EXHIBIT 4.6
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
MCI TELECOMMUNICATIONS CORPORATION
AND
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
FEBRUARY 26, 1997
MCI CONFIDENTIAL
TABLE OF CONTENTS
ARTICLE 1 -- DEFINITIONS; PURCHASE AND SALE............................................ 1
1.1 Definitions............................................................... 1
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(A) "Affiliate"........................................................ 1
(B) "Business Intellectual Property Rights"............................ 1
(C) "CERCLA"........................................................... 2
(D) "Closing"........................................................... 2
(E) "Closing Date"..................................................... 2
(F) "Code"............................................................. 2
(G) "Commercial Documents".............................................. 2
(H) "Company Financial Statements"..................................... 2
(I) "Company Interim Financial Statements"............................. 2
(J) "Environmental Laws"............................................... 2
(K) "ERISA"............................................................ 2
(L) "Fully Diluted Basis".............................................. 2
(M) "GAAP"............................................................. 2
(N) "Hazardous Material"............................................... 2
(O) "IRS".............................................................. 2
(P) "Leased Improvements".............................................. 2
(Q) "Leased Property".................................................. 2
(R) "Material Adverse Effect".......................................... 3
(S) "Pension Plans".................................................... 3
(T) "Person"........................................................... 3
(U) "Plans"............................................................ 3
(V) "Purchase Price"................................................... 3
(W) "Securities Act"................................................... 3
(X) "Stock"............................................................ 3
(Y) "Tax".............................................................. 3
(Z) "Taxing Authority"................................................. 3
(AA) "Tax Return"...................................................... 3
(BB) "Warrant"......................................................... 3
1.2 Interpretive Rules........................................................ 3
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1.3 Purchase and Sale......................................................... 4
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ARTICLE 2 -- PURCHASE PRICE............................................................ 4
2.1 Purchase Price............................................................ 4
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2.2 Payment of Purchase Price................................................. 4
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ARTICLE 3 -- CLOSING................................................................... 4
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ARTICLE 4 -- ADDITIONAL AGREEMENTS...................................................... 4
4.1 Registration Rights Agreement............................................... 4
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4.2 Commercial Documents........................................................ 4
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ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 4
5.1 Corporate Organization...................................................... 5
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5.2 Valid and Binding Agreement................................................. 5
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5.3 No Violation................................................................ 6
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5.4 Consents and Approvals...................................................... 6
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5.5 Capitalization.............................................................. 6
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5.6 Subsidiaries and Affiliates................................................. 7
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5.7 Financial Statements........................................................ 7
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5.8 Absence of Undisclosed Liabilities.......................................... 7
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5.9 Interim Operations and Absence of Certain Changes........................... 8
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5.10 Taxes...................................................................... 9
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5.11 Employee Benefit Plans..................................................... 10
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5.12 Compliance with Law........................................................ 12
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5.13 Litigation; Claims......................................................... 12
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5.14 Contracts and Commitments.................................................. 12
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5.15 Intellectual Property Rights............................................... 12
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5.16 Liens...................................................................... 14
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5.17 Insurance.................................................................. 14
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5.18 Property................................................................... 14
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5.19 Environmental Matters...................................................... 15
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5.20 Governmental Authorizations................................................ 15
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5.21 Employee Relations......................................................... 16
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5.22 Employees.................................................................. 16
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5.23 Broker's or Finder's Fees.................................................. 16
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5.24 Disclosure................................................................. 17
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5.25 Certain Transactions....................................................... 17
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5.26 Offering................................................................... 17
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ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF THE BUYER................................. 17
6.1 Corporate Organization...................................................... 17
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6.2 Valid and Binding Agreements................................................ 17
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6.3 No Violation................................................................ 18
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6.4 Consents and Approvals...................................................... 18
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6.5 Broker's or Finder's Fees................................................... 18
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6.6 Investment Representations.................................................. 18
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ARTICLE 7 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER............................ 19
7.1 Representations and Warranties.............................................. 19
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7.2 Covenants, Agreements and Conditions........................................ 19
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7.3 Proceedings................................................................. 19
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7.4 Corporate Proceedings....................................................... 19
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7.5 Governmental Approvals...................................................... 20
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7.6 Amendment to Articles of Incorporation...................................... 20
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7.7 Insurance................................................................... 20
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7.8 Deliveries.................................................................. 20
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7.9 Opinion of Counsel.......................................................... 20
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ARTICLE 8 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.......................... 20
8.1 Representations and Warranties.............................................. 21
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8.2 Covenants, Agreements and Conditions........................................ 21
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8.3 Proceedings................................................................. 21
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8.4 Corporate Proceedings....................................................... 21
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8.5 Governmental Approvals...................................................... 21
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8.6 Deliveries.................................................................. 21
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ARTICLE 9 -- AFFIRMATIVE COVENANTS AND AGREEMENTS OF THE COMPANY......................... 21
9.1 Financial Reporting......................................................... 21
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9.2 Reservation of Conversion Shares............................................ 22
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9.3 Confidential Information and Invention Assignment Agreement................. 22
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9.4 Repurchase.................................................................. 22
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ARTICLE 10 -- OTHER MATTERS.............................................................. 22
10.1 Indemnification............................................................ 22
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10.2 Indemnification Procedures................................................. 24
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10.3 Confidentiality............................................................ 25
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10.4 Further Assurances......................................................... 26
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ARTICLE 11 -- MISCELLANEOUS.............................................................. 26
11.1 Survival of Representations, Warranties and Agreements..................... 26
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11.2 Service of Process......................................................... 26
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11.3 Notices.................................................................... 26
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11.4 Governing Law.............................................................. 27
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11.5 Modification; Waiver....................................................... 27
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11.6 Entire Agreement........................................................... 27
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11.7 Assignment; Successors and Assigns......................................... 27
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11.8 Public Announcements....................................................... 27
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11.9 Severability............................................................... 28
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11.10 No Third Party Beneficiary................................................ 28
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11.11 Expenses.................................................................. 28
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11.12 Execution in Counterpart.................................................. 28
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SECURITIES PURCHASE AGREEMENT
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This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated February
26, 1997, by and between MCI Telecommunications Corporation, a Delaware
corporation (the "Buyer"), and Genesys Telecommunications Laboratories, Inc., a
California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of the Commercial Documents (as
hereinafter defined) and the issuance of the Warrant (as hereinafter defined),
the Company desires to sell to the Buyer, and the Buyer desires to purchase from
the Company, the Stock (as hereinafter defined) upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants which are to be made and performed by
the respective parties, it is hereby agreed as follows:
ARTICLE 1 -- DEFINITIONS; PURCHASE AND SALE
2.1 Definitions. The following terms when used in this Agreement have the
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meanings set forth below:
(A) "Affiliate" means any Person now or hereafter controlling,
controlled by or under common control with another Person.
(B) "Business Intellectual Property Rights" means any and all
inventions, Marks (including trademarks, service marks, certification
marks, collective marks, and collective membership marks whether word,
logo, or other forms of marks, all of the foregoing collectively referred
to as "Marks"), trade names, copyrights, applications therefor, patents
thereon, patent applications therefor, continuations, divisions and
continuations in part, registrations thereof and licenses thereof, royalty
rights, any and all goodwill associated with the business or represented by
the assets of the Company, trade secrets, secret processes and procedures,
engineering, production, assembly design and installation encompassed in
any and all embodiments including, but not limited to technical drawings
and specifications, working notes and memos, market studies, consultants'
reports, technical and laboratory data, competitive samples, engineering
prototypes, and confidential information, know-how, and all similar
property of any nature, tangible or intangible.
MCI CONFIDENTIAL
(C) "CERCLA" has the meaning set forth in Section 5.19(A).
(D) "Closing" has the meaning set forth in Article III.
(E) "Closing Date" has the meaning set forth in Article III.
(F) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(G) "Commercial Documents" means, collectively, the Amendment to
Master Software License Agreement, the Amendment to Maintenance Agreement
and the Master Consulting Agreement to be entered into between the Buyer
and the Company on the Closing Date.
(H) "Company Financial Statements" has the meaning set forth in
Section 5.7.
(I) "Company Interim Financial Statements" has the meaning set forth
in Section 5.7.
(J) "Environmental Laws" has the meaning set forth in Section
5.19(C).
(K) "ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
(L) "Fully Diluted Basis" means, at any date as of which the number
of shares thereof of any Person is to be determined, (a) all shares of
capital stock of such Person outstanding at such date, and (b) the maximum
number of shares of capital stock of such Person issuable pursuant to
warrants, options or other rights to purchase or acquire (whether or not
such warrants, options or other rights are then exercisable), or pursuant
to securities convertible into or exchangeable (whether or not such
securities are then convertible or exchangeable) for, shares of capital
stock of such Person, outstanding on such date (including any warrants
being issued on such date).
(M) "GAAP" means generally accepted accounting principles of the
United States applied in a manner consistent with past practice of the
Company.
(N) "Hazardous Material" has the meaning set forth in Section
5.19(A).
(O) "IRS" means the United States Internal Revenue Service.
(P) "Leased Improvements" has the meaning set forth in Section
5.18(A).
(Q) "Leased Property" has the meaning set forth in Section 5.18(A).
MCI CONFIDENTIAL
(R) "Material Adverse Effect" means, with respect to any Person, any
event, fact, condition, occurrence or effect which is materially adverse to
the following, taken as a whole: the business, properties, assets,
liabilities, capitalization, stockholders equity, financial condition,
operations, licenses or other franchises or results of operations of such
Person.
(S) "Pension Plans" has the meaning set forth in Section 5.11(B)(1).
(T) "Person" means and includes an individual, a partnership, a joint
venture, a corporation or trust, an unincorporated organization, a group or
a government or other department or agency thereof.
(U) "Plans" has the meaning set forth in Section 5.11(A).
(V) "Purchase Price" has the meaning set forth in Section 2.1.
(W) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(X) "Stock" means the 674,496 shares of Series C Preferred Stock of
the Company, no par value, to be purchased by the Buyer at the Closing,
which shares shall represent three percent (3.0%) of the equity of the
Company on a Fully Diluted Basis as of the Closing Date (after giving
effect to the sale of the Stock and the issuance of the Warrant).
(Y) "Tax" has the meaning set forth in Section 5.10(C).
(Z) "Taxing Authority" has the meaning set forth in Section 5.10(A).
(AA) "Tax Return" has the meaning set forth in Section 5.10(D).
(AB) "Warrant" shall mean that certain Warrant dated as of the
Closing Date to purchase 449,664 shares of Series C Preferred Stock of the
Company which shares shall represent two percent (2.0%) of the equity of
the Company on a Fully Diluted Basis as of the Closing Date (after giving
effect to the sale of the Stock and the issuance of the Warrant), in the
form attached as Exhibit A hereto.
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3.1 Interpretive Rules. For purposes of this Agreement, except as
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otherwise expressly provided herein or unless the context otherwise requires:
(i) defined terms include the plural as well as the singular and the use of any
gender shall be deemed to include the other gender; (ii) references to
"Articles," "Sections" and other subdivisions and to "Schedules" and "Exhibits"
without reference to a document, are to designated Articles, Sections and other
subdivisions of, and to Schedules and Exhibits to, this Agreement; (iii) the use
of the term "including" means "including but not limited to"; and (iv) the words
"herein," "hereof," "hereunder" and other
MCI CONFIDENTIAL
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words of similar import refer to this Agreement as a whole and not to any
particular provision.
4.1 Purchase and Sale. Upon the terms and subject to all of the
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conditions set forth herein, on the Closing Date, the Company agrees to (i) sell
to the Buyer and the Buyer agrees to purchase from the Company, free and clear
of all liens, pledges, security interests, claims, options, charges, rights of
first refusal or encumbrances whatsoever, the Stock and (ii) issue to the Buyer,
free and clear of all liens, pledges, security interests, claims, options,
charges, rights of first refusal or encumbrances whatsoever, the Warrant.
ARTICLE 5 -- PURCHASE PRICE
6.1 Purchase Price. The aggregate purchase price for the Stock (the
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"Purchase Price") shall be Seven Million Five Hundred Thousand Three Hundred
Ninety-five Dollars and Fifty Cents ($7,500,395.50). The exercise price of the
Warrant shall be as set forth therein.
7.1 Payment of Purchase Price. At the Closing, the Buyer shall pay the
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Company the Purchase Price by wire transfer, in immediately available funds, to
an account of the Company, which account shall be designated by the Company at
least three (3) business days prior to the date of the required payment.
ARTICLE 8 -- CLOSING
The closing of the transactions contemplated hereby (the "Closing") shall
take place at the offices of Buyer, 0000 00xx Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000 at 10:00 a.m. local time, on February 26, 1997, or at such other time or
date as may be agreed upon by the parties hereto (the "Closing Date").
ARTICLE 9 -- ADDITIONAL AGREEMENTS
10.1 Registration Rights Agreement. At the Closing, the Company and Buyer
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will enter into the Registration Rights Agreement in the form attached as
Exhibit B, pursuant to which the Company shall grant certain registration rights
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for the Stock and the shares of stock covered by the Warrant to Buyer.
11.1 Commercial Documents. At the Closing, the Company and Buyer will
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enter into the Commercial Documents.
ARTICLE 12 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants, subject to the Schedule of
Exceptions attached hereto as Exhibit C, to the Buyer as follows, and the Buyer
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in agreeing to consummate
MCI CONFIDENTIAL
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the transactions contemplated by this Agreement has relied upon such
representations and warranties, subject to such Schedule of Exceptions, that:
13.1 Corporate Organization.
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(A) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has the
requisite power and authority (corporate and other) to own, lease and
operate its properties and to carry on its business as now being conducted.
(B) The Company is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each of the jurisdictions
listed on Schedule 5.1. The Company is not qualified or licensed to do
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business as a foreign corporation in any other jurisdiction and there are
no other jurisdictions in which the failure to be qualified or licensed as
a foreign corporation would have a Material Adverse Effect on the Company.
(C) The copies of the articles of incorporation and all amendments
thereto of the Company, as certified by the Secretary of State of
California, and the by-laws, as amended to date, of the Company, as
certified by its secretary, which have heretofore been delivered to the
Buyer, are true, complete and correct copies of the articles of
incorporation and by-laws of the Company, as amended and in effect on the
date hereof, and will be true, complete and correct as of the Closing Date.
(D) The minute books and records of the Company, copies of which have
been furnished to the Buyer prior to the date hereof, are the original
minute books and records of the Company, contain all proceedings of the
stockholders, the Board of Directors and any committees thereof with
respect to the Company, and are true, correct and complete in all material
respects. There have been no changes, alterations or additions to the
minute books and records which have not been furnished to the Buyer prior
to the date hereof.
14.1 Valid and Binding Agreement. The Company has all requisite corporate
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power and authority to enter into this Agreement. All necessary action on the
part of the Company has been taken to authorize the execution and delivery of
this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby (which includes, without
limitation, the issuance, sale, and delivery of the Stock, the Warrant and the
common stock issuable upon conversion of the Series C Preferred Stock). This
Agreement has been duly and validly executed and delivered by the Company, and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
MCI CONFIDENTIAL
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15.1 No Violation. Neither the execution and delivery of this Agreement
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nor the consummation of the transactions contemplated hereby nor compliance by
the Company with any of the provisions hereof will (i) violate or conflict with
any provision of the articles of incorporation or by-laws of the Company, or to
the Company's knowledge, any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Company, or (ii)
(a) violate, or (b) conflict with, or (c) result in a breach of any provision
of, or (d) constitute a default (or any event which, with or without due notice
or lapse of time, or both, would constitute a default) under, or (e) result in
the termination of, or (f) accelerate the performance required by, or (g) result
in the creation of any lien, security interest, charge or other encumbrance upon
the Stock, the Warrant or any of the properties or assets of the Company ( (a)
through (g) are collectively, "Defaults") under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation of which the Company is
currently a party or by which the Company or any of its assets are bound where
such Default would have a Material Adverse Effect.
16.1 Consents and Approvals. No permit, consent, approval or
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authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or third party is required to be made or obtained by the
Company in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
17.1 Capitalization.
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(A) The authorized capital stock of the Company consists solely of
(i) 120,000,000 shares of common stock, of which 12,744,086 shares are
issued and outstanding; (ii) 900,000 shares of Series A Preferred Stock, of
which 900,000 shares are issued and outstanding; (iii) 1,897,878 shares of
Series B Preferred Stock, of which 1,897,878 shares are issued and
outstanding; and (iv) 1,348,992 shares of Series C Preferred Stock of which
854,363 shares are issued and outstanding (including the Stock). The
issued and outstanding capital stock is duly authorized, validly issued,
fully paid and nonassessable, and none of the issued and outstanding shares
of capital stock were issued in violation of the preemptive rights of any
present or former stockholder of the Company.
(B) Schedule 5.5 contains a true, complete and correct listing of all
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of the holders of issued and outstanding shares of capital stock of the
Company and the number and type of shares held by each of them.
(C) Except as set forth in Section 5.5(A) and (B), (i) there are no
shares of capital stock or other equity securities (as the term "equity
security" is defined in the Securities Exchange Act of 1934, as amended) of
the Company outstanding, (ii) there are no outstanding subscriptions,
options, warrants or rights to purchase or acquire any
MCI CONFIDENTIAL
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equity securities of the Company, (iii) no equity securities of the Company
are reserved for issuance for any purpose, (iv) there are no contracts,
commitments, agreements, understandings, arrangements or restrictions to
which the Company is a party or by which the Company is bound relating to
any shares of the capital stock or other equity securities of the Company
(including the Stock), whether or not outstanding, (v) and there is no
other instrument, certificate, document or other right, whether or not
represented by a certificate or other document or instrument, convertible
(with or without consideration) into the capital stock of the Company.
(D) There are no repurchase rights except as set forth in Section 9.4
hereof.
18.1 Subsidiaries and Affiliates. The Company owns no capital stock or
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other equity securities of any other corporation and has no other type of
interest (whether ownership or other) in any other corporation, partnership,
joint venture or other business organization or entity. The interests of the
Company in any Person are owned by the Company free and clear of all liens,
options, claims or encumbrances (including without limitation, rights of first
refusal or similar rights) with respect to the ownership thereof. The Company
is not subject to any obligation or requirement to provide funds for, or to make
any investment (in the form of a loan, capital contribution or otherwise) to or
in, any Person.
19.1 Financial Statements. The audited consolidated financial statements
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of the Company for each of the two (2) years ended June 30, 1994 and 1995,
attached as Schedule 5.7 hereto (the "Company Financial Statements") (i) present
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fairly the financial position, results of operations, shareholders' equity and
cash flows of the Company in accordance with GAAP, as of the statement dates and
for the periods indicated, and (ii) have been prepared in accordance with the
Company's customary procedures for the preparation of financial statements
consistently applied throughout and among the periods indicated. The unaudited
interim consolidated financial statements of the Company for the year ended June
30, 1996 attached as Schedule 5.7A hereto (the "Company 1996 Financial
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Statements") and the unaudited condensed consolidated financial statements for
the six (6) months ended December 31, 1996, attached as Schedule 5.7B hereto
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(the "Company Interim Financial Statements") (x) present fairly the financial
position, results of operations, shareholder's equity and cash flows of the
Company, as of the statement date and for the period indicated, and (y) have
been prepared in accordance with the Company's customary procedures for the
preparation of annual and interim financial statements, respectively,
consistently applied throughout and among the periods indicated and are
consistent with the Company Financial Statements subject to year-end audit and
other normal or recurring year-end adjustments (made in accordance with GAAP, in
the ordinary course of business and consistent with prior year-end accounting
principles and adjustments), except that the Company Interim Financial
Statements do not contain any footnotes required by GAAP, are presented in a
condensed format and do not include a statement of shareholders' equity or a
statement of cash flows.
20.1 Absence of Undisclosed Liabilities. The Company has no material
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liability or obligation (absolute, accrued, contingent or otherwise), including
any guaranty with respect to
MCI CONFIDENTIAL
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any obligation, except (a) such liabilities or obligations as are fully
reflected, reserved against or disclosed in the Company Financial Statements,
the Company 1996 Financial Statements or the Company Interim Financial
Statements and (b) such liabilities or obligations as have been incurred in the
ordinary course of business, consistent with past practice, since June 30, 1995.
21.1 Interim Operations and Absence of Certain Changes.
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Since December 31, 1996, the Company has conducted its business in the
ordinary course and consistent with past practice, and the Company has not:
(A) incurred any indebtedness or other liabilities (whether absolute,
accrued, contingent or otherwise) or guaranteed any such indebtedness,
except in the usual and ordinary course of its business, consistent with
past practice;
(B) suffered any damage, destruction or loss of tangible assets,
whether or not covered by insurance, in excess of $50,000;
(C) suffered any change in its financial condition, assets,
liabilities or business or suffered any other event or condition of any
character which individually or in the aggregate had or has a Material
Adverse Effect on the Company or materially diminishes the value of the
assets of the Company;
(D) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) except in each
case in the ordinary course of business;
(E) canceled any debts or waived any claims or rights of substantial
value, except in each case in the ordinary course of business;
(F) pledged or permitted the imposition of any lien on or sold,
assigned, transferred or otherwise disposed of any of its tangible assets,
except the sale of inventory in the ordinary course of business;
(G) sold, assigned, encumbered, licensed, pledged, abandoned or
otherwise transferred any patents, applications for patents, Marks, trade
names, copyrights, licenses or other intangible assets other than in the
ordinary course of its business;
(H) made any change in any method of accounting or accounting
principle or practice;
(I) written up or down the value of the inventory or determined as
collectible any notes or accounts receivable that were previously
considered to be uncollectible, except for write-ups or write-downs and
other determinations in accordance with GAAP and in the ordinary course of
business and consistent with past practice;
(J) declared, paid or set aside for payment any dividend or other
distribution on any shares of its capital stock;
MCI CONFIDENTIAL
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(K) made any loans which in the aggregate exceed $10,000 to any
employee or made any loans to any stockholder, officer, director or
Affiliate;
(L) made capital expenditures or commitments for same in excess of
$100,000 in the aggregate;
(M) agreed, whether in writing or otherwise, to take any action
described in this Section 5.9.
22.1 Taxes.
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(A) The Company has duly and timely filed with each appropriate
federal, state, local and foreign governmental entity or other authority
(individually or collectively, "Taxing Authority") all Tax Returns required
to be filed. All such Tax Returns were true, correct and complete in all
material respects. The Company has timely paid all material Taxes which
have become due and payable (whether or not shown on any Tax Return). The
Company is not currently, and has not been in the past, delinquent in the
payment of any Tax, governmental charge or deposit for which any such
failure would have a Material Adverse Effect. Adequate reserves and
accruals in accordance with generally accepted accounting principles have
been established by the Company to provide for the payment of all Taxes
which are not yet due and payable with respect to the Company for taxable
periods or portions thereof ending on or before the Closing Date. There
are no liens for Taxes upon the Company or its assets except liens for
current Taxes not yet due. There are no liens on any property of the
Company that arose in connection with the failure (or alleged failure) to
pay any Taxes. No audit, examination, investigation, proceeding, action or
claim with respect to the Company's Taxes is pending, proposed or
threatened, and there is no basis for the assessment or collection of
additional Taxes against the Company. To the Company's knowledge, there
has never been an examination or notice of a potential examination of the
Tax Returns of the Company by any Taxing Authority. No extension is in
effect with respect to the filing of any Tax Return, the payment of any
Taxes, or any limitation period regarding the assessment or collection of
any Taxes.
(B) All material Taxes that are required to have been withheld or
collected by the Company have been duly withheld or collected and, to the
extent required, have been paid to the proper governmental authorities or
properly deposited as required by applicable laws.
(C) As used in this Agreement, "Tax" means any of the Taxes and
"Taxes" means, with respect to the Company, all income taxes (including any
tax on or based upon net income, or gross income, or income as specially
defined, or earnings, or profits, or selected items of income, earnings or
profits) and all gross receipts, capital gains, sales, use, ad valorem,
transfer, franchise, license, withholding, payroll, employment, workers
compensation, excise, severance, stamp, occupation, premium, property or
windfall profit taxes, environmental (including taxes under Code Section
59A, social security or similar taxes), unemployment, disability,
registration, value-added, alternative or add-on minimum taxes, custom
duties or other taxes, fees,
MCI CONFIDENTIAL
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assessments or charges of any kind whatsoever, together with any interest,
penalties, additions to tax or additional amounts imposed by any Taxing
Authority whether disputed or not.
(D) As used in this Agreement, "Tax Return" means any return, report,
information return or other document (including any related or supporting
information) filed or required to be filed with any Taxing Authority or
other authority in connection with the determination, assessment or
collection of any Tax paid or payable by the Company or the administration
of any laws, regulations or administrative requirements relating to any
such Tax.
(E) No claim which could have a Material Adverse Effect has ever been
made by any Taxing Authority in a jurisdiction where the Company does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
23.1 Employee Benefit Plans.
----------------------
(A) Except as set forth on the Schedule of Exceptions, the Company is
not a party to any employee agreement, understanding, plan, policy,
procedure, pattern or practice, or other arrangement, whether written or
oral, which provides compensation or fringe benefits to its employees, and
the Company is in material compliance with all its obligations under all
annuity, bonus, cafeteria, stock option, stock purchase, profit sharing,
savings, pension, retirement, incentive, group insurance, disability,
employee welfare, prepaid legal, nonqualified deferred compensation
(including without limitation, excess benefit plans, top-hat plans,
deferred bonuses, rabbi trusts, secular trusts, nonqualified annuity
contracts, insurance arrangements, nonqualified stock options, phantom
stock plans, or golden parachute payments) and other similar fringe benefit
plans, and all other employee benefit funds or programs (within the meaning
of Section 3(3) of ERISA), covering employees, former employees or
directors of the Company (the "Plans"). Except as required by applicable
law, there are no negotiations, demands, commitments or proposals that are
pending or that have been made that concern matters now covered, or that
would be covered by the type of agreements described on the Schedule of
Exceptions or in this Section 5.11(A).
(B) With respect to the Plans which are subject to ERISA:
(1) The Plans are in material compliance with the applicable
provisions of ERISA and each of the employee pension benefit plans,
within the meaning of Section 3(2) of ERISA (the "Pension Plans"),
which are intended to be qualified under Section 401(a) of the Code
have received a favorable determination letter from the IRS or a
request for such determination has been timely filed with the IRS (and
to the knowledge of the Company, nothing has occurred to cause the IRS
to revoke such determination and the IRS has not indicated any
disapproval
MCI CONFIDENTIAL
10
of any request for such a determination);
(2) Each Plan has been materially operated in accordance with
its terms and all required filings that are due prior to the date
hereof, including without limitation, the Forms 5500, for all Plans
have been timely made;
(3) No prohibited transactions, as defined by Section 406 of
ERISA or Section 4975 of the Code, have occurred with respect to any
of the Plans which would have a Material Adverse Effect;
(4) The Company has not engaged in any transaction in connection
with which the Company could be subjected to a criminal or civil
penalty under ERISA;
(5) None of the Plans, nor any trust which serves as a funding
medium for any of such Plans, nor any issue relating thereto is
currently under examination by or pending before the IRS, the
Department of Labor, the PBGC or any court, other than applications
for determinations pending before the IRS;
(6) None of the Pension Plans is a defined benefit plan within
the meaning of Section 414(j) of the Code;
(7) None of the Plans is a "multiemployer plan" as that term is
defined in Section 3(37) of ERISA, nor a plan maintained by more than
one employer (hereinafter referred to as an "multiple employer plan"),
nor a single employer plan under a multiple controlled group within
the meaning of Section 4063 of ERISA, and neither the Company nor any
entity required to be aggregated with the Company under Section
414(b), (c), (m), or (o) of the Code has incurred any withdrawal
liability with respect to any single plan, multiemployer or multiple
employer plan;
(8) No benefit claims (except those submitted in the ordinary
course of administration of such Plan) are currently pending against
any Plan;
(9) No Plan provides for retiree medical or retiree life
insurance benefits for former employees of the Company, except as
required pursuant to the Consolidated Omnibus Reconciliation Act of
1985, as amended, and there is no liability for taxes with respect to
disqualified benefits under Section 4976 of the Code; and
(10) No Pension Plan has been terminated by the Company, and
there is no liability for taxes with respect to a reversion of
qualified plan assets under Section 4980 of the Code.
(C) There have been no failures to comply with the continuation
coverage
MCI CONFIDENTIAL
11
provisions required by Sections 601-608 of ERISA and Section 4980B of the
Code under any Plan which would have a Material Adverse Effect.
(D) All excess contributions, if any (together with any income
allocable thereto), have been distributed (or, if forfeitable, forfeited)
before the close of the first two and one half (2 1/2) months of the
following plan year; and there is no liability for excise tax under Section
4979 of the Code with respect to such excess contributions, if any, for any
Plan.
(E) There is no liability for taxes with respect to: (i) an
accumulated funding deficiency under Section 4971 of the Code and/or (ii) a
nondeductible contribution under Section 4792 of the Code.
24.1 Compliance with Law. The Company is in compliance with all
-------------------
applicable laws (including duties imposed by common law), rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities
(federal, state, local and foreign) and all requirements imposed under building,
zoning, occupational safety and health, pension, environmental control, toxic
waste, fair employment, equal opportunity or similar laws, rules, regulations
and ordinances, in each case the noncompliance with which would be likely to
have a Material Adverse Effect on the Company.
25.1 Litigation; Claims. There are no (a) claims, actions, suits,
------------------
proceedings or investigations pending or (to the knowledge of the Company)
threatened by or against the Company in relation to the Company or its business,
or (b) judgments, decrees, arbitration awards, agreements or orders binding upon
the Company in relation to the Company or its business. No material claims,
including without limitation, product liability claims, have been asserted
against the Company in relation to the Company or its business since the
Company's inception, and, to the knowledge of the Company, there is no
reasonable basis for any material action, proceeding or investigation involving
the Company in relation to the Company or its business.
26.1 Contracts and Commitments. The Company does not have any contract,
-------------------------
agreement, lease, or other commitment, written or oral, absolute or contingent,
other than (i) contracts for the purchase of supplies and services that were
entered into in the ordinary course of business and that do not, as of the date
hereof, involve more than $75,000 each; (ii) sales contracts entered into in the
ordinary course of business; (iii) license agreements entered into in the
ordinary course of business; and (iv) contracts terminable at will by the
Company on no more than sixty (60) days notice without cost or liability to the
Company.
27.1 Intellectual Property Rights.
----------------------------
(A) Schedule 5.15 sets forth an accurate and complete description of
-------------
(i) all patents, trademarks and copyrights of the Company which are
registered or issued or for which registration or issuance is pending with
any governmental authority specifying as to each such item, as applicable
the jurisdiction(s) by or in which such patent, trademark
MCI CONFIDENTIAL
12
or copyright has been issued or registered or in which an application for
such issuance or registration has been filed, including the registration or
application number; (ii) except as set forth in Section 5.14 (iii), all
franchises, licenses, sublicenses, contracts and agreements pursuant to
which any Person other than the Company is authorized to use any Business
Intellectual Property Right owned by the Company; and (iii) the franchises,
licenses, sublicenses, contracts and agreements pursuant to which the
Company is authorized to use any such Business Intellectual Property Right
not owned by the Company, including with respect to (ii) or (iii), the
identity of all parties thereto, a description of the nature and subject
matter thereof, the royalty provided and the term thereof.
(B) Except as set forth on the Schedule of Exceptions, the Company
owns or has the right to use pursuant to franchise, license, sublicense,
contract, agreement, or permission, all of the Business Intellectual
Property Rights necessary for the conduct of its business (as currently
conducted). All applicable fees, royalties and other amounts due and
payable by by the Company to any Person or to the Company by any Person in
respect of such Business Intellectual Property Rights have been paid. The
Company has taken all reasonably necessary and desirable action to maintain
and protect each Business Intellectual Property Right that it owns or has
the right to use.
(C) Except for third party licenses listed on the Schedule of
Exceptions, the Company is the sole and exclusive owner of its Business
Intellectual Property Rights including, but not limited to, those listed or
described on the Schedule of Exceptions, or has the right to the use
thereof for the material covered thereby in connection with the services or
products in respect to which they have been or are now being used.
(D) Except as set forth on the Schedule of Exceptions, the Company
(i) is not the subject of any pending litigation or, to the Company's
knowledge, any claim regarding infringement of or misappropriation or
misuse of any Business Intellectual Property Right of the Company or other
tangible right of any other Person, (ii) has no knowledge of any such
infringement, whether or not claimed by any other Person, which
infringement might have a Material Adverse Effect, (iii) has no knowledge
of any infringement by any other Person of any of the Business Intellectual
Property Rights of the Company, and (iv) has no knowledge of any facts or
circumstances which would reasonably be anticipated to result in any such
litigation or claim or which would reasonably lead the Company to conclude
that the continued operation and conduct of any aspect of its business
would result in any such litigation or claim. To the knowledge of the
Company, except as set forth on the Schedule of Exceptions, there is no
other Person that is operating under or otherwise using any name
confusingly similar with any trade names, trademarks, service names,
service marks or logos included in the Company's Business Intellectual
Property Rights. To the best of the Company's knowledge, no Business
Intellectual Property licensed by the Company from a third party is subject
to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by the Company. Except as set forth on the
Schedule of Exceptions, no Business Intellectual Property Right of the
Company is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use thereof by the Company. Except as
MCI CONFIDENTIAL
13
set forth on the Schedule of Exceptions, the Company has not entered into
any written agreement to indemnify any other Person against any charge of
infringement by any Business Intellectual Property Rights.
(E) Except as set forth on the Schedule of Exceptions, to the best of
the Company's knowledge after reasonable inquiry, no material trade secrets
included in the Company's Business Intellectual Property Rights have been
disclosed by the Company to any Person other than employees, agents and
representatives of the Company and its Affiliates or the Buyer. The
Company has taken such reasonable measures as is appropriate to protect all
of its trade secrets.
(F) Except for obligations that arise under the common law of the
appropriate jurisdiction, to the best of the Company's knowledge, neither
the Company, nor any of its employees, has, other than confidentiality and
other agreements assigning inventions made prior to their employment with
the Company, any written agreements or arrangements with former employers
of such employees relating to trade secrets of such employers, the
assignment of inventions of such employers, or such employee's engagement
in activities competitive with such employers. Except for obligations that
arise under the common law of the appropriate jurisdiction, to the best of
the Company's knowledge, the activities of such employees on behalf of the
Company do not violate any agreements or arrangements known to the Company
which any such employees have with former employers.
28.1 Liens. None of the properties or assets, whether real, personal or
-----
mixed, or tangible or intangible, owned or leased by the Company is subject to
any mortgage, lien, encumbrance or other security interest or restrictions on or
conditions to transfer or assignment, except for (a) liens for taxes and
assessments or governmental charges or levies not at the time due; (b) liens in
respect of pledges or deposits under workmen's compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers' and materialmen's
and similar liens, if the obligations secured by such liens are not then
delinquent or are being contested in good faith by appropriate proceedings; and
(c) liens incidental to the conduct of the business.
29.1 Insurance. Schedule 5.17 contains a list of all insurance policies
--------- -------------
and fidelity bonds relating to the assets of the Company, including summary
descriptions and the termination dates thereof. The Company has not had
coverage denied or limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance, during the last two (2) years.
The Company is not in material default with respect to any provision contained
in any insurance policy and has not failed to give any notice or present any
claim thereunder in timely fashion.
30.1 Property.
--------
(A) Schedule 5.18 identifies all of the real property that the
-------------
Company leases (as lessee), has agreed to lease or has an obligation to
lease in connection with the Business. Such leased real property, the loss
of which would have a Material Adverse Effect, is hereinafter referred to
as the "Leased Property," and the improvements and fixtures
MCI CONFIDENTIAL
14
thereon are hereinafter referred to as the "Leased Improvements." The
Company does not own any real property.
(B) There are no adverse or other parties in possession of the Leased
Property, the Leased Improvements or any portion or portions thereof, and
the leasehold interest in the Leased Property and the Leased Improvements
is free and clear of any and all leases, licensees, occupants or tenants.
To the knowledge of the Company, there are no pending or threatened
condemnation, eminent domain or similar proceedings, or litigation or other
proceedings affecting the Leased Property, the Leased Improvements or any
portion or portions thereof. To the knowledge of the Company, there are no
pending requests, applications or proceedings to alter or restrict any
zoning or other use restrictions applicable to the Leased Property or the
Leased Improvements that would interfere with the conduct of its business,
which interference would have a Material Adverse Effect. The Leased
Property have access, in accordance with past practice, to and from a
public right of way or road dedicated for public use and no notice has been
received by the Company relating to the termination or impairment of such
access (including applicable parking requirements).
31.1 Environmental Matters.
---------------------
(A) As used in this Agreement "Hazardous Material" shall mean: (i)
any "hazardous substance" as now defined pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
42 U.S.C. (S) 9601(14), or any substance listed or identified by any
characteristic in any regulation adopted pursuant to any statute referred
to or incorporated into such definition, all as in effect on the date
hereof; (ii) any petroleum, including crude oil and any fraction thereof;
(iii) natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas usable for fuel; (iv) any "hazardous chemical" as defined pursuant to
29 C.F.R. Part 1910; and (v) any asbestos, polychlorinated biphenyl, or
isomer of dioxin.
(B) To the Company's knowledge, the Company has not used, generated,
manufactured, stored, disposed of, on, or about any of the real property
leased or used by any the Company any Hazardous Materials in violation of
any Environmental Laws. The Company has not received any notice of, or to
the knowledge of the Company is subject to, any actual or potential
liability, fixed or contingent, under any Environmental Laws.
(C) To the Company's knowledge, neither the Company nor any of its
predecessors in interest has any liability, matured or not matured,
absolute or contingent, assessed or unassessed, imposed or based upon any
provision under any foreign, federal, state or local law, rule, or
regulation or common law, or under any code, order, decree, judgment or
injunction applicable to the Company or its predecessors in interest, nor
has the Company received any notice, or request for information issued,
promulgated, approved or entered thereunder, or under the common law, or
any tort, nuisance or
MCI CONFIDENTIAL
15
absolute liability theory, relating to public health or safety, worker
health or safety, or pollution, damage to or protection of the environment
including without limitation, laws relating to emissions, discharges,
releases or threatened releases of Hazardous Material into the environment
(including without limitation, ambient air, surface water, groundwater,
land surface or subsurface), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, generation, disposal,
transport or handling of any Hazardous Material (collectively referred to
as "Environmental Laws").
32.1 Governmental Authorizations. The Company possesses all licenses,
---------------------------
franchises, permits, certificates, orders, approvals, exemptions, registrations
or other authorizations (collectively, the "Permits") from governmental,
regulatory or administrative agencies or authorities required for the ownership
of its properties and assets and operation of its business in the manner
presently conducted (including those required pursuant to laws or regulations
relating to the protection of the environment), each of which is in full force
and effect, the absence of which would have a Material Adverse Effect. No
registrations, filings, applications, notices, transfers, consents, approvals,
orders, qualifications, waivers or other actions of any kind are required by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to enable the Company to continue the
possession and operation of its properties and assets and the business of the
Company as presently conducted in all material respects.
33.1 Employee Relations. The Company has not at any time during the past
------------------
five years had, nor is there now threatened, any labor disputes or any strike,
picket, work stoppage, work slowdowns or other job action due to labor
disagreements. The Company is (a) in material compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, including the terms and provisions of any
collective bargaining agreement or other contract with a labor union
representing any employees of the Company and is not engaged in any unfair labor
practice; (b) there is no unfair labor practice charge or complaint against the
Company, or (to the knowledge of the Company) threatened before the National
Labor Relations Board or any foreign authority; (c) no question concerning
representation has been raised to the Company or is (to the knowledge of the
Company) threatened respecting the employees of the Company; (d) no grievance
that might have a Material Adverse Effect on the Company, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and, to the Company's knowledge, no claims therefor exist; and (e) no
collective bargaining agreement that is binding on the Company restricts it from
relocating, closing or contracting any of its operations.
34.1 Employees. To the knowledge of the Company, no employee of the
---------
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or to the Company's knowledge any
other party because of the nature of the business conducted or to be conducted
by the Company. There is no pending nor, to the Company's knowledge, threatened
action, suit, proceeding or claim, or to its knowledge any basis therefor or
threat thereof with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence.
MCI CONFIDENTIAL
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The Company and each employee of the Company and any subsidiary of the Company
employed in any technical capacity or with access to confidential information
of the Company has entered into a Confidential Information and Invention
Assignment Agreement substantially in the form of Exhibit D hereto.
---------
35.1 Broker's or Finder's Fees. No agent, broker, investment banker,
-------------------------
Person or firm acting on behalf of the Company or under the authority of the
Company is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from any of the parties hereto
in connection with any of the transactions contemplated hereby.
36.1 Disclosure. No representation or warranty by the Company to the
----------
Buyer contained in this Agreement, and no statement contained in the Schedules
hereto or any certificate furnished to the Buyer pursuant to the provisions
hereof, taken as a whole, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein not misleading.
37.1 Certain Transactions. None of the directors or officers of the
--------------------
Company is currently a party to any material transaction with the Company (other
than for services as employees, officers and directors), including without
limitation, any material contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, any such
Person, or to or from any corporation, partnership, trust or other entity in
which any such Person owns in excess of five percent (5%) of the outstanding
equity interest.
38.1 Offering. Subject to the accuracy of the Buyer's representations in
--------
Article VI hereof, the offer, sale and issuance of the Stock and Warrant to be
issued in accordance with the terms of this Agreement, and the issuance of the
common stock to be issued upon conversion of the Stock and shares issuable
pursuant to the Warrant, constitute transactions exempt from the registration
requirements of the Securities Act.
ARTICLE 39 -- REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company, and the Company in
agreeing to consummate the transactions contemplated by this Agreement have
relied upon such representations and warranties, that:
40.1 Corporate Organization. The Buyer is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority (corporate and other) to own, lease
and operate its properties and to carry on its business as now being conducted.
MCI CONFIDENTIAL
17
41.1 Valid and Binding Agreements. The Buyer has all requisite corporate
----------------------------
power and authority to enter into this Agreement. All necessary action on the
part of the Buyer has been taken to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transaction contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Buyer, and will constitute the valid and binding
agreement of the Buyer, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights generally and to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
42.1 No Violation. Neither the execution and delivery of this Agreement
------------
nor the consummation of the transactions contemplated hereby or thereby nor
compliance by the Buyer with any of the provisions hereof or thereof will (i)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Buyer or any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Buyer, or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or other encumbrance upon the stock or any of
the properties or assets of the Buyer under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument of the Buyer.
43.1 Consents and Approvals. No permit, consent, approval or
----------------------
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or third party is required to be made or obtained by the
Buyer in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby or
thereby.
44.1 Broker's or Finder's Fees. No agent, broker, investment banker,
-------------------------
Person or firm acting on behalf of the Buyer, or under the authority of the
Buyer, is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly from the Buyer in connection
with any of the transactions contemplated hereby.
45.1 Investment Representations.
--------------------------
(A) By reason of its business and financial experience, Buyer has the
capacity to protect its own interests in connection with the purchase of
the Stock and Warrant hereunder and has the ability to bear the economic
risk of this investment.
(B) Buyer is acquiring the Stock and the Warrant and the common stock
underlying the Stock and Warrant for investment for its own account, not as
a nominee or agent, and not with the view to, or for resale in connection
with, any distribution
MCI CONFIDENTIAL
18
thereof. Buyer understands that the Stock and Warrant to be purchased (and
the common stock issuable upon conversion of the Stock and Warrant) have
not been, and will not be, registered under the Securities Act by reason of
a specific exemption from the registration provisions of the Securities
Act, the availability of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of Buyer's
representations as expressed herein.
(C) Buyer acknowledges that the Stock and Warrant (and the common
stock issuable upon conversion of the Stock and Warrant) must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. Buyer is aware of
the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less
than two years after a party has purchased and paid for the security to be
sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations.
(D) Buyer understands that no public market now exists for any of the
securities issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Company's
securities.
(E) Buyer has had an opportunity to discuss business, management and
financial affairs of the Company with its management.
ARTICLE 46 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
All obligations of the Buyer that are to be discharged under this Agreement
at the Closing are subject to the Company's fulfillment, at the Closing or
effective as of the Closing Date, of each of the following conditions (unless
expressly waived in writing by the Buyer at any time at or prior to the Closing)
and the Company shall use its reasonable efforts to cause each of such
conditions to be satisfied:
47.1 Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of the Company set forth in Article V of this
Agreement shall be true and correct in all respects as though such
representations and warranties had been made by the Company on and as of the
Closing Date and the Buyer shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of the
Company to such effect.
48.1 Covenants, Agreements and Conditions. The Company shall have
------------------------------------
performed and complied in all respects with all covenants, agreements and
conditions contained in this Agreement required to be performed by the Company
on or prior to the Closing Date, and the
MCI CONFIDENTIAL
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Buyer shall have received at the Closing a certificate, dated the Closing Date,
signed by the President or a Vice President of the Company to such effect.
49.1 Proceedings. No action or proceeding shall be pending or threatened
-----------
to restrain or prevent the consummation of the transactions contemplated hereby.
50.1 Corporate Proceedings. All corporate and other proceedings to be
---------------------
taken and all consents to be obtained in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Buyer and its counsel,
both of whom shall have received all such originals or certified or other copies
of such documents as either may reasonably request.
51.1 Governmental Approvals. There shall have been received all necessary
----------------------
governmental consents or authorizations required in connection with the
transactions contemplated hereby including all necessary Blue Sky law permits
and qualification.
52.1 Amendment to Articles of Incorporation. The Company shall have filed
--------------------------------------
its Amended and Restated Articles of Incorporation in the form attached hereto
as Exhibit E.
---------
53.1 Insurance. The Company shall have maintained in full force and
---------
effect the insurance coverage described on Schedule 5.17 hereto or policies
-------------
providing substantially equivalent coverage.
54.1 Deliveries. The Company shall have delivered to the Buyer the
----------
following items:
(A) certificates representing the shares of Stock, duly endorsed or
accompanied by stock powers duly executed in blank (with signatures
guaranteed by any national bank or trust company) and otherwise in form
acceptable for transfer on the books of the Company, with all requisite
stock transfer tax stamps attached;
(B) the executed Warrant;
(C) the executed Commercial Documents and Registration Rights
Agreement;
(D) a certificate dated as of or about the Closing Date, as to the
good standing of the Company from the Secretary of State of California;
(E) a certificate of the Secretary or Assistant Secretary of the
Company, certifying as to the Articles of Incorporation, By-laws,
resolutions of the Board of Directors, and incumbency and signatures of
officers of the Company; and
(F) all other previously undelivered items required to be delivered
by the Company to the Buyer at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith unless waived in
writing by the Buyer.
MCI CONFIDENTIAL
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55.1 Opinion of Counsel. The Buyer shall have received a written opinion
------------------
dated as of the Closing Date from Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, counsel to the
Company, in the form attached hereto as Exhibit F.
---------
ARTICLE 56 -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
All obligations of the Company that are to be discharged under this
Agreement at the Closing are subject to Buyer's fulfillment at the Closing or
effective as of the Closing Date of each of the following conditions (unless
expressly waived in writing by the Company at any time at or prior to the
Closing) and the Buyer shall use its reasonable efforts to cause each of such
conditions to be satisfied:
57.1 Representations and Warranties. On the Closing Date, the
------------------------------
representations and warranties of the Buyer set forth in Article VI of this
Agreement shall be true and correct in all respects as though such
representations and warranties had been made on and as of the Closing Date, and
the Company shall have received at the Closing a certificate, dated the Closing
Date, signed by the President or a Vice President of the Buyer to such effect.
58.1 Covenants, Agreements and Conditions. The Buyer shall have performed
------------------------------------
and complied in all respects with all covenants, agreements and conditions
contained in this Agreement required to be performed by it on or prior to the
Closing Date, and the Company shall have received at the Closing a certificate,
dated the Closing Date, signed by the President or a Vice President of the Buyer
to such effect.
59.1 Proceedings. No action or proceeding shall be pending or threatened
-----------
to restrain or prevent the consummation of the transactions contemplated hereby.
60.1 Corporate Proceedings. All corporate and other proceedings to be
---------------------
taken and all consents to be obtained in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and its counsel,
Xxxxxxx Phleger & Xxxxxxxx LLP, each of whom shall have received all such
originals or certified or other copies of such documents as either may
reasonably request.
61.1 Governmental Approvals. There shall have been received all necessary
----------------------
governmental consents or authorizations required in connection with the
transactions contemplated hereby including all necessary Blue Sky law permits
and qualities.
62.1 Deliveries. The Buyer shall have delivered to the Company the
----------
following items:
(A) the payment as required by Section 2.2;
(B) the Commercial Documents executed by it; and
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(C) all other previously undelivered items required to be delivered
by the Buyer at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith unless waived in writing by the
Company and the Stockholders.
ARTICLE 63 -- AFFIRMATIVE COVENANTS AND AGREEMENTS OF THE COMPANY
64.1 Financial Reporting. The Company hereby covenants and agrees with
-------------------
the Buyer that from and after the Closing, so long as any of the Series C
Preferred Stock is outstanding, the Company will deliver to the Buyer (i) within
forty-five (45) days after the end of each quarter, quarterly unaudited
financial statements; (ii) within one hundred twenty (120) days after the end of
each fiscal year, audited financial statements for such period; and (iii)
within ninety (90) days after the end of the fiscal year, an annual financial
plan for the Company. The Company also agrees to provide Buyer the opportunity
for its representative who is approved by the Company to attend Board of
Directors meetings including the receipt of advance notice thereof; provided,
however, that the Company shall not be obligated to provide any information that
it considers in good faith to be a trade secret or to contain confidential or
classified information and provided further that the Company may at the
discretion of the Board of Directors exclude any non-board member from its
executive sessions of its Board of Directors.
65.1 Reservation of Conversion Shares. The Company shall at all times
--------------------------------
reserve and keep available out of its authorized but unissued shares of common
stock, for the purposes of effecting the conversion of the Stock and the
issuance of shares issuable pursuant to the Warrant and otherwise complying with
the terms of this Agreement, such number of its duly authorized shares of common
stock as shall be sufficient to effect the conversion of the Stock and the
issuance of shares issuable pursuant to the Warrant, as from time to time
outstanding. If at any time the number of authorized but unissued shares of
common stock shall not be sufficient to effect the conversion of the Stock and
the issuance of shares issuable pursuant to the Warrant, the Company will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of common stock as shall be sufficient for such
purposes.
66.1 Confidential Information and Invention Assignment Agreement. The
-----------------------------------------------------------
Company and each person now or hereafter employed in any technical capacity by
it or any subsidiary with access to confidential information will enter into a
Confidential Information and Invention Assignment Agreement in substantially the
form of Exhibit E hereto, and the Company shall use its best efforts to cause
---------
any consultant retained by it that has access to confidential information to
enter into a form of Consulting Agreement with substantially similar
confidentiality and non-solicitation provisions.
67.1 Repurchase. Upon and only at the written request of Buyer, so long
----------
as any of the Series C Preferred Stock is outstanding, in the event of (a) a
material breach of any of the Company's representations, warranties or covenants
contained herein, or (b) a termination of any of the Commercial Documents as a
result of the Company's material breach of any of its
MCI CONFIDENTIAL
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representations, warranties or covenants contained in such documents, the
Company shall repurchase the Stock for the liquidation value thereof as
specified in the Company's articles of incorporation.
ARTICLE 68 -- OTHER MATTERS
69.1 Indemnification.
---------------
(A) Subject to the limitations hereinafter set forth in this Section
10.1, the Company shall protect, defend, hold harmless and indemnify the
Buyer, its officers, directors, employees and agents, and their respective
successors and assigns from, against and in respect of any and all losses,
liabilities, deficiencies, penalties, fines, costs, damages and expenses
whatsoever (including without limitation, reasonable professional fees and
costs of investigation, litigation, settlement, and judgment and interest)
(collectively, "Losses") that is suffered or incurred by any of them
arising from or by reason of any of the following:
(1) Any breach of any representation, warranty, covenant or
agreement made by the Company in this Agreement or contained in any
certificate executed by the Company and delivered to the Buyer in
connection with this Agreement;
(2) Any claims of any broker, investment banker, Person or firm
acting on behalf of the Company for a broker's or finder's fee or any
other commission or similar fee arising in connection with the
transactions contemplated hereby;
(3) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without
limitation, interest, penalties, reasonable legal fees and accounting
fees) incident to the foregoing and the enforcement of the provisions
of this Section 10.1.
(B) Subject to the limitations hereinafter set forth in this Section
10.1, the Buyer shall protect, defend, hold harmless and indemnify the
Company, its officers, directors, employees and agents, and its respective
successors and assigns, from, against and in respect of any and all Losses
that is suffered or incurred by any of them arising from or by reason of
any of the following:
(1) Any breach of any representation, warranty, covenant or
agreement made by the Buyer in this Agreement or contained in any
certificate executed by the Buyer and delivered to the Company in
connection with this Agreement;
(2) Any claims of any broker, investment banker, Person or firm
acting on behalf of the Buyer for a broker's or finder's fee or any
other commission or similar fee arising in connection with the
transactions contemplated hereby; and
(3) Any and all actions, suits, proceedings, claims, demands,
assessments,
MCI CONFIDENTIAL
23
judgments, costs and expenses (including without limitation, interest,
penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 10.1.
(C) Each of the Buyer and the Company shall be liable to the other
for any Losses arising under this Agreement or caused by any breach of a
representation or warranty made by such party as to which the Buyer or
Company is otherwise entitled to indemnity under this Agreement only up to
the amount of the Purchase Price.
(D) For purposes of this Section 10.1, any assertion of fact and/or
law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date
that such assertion is made, immediately invoke that party's obligation to
protect, defend, hold harmless and indemnify the other party to this
Agreement pursuant to this Section 10.1.
70.1 Indemnification Procedures. All claims for indemnification under
--------------------------
this Agreement shall be asserted and resolved as follows:
(A) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party
claim ("Third Party Claim") asserted against the Indemnified Party which
could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party a written notice ("Claim Notice")
describing in reasonable detail the nature of the Third Party Claim, a copy
of all papers served with respect to such claim (if any), an estimate of
the amount of damages attributable to the Third Party Claim, if reasonably
possible, and the basis of the Indemnified Party's request for
indemnification under this Agreement.
(B) Within thirty (30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified
Party (i) whether the Indemnifying Party disputes its potential liability
to the Indemnified Party under this Article X with respect to such Third
Party Claim and (ii) whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
(C) If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party does not dispute its
potential liability to the Indemnified Party under this Article X and that
the Indemnifying Party elects to assume the defense of the Third Party
Claim, then the Indemnifying Party shall have the right to defend, at its
sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 10.2. The
Indemnifying Party shall have full control of such defense and proceedings
including any compromise or settlement thereof; provided that any
MCI CONFIDENTIAL
24
non-monetary aspect of any settlement shall require the consent of the
Buyer, which consent shall not be unreasonably withheld or delayed. The
Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party (but only if the Indemnified Party consents, which
consent shall not be unreasonably withheld), to file, during the Election
Period, any motion, answer or other pleadings which the Indemnified Party
shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party. If requested by the Indemnifying Party, the
Indemnified Party shall, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim which the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 10.2 and, except as permitted above, shall bear
its own costs and expenses with respect to such participation.
(D) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to this Section 10.2, or if the Indemnifying
Party elects to defend the Indemnified Party pursuant to this Section 10.2
but fails to diligently prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings. The Indemnified Party shall have full control of such defense
and proceedings; provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld or delayed, any compromise or settlement of such
Third Party Claim. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 10.2, and the Indemnifying Party shall bear its
own costs and expenses with respect to such participation.
(E) In the event an Indemnified Party should have a claim against an
Indemnifying Party hereunder which does not involve a Third Party Claim,
the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature
of the claim, an estimate of the amount of damages attributable to such
claim and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the
Indemnified Party within sixty (60) days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes such claim, the claim specified
by the Indemnified Party in the Indemnity Notice shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party
has timely disputed such claim, as provided above, such dispute shall be
resolved by litigation in an appropriate court of competent jurisdiction.
(F) Payments of all amounts owing by the Indemnifying Party pursuant
to Sections 10.2(C) and (D) shall be made within thirty (30) days after the
latest of (i) the
MCI CONFIDENTIAL
25
settlement of the Third Party Claim, (ii) the expiration of the period for
appeal of a final adjudication of such Third Party Claim or (iii) the
expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by the Indemnifying Party
pursuant to Section 10.2(E) shall be made within thirty (30) days after the
later of (i) the expiration of the sixty-day Indemnity Notice period or
(ii) the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this
Agreement.
(G) The failure to provide notice as provided in this Section 10.2
shall not excuse any party from its continuing obligations hereunder;
however, any claim shall be reduced by the damages resulting from such
party's delay or failure to provide notice as provided in this Section
10.2.
71.1 Confidentiality. Notwithstanding the termination of this Agreement,
---------------
each party hereto and its respective accountants, attorneys, employees and other
agents, will keep confidential all information, oral and written, obtained from
any other party hereto or its Affiliates and refrain from using in any manner
all information set forth above in accordance with that certain Nondisclosure
Agreement between the Company and the Buyer dated October 29, 1996.
72.1 Further Assurances. Each party hereto shall cooperate with the
------------------
others, and execute and deliver, or cause to be executed and delivered, all such
other instruments, including instruments of conveyance, assignment and transfer,
and take all such other actions as may be reasonably requested by the other
parties hereto from time to time, consistent with the terms of this Agreement,
to effectuate the purposes and provisions of this Agreement.
ARTICLE 73 -- MISCELLANEOUS
74.1 Survival of Representations, Warranties and Agreements. All
------------------------------------------------------
representations and warranties of the Buyer and the Company contained in
Articles V and VI herein and in any certificate executed and delivered by either
the Buyer or the Company in connection with this Agreement shall survive the
Closing Date and shall terminate and expire one (1) year from the Closing Date.
All agreements of the parties contemplating performance after the Closing Date
shall survive the Closing Date for a period equal to ninety (90) days after the
expiration of the applicable statute of limitations for any claim relating
thereto.
75.1 Service of Process. Service of process on the Company or the Buyer
------------------
for any claim, legal action or proceeding under this Agreement may be made in
the manner set forth in Section 11.3.
76.1 Notices. All notices, requests, consents and other communications
-------
hereunder shall be deemed given if delivered personally (including by courier),
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses or to other
such addresses as may be furnished in writing by one party to the others:
MCI CONFIDENTIAL
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(A) if to the Company:
Genesys Telecommunications Laboratories, Inc.
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx and Xxxxxxx X. XxXxxxx
with a copy to:
Xxxxxxx Phleger & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(B) If to the Buyer:
MCI Telecommunications Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: President, networkMCI Services
with a copy to:
MCI Communications Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: General Counsel
77.1 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of California, without regard to such
jurisdiction's conflicts of law principles. The parties agree that venue or any
suit, action, proceeding or litigation arising out of or in relation to this
Agreement shall be in any federal or state court in the State of California
having subject matter jurisdiction.
78.1 Modification; Waiver. This Agreement shall not be altered or
--------------------
otherwise amended except pursuant to an instrument in writing signed by the
Buyer and the Company. Any party may waive any misrepresentation by any other
party, or any breach of warranty by, or failure to perform any covenant,
obligation or agreement of, any other party, provided that mere inaction or
--------
failure to exercise any right, remedy or option under this Agreement, or
delaying in exercising the same, will not operate as nor shall be construed as a
waiver, and no waiver will be effective
MCI CONFIDENTIAL
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unless set forth in writing and only to the extent specifically stated therein.
79.1 Entire Agreement. This Agreement, the Schedules and Exhibits hereto,
----------------
and any other agreements or certificates delivered pursuant hereto constitute
the entire agreement of the parties hereto with respect to the matters
contemplated hereby and supersede all previous written or oral negotiations,
commitments, representations and agreements (provided however that the
Nondisclosure Agreement between the parties dated October 29, 1996 shall remain
in full force and effect).
80.1 Assignment; Successors and Assigns. This Agreement may not be
----------------------------------
assigned by either Party without the prior written consent of the other Party,
except that Buyer may assign this Agreement to its subsidiaries or affiliates.
All covenants, representations, warranties and agreements of the parties
contained herein shall be binding upon and inure to the benefit of their
respective successors and permitted assigns.
81.1 Public Announcements. No public announcement of the transactions
--------------------
contemplated hereby or of the terms hereof shall be made by the parties to this
Agreement without the written consent, such consent not to be unreasonably
withheld or delayed, of the Buyer and the Company, except to the extent required
by law. The parties expressly agree that a public announcement shall be deemed
to include a description of the transactions contemplated hereby contained in
any registration statement filed by the Company with the Securities and Exchange
Commission.
82.1 Severability. The provisions of this Agreement are severable, and in
------------
the event that any one or more provisions are deemed illegal or unenforceable,
the remaining provisions shall remain in full force and effect, provided that no
such severability shall be effective if it materially changes the economic
benefits of this Agreement to either party.
83.1 No Third Party Beneficiary. This Agreement is intended and agreed to
--------------------------
be solely for the benefit of the parties hereto and their stockholders, and no
other party shall accrue any benefit, claim or right of any kind whatsoever
pursuant to, under, by or through this Agreement.
84.1 Expenses. Except as otherwise expressly provided herein, each party
--------
to this Agreement will pay its own expenses in connection with the negotiation
of this Agreement, the performance of its obligations hereunder, and the
consummation of the transactions contemplated herein.
85.1 Execution in Counterpart. This Agreement may be executed in one or
------------------------
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
MCI CONFIDENTIAL
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IN WITNESS WHEREOF, the parties have executed this Securities
Purchase Agreement as of the date first written above.
MCI TELECOMMUNICATIONS CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Executive Vice President
GENESYS TELECOMMUNICATIONS
LABORATORIES, INC.
By: /s/ Xxxxxxx X. XxXxxxx
----------------------------------
Name: Xxxxxxx X. XxXxxxx
Title: Vice President
CONFIDENTIAL
