrees and warrants that he shall maintain workers'
compensation insurance coverage for his employees and acknowledges that he alone
has responsibility for such coverage.
6. Reporting to Genesys' Facilities. Consultant is not required to
--------------------------------
report to work at any facility of Genesys or during any particular work hours.
Rather, Consultant is free to report or not report to any of Genesys' facilities
as he sees fit and as necessary to provide Services to Genesys. When Consultant
does visit any of Genesys' facilities, he will be required to sign in and be
issued a temporary identification badge like any other non-employee visitor to a
Genesys facility.
7. Compensation. For the duration of the consulting period, Consultant
------------
shall be paid $15,000 per month, and shall be permitted to continue vesting in
restricted shares and stock options that were purchased by Consultant or granted
to Consultant in connection with his former employment with Genesys (including,
without limitation, the $2 bonus per share awarded at the time of exercise
pursuant to the offer letter given Consultant before Consultant became a Genesys
employee). Genesys shall also pay Consultant's COBRA premiums directly to the
COBRA provider of up to $366.00 per month for medical benefits and $56.21 per
month for dental benefits during the term of this IC Agreement. The foregoing
is Consultant's sole compensation for rendering Services to Genesys. The
parties agree that Genesys is not responsible to reimburse any costs or expenses
incurred by Consultant in performing the Services but Consultant need not take
any action requiring that he incur expenses until Genesys has agreed to
reimburse him for those expenses. Consultant's stock option agreements shall
continue to remain in effect during the term of this Independent Consulting
Agreement, including without limitation, provisions relating to a change of
control of Genesys.
Consultant will be responsible for any and all taxes due on all
benefits provided by Genesys under this IC Agreement, and if any tax authority
imposes any tax, interest or penalty liability on Genesys for failing to
withhold from any payment made by Genesys under this IC Agreement, then
Consultant will indemnify Genesys for such tax, interest or penalty amounts.
8. Obligations re: Confidential Information.
----------------------------------------
a. "Confidential Information" means any information, technical data,
or know-how including, but not limited to, Genesys' research, products, product
features, software, services, development, inventions, processes, designs,
drawings, engineering, marketing plans, customers, prospective customers,
finances, employee information, organizational structure information, disclosed
by Genesys, either directly or indirectly, in writing, orally or by drawings or
inspection of equipment or facilities. Confidential Information does not include
information, technical data or know-how which (A) is in the Consultant's
possession at the time of disclosure as evidenced by the Consultant's files and
records prior to
2
<PAGE>
the earliest time of Consultant's interaction with Genesys, as either an
employee or consultant of Genesys or otherwise; or (B) before or after it has
been disclosed to the Consultant, is part of the public knowledge of literature,
not as a result of any action or inaction of the Consultant or unauthorized
disclosure by any other party; or (C) is approved for release to the general
public by written authorization of Genesys.
b. The Consultant agrees not to use Confidential Information for its
own use, for the use of any other company, individual or entity, or for any
purpose except to perform the specific assigned duties for Genesys. The
Consultant agrees not to use Genesys' name or logo in any advertising nor as a
reference for any promotional purposes without the prior written consent of
Genesys. The Consultant will not present themselves as employees or authorized
representatives of Genesys', except as independent consultants.
c. The Consultant agrees not to disclose Genesys' Confidential
Information to any third party. The Consultant agrees that is shall protect the
confidentiality of all Confidential Information and take all necessary steps to
prevent disclosure to or misuse of the Confidential Information and to prevent
it from falling into the public domain or the possession of any unauthorized
party. The Consultant agrees that during and after the term of this Agreement is
shall not solicit or accept Confidential Information, such as lists of
employees, customers, telephone numbers, or organizational charts, from current
or prior employees, temporary or contract employees, vendors, or customers of
Genesys.
d. The Consultant agrees not to use Genesys' name or logo in any
advertising nor as a reference for any promotional purposes without the prior
written consent of Genesys.
e. Because of the unique and proprietary nature of Confidential
Information, the Consultant acknowledges that the breach of any of its
obligations under this provision is likely to cause or threaten irreparable harm
to Genesys and, accordingly, the Consultant agrees that in such event, any
remedies at law for a breach will be inadequate and therefore Genesys shall be
entitled to seek equitable relief to protect its interests, including but not
limited to preliminary and permanent injunctive relief, as well as money
damages. Nothing stated herein shall be construed to limit any other remedies
available to Genesys. In the event Genesys seeks equitable relief pursuant to
this section, and a trier of fact determines that such relief is not warranted,
Genesys shall pay Consultant three times the expenses, damages, and attorneys'
fees incurred while defending himself, in addition to whatever other relief the
trier of fact awards.
9. Non-solicitation of Genesys Employees. During the Consulting Period
-------------------------------------
and for one year thereafter, Consultant shall not solicit any employee of
Genesys to leave Genesys for any reason.
10. Earlier Termination of I C Agreement. This IC Agreement may be
------------------------------------
terminated:
3
<PAGE>
a. by the Consultant at any time prior to the Termination Date by
giving thirty (30) days' written notice of termination which may be given at any
time for any reason, with or without cause; or
b. by Genesys at any time prior to the Termination Date for the
breach by Consultant of any obligation of sections 4, 8 or 9 of this IC
Agreement.
11. Enforceability of IC Agreement. Consultant agrees that any dispute
------------------------------
in the meaning, effect or validity of this IC Agreement shall be resolved in
accordance with the laws of the State of California without regard to the
conflict of laws provision thereof. Consultant further agrees that if one of
more provisions of this IC Agreement are held to be unenforceable under
applicable California law, such provision(s) shall be excluded from this IC
Agreement and the balance of the IC Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
12. Assignment. This IC Agreement shall not be assignable by either the
----------
Consultant or Genesys without the express written consent of the other party.
13. Dispute Resolution. Any controversy between the parties hereto
------------------
involving the construction or application of any terms, covenants, or conditions
of this IC Agreement or any claim arising out of or relation to this IC
Agreement will be submitted to and be settled by final and binding arbitration
in San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. If any
action at law or in equity is necessary to enforce or interpret the terms of
this IC Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and costs in addition to any other relief to which the party may
be entitled.
14. Entire Agreements. This IC Agreement contains the entire
-----------------
understandings and agreements of the parties regarding its subject matters and
can only be modified by a subsequent written agreement executed by the
Consultant and Genesys' President.
15. Notices. All notices required or given pursuant to this IC Agreement
-------
shall be addressed to Genesys or Consultant at the designated addresses shown
below by registered mail, special delivery, or by certified courier service:
To Genesys:
-----------
Genesys Telecommunications Laboratories, Inc.
1155 Market Street, 11th Floor
San Francisco, CA 94103
Attn: Director of Legal Affairs
To Consultant:
--------------
John Metcalfe
12933 Tripoli Court
Los Altos Hills, CA 94022
4
<PAGE>
Fax signatures to this IC Agreement shall be considered binding original
signatures, and this IC Agreement may be executed in counterparts, each of which
shall be considered together as one original.
IN WITNESS, the parties have executed this Independent Consulting Agreement
to be effective as of the date set forth above.
CONSULTANT:
Dated: 11 September 1998 ____________________________________________
John Metcalfe
Genesys Telecommunications Laboratories, Inc.
Dated: 11 September 1998 By:_________________________________________
Michael J. McCloskey
President
5
<PAGE>
EXHIBIT 10.3
December 9, 1998
Mr. Ori Sasson
11 El Sueno
Orinda, CA 94563
Re: Offer of Employment
-------------------
Dear Ori:
On behalf of Genesys Telecommunications Laboratories, Inc. (the "Company"), I am
pleased to offer employment with the Company on the following terms:
1. You ("Executive") shall be employed as President and Chief Executive
Officer of the Company reporting to the Board of Directors ("the Board")
with a start date of December 9, 1998, and while so employed, Executive
shall also serve as a director on the Board. This offer and Executive's
employment is contingent upon:
(a) Receipt of an executed copy of the Company's form of confidential
information and invention assignment agreement (which is attached);
(b) Receipt of an executed copy of this letter; and
(c) Receipt of proof of right to work in the United States.
2. Executive will be paid a Salary at a monthly rate of $25,000, which is an
annualized amount of $300,000, paid in accordance with the Company's normal
semi-monthly payroll practice ("Base Salary"). Executive will also be
eligible for a bonus for each fiscal year based upon achievement of certain
milestones ("Bonus") targeted at 40% of his Base Salary. As such, during
the Company's fiscal year ended June 30, 1999, Executive will be eligible
for a bonus targeted at $60,000. The Base Salary and any Bonus collectively
shall be referred to as "Salary."
3. Executive will be granted an option to purchase 900,000 shares of the
Company's Common Stock at a purchase price equal to the fair market value
of such shares on the date the options are approved by the Board. The
options will vest over a period of four years beginning with Executive's
date of employment at a monthly rate of 1/48th of the shares at the end of
each month thereafter.
4. Executive will be eligible to participate in the company's standard package
of benefits made available to all regular employees, which includes
medical, dental, life and disability insurance, a flexible spending
program, and Employee Stock Purchase Plan (ESPP), and a 401(k) plan. Please
refer to the enclosed benefit summary for further information on Company's
suite of benefits. Executive also will be eligible to receive all other
benefits generally made available to executive employees of the Company. In
addition, the Company shall obtain a policy insuring Executive's life for
$10 million
<PAGE>
Page 2
dollars, subject to availability of an insurance policy at a reasonable
cost, and shall pay the premiums for said life insurance policy, of which
Executive shall have sole right to designate the beneficiary(ies). Company
will also obtain a disability policy that is reasonably acceptable to
Company and Executive.
5. At all times during Executive's employment, Executive shall devote his full
time and best efforts to Executive's job duties and responsibilities at the
Company and shall not engage in any other activities which would conflict
with the best interests of the Company except that:
(a) Executive initially may remain on the Board of Directors for each of
the [four] companies for which he is currently a director provided that he makes
reasonable efforts to reduce his obligations to said companies as promptly as
practicable without impairing his prior commitments to said companies; and
(b) Executive may engage in other activities as the Board shall agree,
which agreement shall not be unreasonably withheld.
6. At all times, Executive's employment with the Company is "at-will", which
means that employment with the Company may be terminated at any time by
either Executive or the Company with or without cause or justification,
subject only to the entitlements and liabilities set forth in 6(a) or 6(b)
or 6(c), below, and the conditions of section 7, below; and upon any
termination of Executive's employment, Executive agrees to immediately
resign as an officer and as a director of Company unless requested by the
Board to remain as a director. Although other terms and conditions of
employment, including job duties and title, compensation and benefits, may
be changed by the company at any time, the at-will nature of an employment
relationship shall not change.
(a) Involuntary Termination.
-----------------------
In the event that Executive's employment is terminated by the Company,
or is Constructively Terminated, the total entitlements of Executive
and the total liabilities of the Company to Executive shall be two
years of Salary and acceleration of two years of stock option vesting
with one year to exercise such options. In addition, Company shall
make available COBRA continuation for Executive and his dependents to
continue health and life insurance coverages for so long as permitted
by law, with the first 18 months of such COBRA payments paid for by
Company.
For the purpose of section 6 of this Agreement, Executive's employment
will be "Constructively Terminated" if:
(i) The Board shall have changed Executive's job title such
that he no longer holds the title of Chief Executive Officer of the
Company;
(ii) The Board shall have changed Executive's job duties and
responsibilities so as to be inconsistent with the title of Chief
Executive Officer;
(iii) Executive ceases to report directly to the entire Board;
(iv) Executive's Salary is reduced by 10% or more without
Executive's written consent; or
(v) The Company moves its headquarters more than 40 miles
outside San Francisco, California.
(b) Termination Due to Death or Disability.
--------------------------------------
<PAGE>
Page 3
In the event of Executive's death, or in the event that Executive is
unable due to mental or physical disability to perform the essential
functions of his position for 90 consecutive days, Executive's
employment shall terminate, and the total entitlements (in addition to
any benefits provided by the insurance policies provided for above) of
Executive or his estate, whichever applies, and the total liabilities
of the Company to Executive or his estate, whichever applies, shall be
acceleration of two years of stock option vesting with one year to
exercise such options. In addition, Company shall make available COBRA
continuation for Executive and his dependents to continue health and
life insurance coverages for so long as permitted by law, with the
first 18 months of such COBRA payments paid for by Company. In the
event Company elects to terminate Executive for a disability, Company
shall provide Executive with written notice of such proposed
termination, and if Executive is able to resume his duties full time
within 30 days of such notice, then such termination shall not be
effected.
(c) Termination within One year after Corporate Transaction.
-------------------------------------------------------
In the event that Executive's employment is terminated by the Company,
or is Constructively Terminated, within one year of the date of a
Corporate Transaction, the total entitlements of Executive and the
total liabilities of the Company to Executive shall be two years of
Salary and full acceleration of all unvested stock options with one
year to exercise such options. In addition, Company shall make
available COBRA continuation for Executive and his dependents to
continue health and life insurance coverages for so long as permitted
by law, with the first 18 months of such COBRA payments paid for by
Company.
For the purpose of section 6 of this Agreement, a "Corporate
Transaction" means the sale of all or substantially all of the
Company's assets, the merger or consolidation of the Company or the
consummation of a tender offer or other share transaction (or any
series of such transactions) pursuant to which the shareholders of the
Company immediately prior to the closing of such merger or
consolidation (or series of transactions) retain by virtue of their
share position in the Company prior to the transaction(s) less than
50% of the voting securities of the company surviving to the business
of the Company following such transactions.
(d) Voluntary Termination within 6 months after Corporate Transaction.
-----------------------------------------------------------------
In the event that Executive elects to resign or otherwise separate
from the Company within 6 months after the date of a Corporate
Transaction, the entitlements of Executive and the total liabilities
of the Company to Executive shall be two years of Salary and
acceleration of two years of stock option vesting with one year to
exercise such options. In addition, Company shall make available COBRA
continuation for Executive and his dependents to continue health and
life insurance coverages for so long as permitted by law, with the
first 18 months of such COBRA payments paid for by Company.
7. As a condition of receiving any Salary and continued stock option vesting
under section 6 of this Agreement,
(a) Executive shall be required to execute in favor of the Company and
deliver a waiver and general release of any and all claims, known and
unknown, in such form as the Board
<PAGE>
Page 4
shall specify. The parties shall also enter into a mutually acceptable non-
disparagement agreement.
(b) Executive shall, for a period equivalent to the period of time on which
the post-termination Salary payment is based, hold himself available to
consult with Company in a manner requested by the Board and shall not
(except for positions, ownerships and relationships in existence and
disclosed to the Board prior thereto):
(i) own, engage in, have any substantial interest in, advise or
provide any services or labor to any business that is in any material
way directly competitive with the business that is conducted by Company
at the time that Executive's employment terminated; or
(ii) contact, solicit or call upon any customer or supplier of
Company on behalf of any person or entity other than Company for the
purpose of selling, providing or performing any products or services
directly competitive with those provided or performed by Company; or
(iii) induce or attempt to induce any person to terminate such
person's employment relationship with Company.
8. Executive represents and warrants that his acceptance of this offer,
and employment with the Company, does not breach any pre-existing obligation
owed by Executive to any other person or entity. Executive understands that
Company is hiring him solely for the purpose of engaging his skill and
expertise, and not to acquire any trade secret, proprietary or confidential
information belonging to any other person or entity; and that in performing
under this Agreement, Executive is prohibited by Company from disclosing any
such trade secret and proprietary or confidential information to Company.
9. Dispute Resolution; Arbitration in Lieu of Civil Litigation.
(a) Company and Executive (hereafter "the Parties") hereby agree that any
and all controversies, claims or disputes that Company may have with
Executive or that Executive may have with Company, or any of its
employees, officers, directors, agents or assigns, which arise out of
the Executive's employment with Company, shall be resolved through
final and binding arbitration in accordance with National Rules for the
Resolution of Employment Disputes of the American Arbitration
Association. The arbitration shall be conducted in San Francisco,
California before a single arbitrator mutually agreed by Company and
Executive; provided that if they are unable to agree on a single
arbitrator within 30 days of the demand by either party for
arbitration, an arbitrator shall be designated by the San Francisco
Office of the American Arbitration Association.
(b) Such controversies, claims and disputes include, without limitation,
any controversy, claim or dispute relating to Executive's employment or
the termination thereof, claims for breach of contract or breach of the
covenant of good faith and fair dealing, infliction of emotional
distress, defamation and any claims of discrimination, harassment or
other claims under the California Fair Employment and Housing Act,
Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans With Disabilities Act, the Employee
Retirement Income Securities Act, the Family Care and Medical Leave
Act, and any other federal, state or local law or regulation now in
existence or hereinafter enacted and as amended from time to time
regarding employment, termination of employment and the terms and
conditions of employment, including the California Labor Code.
<PAGE>
Page 5
(c) The only controversies, claims or disputes not covered by this covenant to
arbitrate, are those regarding Executive's entitlement to benefits under
the unemployment insurance or workers' compensation laws.
(d) The Company will advance the cost of the arbitration filing, hearing fees
and the arbitrator. Each party will bear its own attorneys' fees, and the
arbitrator will not have authority to award attorneys' fees unless a
statutory section at issue in the dispute authorizes the award of
attorneys' fees to the prevailing party, in which case the arbitrator shall
have the authority to make such award as permitted by the statute in
question. The arbitrator will have the authority to award costs of the
arbitration filing, hearing fees and the arbitrator to the prevailing
party.
(e) The Parties understand and agree that arbitration shall be instead of any
civil litigation. This means that each party is waiving any right to a jury
trial, and that the arbitrator's decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having
jurisdiction thereof.
10. This Agreement and the Plan of Reorganization by and among the Company,
Company's subsidiary and Plato Software Ltd. reflect the full and complete
understanding and agreement between Executive and the Company regarding
Executive's employment relationship with the Company, and it shall
supersede any and all prior written or oral negotiation, offer or agreement
regarding Executive's employment relationship with the Company. This
Agreement cannot be changed or modified in any respect except by another
written agreement signed by the Chairman of the Board of Directors and by
Executive.
To indicate your acceptance of the Company's offer, please sign and date this
letter in the space provided below and return it to me. This offer will remain
open for 5 calendar days from the date of this letter. A duplicate original is
enclosed for your records.
Ori, we very much look forward to working with you.
Very truly yours,
/s/ Gregory Shenkman
Gregory Shenkman
Chairman
================================================================================
Agreed and accepted:
/s/ Ori Sasson
- --------------------------------- ----------------------
Ori Sasson Anticipated Start Date
Please remit by fax, followed by mail, a signed copy of this letter, indicating
your acceptance, to Human Resources whose confidential fax number is 415/437-
1287. No cover is needed.
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement (this "Agreement") has been entered
into, effective as of December 11, 1998, between GENESYS TELECOMMUNICATIONS
LABORATORIES, INC., a California corporation (the "Company"), and MICHAEL J.
MCCLOSKEY ("Executive") to provide for the employment of Executive on the terms
and conditions set forth herein.
WHEREAS, Executive currently serves as the President and Chief Financial
Officer of the Company;
WHEREAS, the Company wishes to assure itself of the continued employment
efforts of Executive for the period provided in this Agreement, and Executive is
willing to continue to serve in the employ of the Company on a full-time basis
for said period upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
intending to be legally bound, the Company and Executive agree as follows:
1. Employment. The Company hereby employs Executive, and Executive hereby
- -- ----------
accepts such employment by the Company, upon the terms and conditions herein
provided.
2. Term of Employment. Executive's employment with the Company pursuant to
- -- ------------------
this Agreement shall commence on December 11, 1998 and shall continue through
the earlier to occur of (i) June 30, 1999 (the "Final Termination Date") or (ii)
the date on which the Company hires one or more individuals who individually or
collectively fulfill the responsibilities of the positions of (A) vice
president-finance and chief financial officer and (B) vice president-worldwide
sales, or (iii) the date on which such employment is otherwise terminated. The
period during which this Agreement continues in effect shall constitute the
"Employment Period".
3. Positions and Responsibilities.
- -- ------------------------------
(a) Position. During the Employment Period, Executive shall serve as the
--------
Company's President, reporting directly to the Chief Executive Officer
("CEO") of the Company.
(b) Duties. During the Employment Period, and subject to the control of the
------
CEO, Executive shall have active management and supervision over the
operations and affairs of the Company and shall perform such other
executive and/or administrative duties consistent with the office of
President as from time to time may be assigned to Executive by the CEO, but
subject to the conditions in this Agreement. During the Employment Period,
Executive shall devote substantially Executive's full business time and
attention to, and exert Executive's best efforts in, the performance of
Executive's duties hereunder, so as to promote the business of the Company.
Executive's principal place of business shall be at the Company's corporate
offices in San Francisco, California.
<PAGE>
4. Compensation. For all services rendered by Executive pursuant to this
- -- ------------
Agreement, the Company shall pay Executive, and Executive agrees to accept, the
salary and other compensation and benefits described below in this Section 4.
(a) Salary. The Company shall pay Executive an annual base salary
------
equal to Executive's base salary in effect as of December 1, 1998 ("Base
Salary"), payable at periodic intervals in accordance with the Company's
payroll practices for salaried employees.
(b) Health Care. During the Employment Period, Executive shall be
-----------
eligible to participate in any health insurance programs and medical plans
available to officers or employees of the Company.
(c) Participation in Benefit and Equity Compensation Plans. During the
------------------------------------------------------
Employment Period, Executive shall be eligible to receive all benefits,
including those under equity participation and bonus programs, to which key
employees are or become eligible under such plans or programs as may be
established by the Board.
(d) 401(k) Plan Benefits. In addition to the other benefits to which
--------------------
Executive shall be entitled to under this Agreement, Executive shall be
entitled to continue to participate in the Company's 401(k) Plan.
5. Vacation. During the Employment Period, Executive shall be entitled to
- -- --------
vacation in accordance with the Company policy in effect for executive officers.
6. Indemnification. The Company shall maintain indemnification of Executive
- -- ---------------
pursuant to the provisions of the Company's Articles of Incorporation and Bylaws
to the fullest extent of California law and all other applicable law, and shall
provide Executive with indemnification pursuant to the Company's standard
indemnification agreement and any director's and officer's liability insurance
policy maintained by the Company.
7. Acceleration and Vesting of Stock Options.
- -- -----------------------------------------
(a) As of December 11, 1998, the status of Executive's outstanding
options (the "Options") to purchase shares of the Company's common stock (the
"Common Stock") and Executive's restricted stock purchases (the "Restricted
Shares") of Common Stock is as follows:
<TABLE>
<CAPTION>
Shares Shares Vested Shares
Date of Subject to Exercise/Purchase as of Unvested
Grant/Issue Type Grant/Issue Price ($) 12/11/98 as of 12/11/98
- ------------- ---- ------------- -------------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
11/8/96 RS* 396,000 $0.375 231,000 165,000
1/22/97 RS* 84,000 $0.375 49,000 35,000
10/13/98 NQO** 150,000 $12.50 -- 150,000
</TABLE>
________________________________
2
<PAGE>
* RS=Restricted Stock
** NQO=Non-Qualified Stock Option
Pursuant to the terms of the stock purchase agreements evidencing the
480,000 Restricted Shares purchased by Executive pursuant to the 11/8/96 and
1/22/97 grants shown in the table above (the "Purchase Agreements"), an
aggregate of 200,000 of such Restricted Shares are subject to repurchase by the
Company as of December 11, 1998, at the purchase price paid per share, in the
event of Executive's cessation of services with the Company. The table above
illustrates the number of Restricted Shares in which Executive is vested as of
December 11, 1998. The portion of such Restricted Shares representing the 70,000
shares that would become vested prior to the Final Termination Date in the event
Executive continues to provide service to the Company during such period shall
continue to vest during the Employment Period, and the repurchase rights with
respect thereto shall terminate, in accordance with the applicable Purchase
Agreements, subject to the terms of this Agreement. With respect to the
remaining 130,000 Restricted Shares that would not otherwise become vested prior
to the Final Termination Date, notwithstanding the provisions of the applicable
Purchase Agreements covering such Restricted Shares, and in recognition of past
services provided by Executive to the Company, the vesting of all such 130,000
unvested Restricted Shares shall be accelerated so that all such Restricted
Shares are fully vested on and as of December 11, 1998 and shall not be subject
to repurchase by the Company under any circumstances thereafter, including but
not limited to any events of termination as addressed in Section 9 of this
Agreement. Executive shall own such shares free and clear of any repurchase or
other rights or restrictions on the part of the Company.
Pursuant to the terms of the existing stock option agreement evidencing the
Option to purchase 150,000 shares of Common Stock pursuant to the grant on
10/13/98 shown in the table above (the "Option"), the Option shall continue to
vest during the Employment Period and be subject to all the terms and conditions
of the Option, except as provided in this Agreement.
3
<PAGE>
8. Release and Waiver of All Claims.
- -- --------------------------------
(a) Executive agrees that he fully and forever discharges, waives and
releases any and all claims and causes of action of any kind, known and unknown,
that he has or may have against the Company, including any of its officers,
directors, agents, employees, affiliates, representatives, predecessors,
successors and assigns, arising out of or relating in any way to his employment,
status and responsibility as President and Chief Financial Officer of the
Company, and any and all acts or omissions occurring on or before December 11,
1998, including but not limited to claims of wrongful discharge, breach of
contract, breach of the covenant of good faith and fair dealing, violation of
public policy, defamation, personal injury, infliction of emotional distress,
claims under Title VII of the 1964 Civil Rights Act, as amended, the California
Fair Employment and Housing Act, the Equal Pay Act of 1963, the California Labor
Code, including Section 1197.5 thereof, age discrimination under the Age
Discrimination in Employment Act of 1967, as amended, the Americans with
Disabilities Act, the Civil Rights Act of 1866, the Employee Retirement Income
Security Act of 1974, as amended, and any other local, state and federal laws
and regulations relating to employment.
(b) Executive agrees that he fully and forever waives any and all
rights and benefits conferred upon him by the provisions of Section 1542 of the
Civil Code of the State of California, which states as follows:
A general release does not extend to claims which the creditor [Executive]
does not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor [the Company].
Executive agrees and understands that if, hereafter, he discovers facts
different from or in addition to those which he now knows or believes to be
true, that the waivers of this Agreement shall be and remain effective in all
respects notwithstanding such different or additional facts or the discovery
thereof.
(c) The only exceptions to the releases and waivers of Sections 8(a)
and 8(b) above are the following:
(i) claims Executive may have for indemnification, defense,
advances or reimbursements under California Labor Code section 2802 or
other applicable law, under the Indemnification Agreement and under any
other pre-existing contractual indemnification agreement between Executive
and the Company, and under The Company's by-laws or articles of
incorporation;
(ii) claims Executive may have for unemployment insurance
benefits and for workers' compensation insurance benefits; and
(iii) claims under the stock option agreements and stock purchase
agreements described in Section 7 above.
4
<PAGE>
9. Benefits Payable Upon Disability or Death.
- -- -----------------------------------------
(a) Disability Benefits. In the event of the Disability of Executive,
-------------------
the Company shall continue to pay Executive the Base Salary payable to Executive
in accordance with Section 4 hereof during the period of Executive's Disability
through the Final Termination Date, and, to the extent not vested as of the date
hereof as provided in Section 7 of this Agreement, all Restricted Shares and the
Option shall continue to vest according to the applicable vesting schedule as if
Executive were continuing as a full-time employee through the Final Termination
Date.
(b) Death Benefits. In the event of Executive's death during
--------------
Executive's Disability or otherwise during the Employment Period, the Company
shall continue to pay Executive the Base Salary payable to Executive in
accordance with Section 4 hereof through the Final Termination Date, and, to the
extent not vested as of the date hereof as provided in Section 7 of this
Agreement, all Restricted Shares and the Option shall continue to vest according
to the applicable vesting schedule as if Executive were continuing as a full-
time employee through the Final Termination Date.
10. Severance Benefits.
- --- ------------------
(a) Termination of Employment. In the event of the termination of
-------------------------
Executive's employment, then Executive shall be entitled to receive severance
benefits as follows:
(i) Voluntary Resignation. If Executive's employment
---------------------
terminates by reason of Executive's voluntary resignation (and such
termination is not an Involuntary Termination or a termination for Cause),
then Executive shall not be entitled to receive severance or other benefits
except for those to which Executive may be entitled under this Agreement,
in particular, the Consulting Agreement described in Section 12, or any
separate agreement with the Company or as may then be established under the
Company's then existing severance and benefit plans and policies at the
time of such termination.
(ii) Involuntary Termination Other Than Termination For Cause.
--------------------------------------------------------
If Executive's employment is terminated as a result of an Involuntary
Termination other than a termination for Cause, then the following
severance benefits shall be paid or otherwise provided to Executive: (A)
the Company shall continue to pay to Executive the Base Salary payable to
Executive in accordance with Section 4 hereof through the Final Termination
Date; and (B) the Company shall pay the monthly continuation premiums for
medical coverage for Executive (and Executive's eligible dependents, if
any) pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), through the Final Termination Date.
(iii) Termination for Cause. If Executive's employment is
---------------------
terminated for Cause, then Executive shall not be entitled to receive any
severance payments or other severance benefits under this Section 10.
Executive's benefits will be continued under the Company's then
5
<PAGE>
existing benefit plans and policies in accordance with such plans and
policies in effect on the date of termination.
11. Confidential Information; Non-solicitation. Executive shall, at
--- ------------------------------------------
all times in the future, remain bound by the Genesys Telecommunications
Laboratories Confidential Information and Invention Assignment Agreement signed
by Executive, including the provisions regarding confidentiality and non-
solicitation of employees of the Company.
12. Consulting.
--- ----------
In the event that Executive's employment is terminated (as a result of
Executive's voluntary resignation or otherwise) prior to the Final Termination
Date as contemplated by clause (ii) of Section 2 of this Agreement, then the
Company shall engage Executive as an Independent Consultant for the remaining
period through June 30, 1998 pursuant to the terms of the Independent Consulting
Agreement which is attached as Exhibit A hereto.
13. Services to Other Parties. Executive agrees that he will not
--- --------------------------
provide services to another person or entity if such services will interfere
with Executive's ability to fulfill Executive's responsibilities to the Company
pursuant to this Agreement, or if such services are directly related to the
business in which the Company is now involved or becomes involved during the
Employment Period.
14. Successors. Any successor to the Company (whether direct or
--- ----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) or to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and shall perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Executive's rights hereunder
shall inure to the benefit of, and be enforceable by, Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
15. Notice. Notices and all other communications contemplated by this
--- ------
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to Executive shall be
addressed to Executive at the home address from which Executive most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notice shall
be directed to the attention of its Secretary.
6
<PAGE>
16. Miscellaneous Provisions.
- --- ------------------------
(a) Definition of Terms. The capitalized terms in this Agreement
-------------------
shall have the meanings set forth in this Agreement or in Appendix A hereto.
----------
(b) No Duty to Mitigate. Executive shall not be required to mitigate t
-------------------
he amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by
earnings that Executive may receive from any other source.
(c) Waiver. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by Executive and by an authorized officer or representative
of the Company (other than Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision of another time.
(d) Whole Agreement. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity of unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(g) Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Agreement may be settled by arbitration in the County of
San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect. Such arbitration proceedings shall be
nonbinding and any claim with respect to this Agreement, whether or not
previously the subject of an arbitration proceeding, may be brought in any court
of competent jurisdiction.
(h) Employment Taxes. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
7
<PAGE>
(i) Assignment by Company. The Company may assign its rights
---------------------
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company; provided, however,
that if there is any such assignment, the Company will guarantee all payments
and the performance of all obligations under this Agreement. In the case of any
such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation or other entity that actually employs Executive.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
17. Prior Agreements. This Agreement replaces any other agreements
--- ----------------
between the Company and Executive.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this day and
year first above written.
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
By: /s/ Ori Sasson
--------------------------------
Ori Sasson
Chief Executive Officer
EXECUTIVE:
/s/ Michael J. McCloskey
____________________________________
Michael J. McCloskey
9
<PAGE>
APPENDIX A
----------
Definitions
-----------
Cause. "Cause" shall mean (i) material and intentional breach of any
-----
material terms of this Agreement, (ii) conviction of a felony, (iii) repeated
unexplained or unjustified absence, (iv) willful breach of fiduciary duty under
this Agreement or (v) gross negligence or willful misconduct where such gross
negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries.
Disability. "Disability" shall mean the inability of Executive to
----------
perform all the material duties of Executive's position as determined by an
independent physician selected with the approval of the Company and Executive.
Involuntary Termination. "Involuntary Termination" shall mean
-----------------------
termination by the Company of Executive's employment for any reason other than
for Cause, and shall include Executive's voluntary resignation following (i) the
material breach by the Company of one or more of its obligations under this
Agreement which are not otherwise corrected within ten (10) days following
Executive's written notice to the Company of such breach, or (ii) the occurrence
of any of the following events without Executive's express prior written
consent: (A) a change in Executive's position with the Company which materially
reduces Executive's level of responsibilities, (B) a reduction in Executive's
level of compensation, (C) a relocation of Executive's place of employment by
more than twenty (20) miles from Executive's current place of employment, (D)
the assignment of additional material job responsibilities or a reduction in job
responsibilities inconsistent with Executive's position with the Company and
Executive's prior responsibilities, or (E) in the event Executive is no longer
the Company's President reporting to the CEO.
10
<PAGE>
ANNEX A
INDEPENDENT CONSULTING AGREEMENT
--------------------------------
The following confirms the agreement ("Agreement") between Michael
McCloskey ("Consultant") and Genesys Telecommunications Laboratories, Inc. and
any successors thereto ("Genesys") with respect to the provision of consulting
services by Consultant to Genesys.
1. Term of Agreement. The Consulting Period shall commence on
-----------------
[insert appropriate date], 1999 ("Effective Date"). The term of this Agreement
shall be through June 30, 1999 ("Consulting Period"). This Agreement shall
terminate on June 30, 1999, or an earlier date pursuant to section 10 of this
Agreement ("Termination Date").
2. Independent Contractor Status. It is the express intention of the
-----------------------------
parties to this Agreement that the Consultant is an independent contractor, and
is not an employee, agent, joint venturer or partner of Genesys. Nothing in this
Agreement shall be interpreted or construed as creating or establishing an
employment relationship between Genesys and the Consultant.
3. Services. Consultant agrees to provide consulting services
--------
("Services") to Genesys during the Consulting Period which shall be those
Services that Genesys reasonable requests of Consultant from time-to-time by and
through Genesys' Chief Executive Officer ("CEO"). Consultant shall be available
to perform such Services for up to an average of twenty (20) hours per week
during the Consulting Period. The Services to be provided by Consultant will
include:
i. Doing all things necessary and requested to effect a smooth
transition of all business related matters for which Consultant has been
responsible to the CEO, any CFO and any other proper officer of Genesys; and
ii. Providing advice and guidance with respect to operations,
sales, marketing and strategic matters as requested by the CEO, the Board or the
Chairman.
4. Compensation. For the duration of the consulting period,
------------
Consultant shall be paid cash compensation equal to Consultant's salary
compensation as such compensation was in effect on December 1, 1998 in
Consultant's position as President of Genesys, such compensation to be paid bi-
monthly in accordance with the Company's practice for employees, and Consultant
shall continue vesting in all stock options that were granted to, and in all
restricted shares that were purchased by, Consultant in connection with his
employment with Genesys. The foregoing is Consultant's sole compensation for
rendering Services to Genesys and for reserving Consultant's time to render
Services to Genesys. Genesys also agrees to reimburse Consultant for any costs
incurred in performing the Services.
5. Services to other Persons/Entities. The parties to this Agreement
----------------------------------
understand and agree that the Consultant may, and probably will, perform
consulting and employment (full-time or part-time) services for other persons or
entities during the Consulting Period. However, Consultant agrees that he will
not provide services to another person or entity if such services will interfere
with Consultant's ability to provide Services to Genesys pursuant to this
Agreement, or if such services are directly competitive with the business in
which Genesys is now involved.
6. Employment of Assistants. Should the Consultant, in his sole
------------------------
discretion, deem it necessary to employ assistants to aid him in the performance
of the Services, the parties agree that Genesys will not direct, supervise, or
control in any way such assistants to the Consultant in their performance of
Services, unless otherwise agreed or requested by Genesys. The parties further
agree that, unless otherwise agreed or requested by Genesys, such assistants are
employed solely by the Consultant, and that he alone is responsible for
providing workers' compensation insurance for his employees, for paying the
salaries and wages of his employees, and for ensuring
1 of 3
<PAGE>
that all required tax withholdings are made. Consultant further agrees and
warrants that he shall maintain workers' compensation insurance coverage for his
employees and acknowledges that he alone has responsibility for such coverage.
7. Obligations of the Consultant. Consultant will be responsible for
-----------------------------
any and all taxes due on all payments and benefits provided to him by Genesys
under this Agreement, including state, federal and local taxes and mandatory
contributions to government benefit programs.
8. Reporting to Genesys' Facilities. Consultant is not required to
--------------------------------
report to work at any facility of Genesys or during any particular work hours.
Rather, Consultant is free to report or not report to any of Genesys' facilities
as he sees fit and only as necessary to provide Services to Genesys.
9. Obligations re: Confidential Information, Inventions and Non-
------------------------------------------------------------
Solicitation.
- ------------
The Confidential Information and Inventions Assignment Agreement,
signed by Consultant in his capacity as a Genesys employee, is hereby renewed by
Consultant and shall have the same force and effect as if executed by Consultant
contemporaneous with execution of this Agreement; and for the purpose of this
Agreement, every reference to employment with Genesys made in the Confidential
Information and Inventions Assignment Agreement shall be interpreted and
construed to mean and refer to the consulting relationship between Executive and
Genesys established by this Agreement.
10. Earlier Termination of Agreement. This Agreement may be
--------------------------------
terminated by Genesys at any time prior to the Termination Date for the breach
by Consultant of any obligation of sections 5, 6, 7 or 9 of this Agreement.
11. Enforceability of Agreement. Consultant agrees that any dispute
---------------------------
in the meaning, effect, or validity of this Agreement shall be resolved in
accordance with the laws of the State of California without regard to the
conflict of laws provisions thereof. Consultant further agrees that if one or
more provisions of this Agreement are held to be unenforceable under applicable
California law, such provision(s) 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.
12. Assignment. This Agreement shall not be assignable by either the
----------
Consultant or Genesys without the express written consent of the other party.
2 of 3
<PAGE>
13. Dispute Resolution. Any controversy between the parties hereto
------------------
involving the construction or application of any terms, covenants, or conditions
of this Agreement or any claim arising out of or relating to this Agreement will
be submitted to and be settled by final and binding arbitration in San
Francisco, California, in accordance with the rules of the American Arbitration
Association then in effect, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. 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 attorneys'
fees and costs in addition to any other relief to which the party may be
entitled.
14. Entire Agreement. This Agreement contains the entire
----------------
understanding and agreement of the parties regarding its subject matters and can
only be modified by a subsequent written agreement executed by the Consultant
and Genesys.
15. Notices. All notices required or given pursuant to this Agreement
-------
shall be addressed to Genesys or Consultant at the designated addresses shown
below by registered mail, special delivery, or by courier service:
a. To Genesys:
----------
Genesys Telecommunications Laboratories, Inc.
1155 Market Street, 11th Floor
San Francisco, CA 94103
Attn: Ori Sasson, Chief Executive Officer
b. To Consultant:
-------------
Michael J. McCloskey
2999 Sorano Court
Pleasanton, CA 94566
IN WITNESS, the parties have executed this Independent Consulting
Agreement to be effective as of [insert appropriate date], 1999.
Dated: ______________, 1999 Consultant:
-------------------------------
Michael J. McCloskey
Dated: ______________, 1999 Genesys Telecommunications Laboratories, Inc.:
By:
-----------------------------
. Ori Sasson
Chief Executive Officer
3 of 3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 42,469 30,256
<SECURITIES> 14,816 16,985
<RECEIVABLES> 33,744 28,007
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 100,678 83,562
<PP&E> 17,697 14,675
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 125,204 104,700
<CURRENT-LIABILITIES> 43,146 30,977
<BONDS> 0 0
0 0
0 0
<COMMON> 87,022 72,356
<OTHER-SE> (5,049) 1,265
<TOTAL-LIABILITY-AND-EQUITY> 125,204 104,700
<SALES> 61,226 35,389
<TOTAL-REVENUES> 61,226 35,389
<CGS> 10,776 5,552
<TOTAL-COSTS> 10,776 5,552
<OTHER-EXPENSES> 53,753 26,907
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,419) 3,659
<INCOME-TAX> 4,224 1,110
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,643) 2,549
<EPS-PRIMARY> (.29) .12
<EPS-DILUTED> (.29) .09
</TABLE>
