<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DALEEN TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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FLORIDA 7372 68-0499260
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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902 CLINT MOORE ROAD
BOCA RATON, FLORIDA 33487
(561) 999-8000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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JAMES DALEEN
CHIEF EXECUTIVE OFFICER
DALEEN TECHNOLOGIES, INC.
902 CLINT MOORE ROAD
BOCA RATON, FLORIDA 33487
(561) 999-8000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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COPIES TO:
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JOHN C. YATES, ESQ. BRENT B. SILER, ESQ.
JEFFREY L. SCHULTE, ESQ. HALE AND DORR LLP
VIPANJ B. PATEL, ESQ. 1455 PENNSYLVANIA AVENUE, N.W.
MORRIS, MANNING & MARTIN, L.L.P. WASHINGTON, D.C. 20004
1600 ATLANTA FINANCIAL CENTER (202) 942-8400
3343 PEACHTREE ROAD, N.E. (202) 942-8484 (FACSIMILE)
ATLANTA, GEORGIA 30326
(404) 233-7000
(404) 365-9532 (FACSIMILE)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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Common stock, par value $0.01 per share............. $57,000,000 $15,846
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(1) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE IN
ACCORDANCE WITH RULE 457(O) UNDER THE SECURITIES ACT OF 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 8, 1999
SHARES
[COMPANY LOGO]
DALEEN TECHNOLOGIES, INC.
COMMON STOCK
We are offering shares of our common stock. This is our
initial public offering and no public market currently exists for our shares. We
have applied to have the shares we are offering approved for quotation on the
Nasdaq National Market under the symbol "DALN." We anticipate that the initial
public offering price will be between $ and $ per share.
-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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PER SHARE TOTAL
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Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to Daleen Technologies, Inc........................ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We and one of our stockholders have granted the underwriters a 30-day
option to purchase up to an additional shares of common stock to
cover over-allotments. We will not receive any proceeds from the sale of shares
by the selling stockholder. BancBoston Robertson Stephens Inc. expects to
deliver the shares of common stock to purchasers on , 1999.
-------------------------
BANCBOSTON ROBERTSON STEPHENS
HAMBRECHT & QUIST
SG COWEN
ROBERT W. BAIRD & CO.
INCORPORATED
The date of this Prospectus is , 1999
<PAGE> 3
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
"DALEEN," "WE," "US" AND "OUR" REFER TO DALEEN TECHNOLOGIES, INC. AND ITS
SUBSIDIARIES.
UNTIL 1999, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
-------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Special Note Regarding Forward-Looking Statements........... 16
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 20
Selected Consolidated Financial Data........................ 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 35
Management.................................................. 50
Certain Transactions........................................ 59
Principal Stockholders...................................... 61
Description of Capital Stock................................ 64
Shares Eligible for Future Sale............................. 67
Underwriting................................................ 69
Legal Matters............................................... 71
Experts..................................................... 71
Where You Can Find More Information......................... 71
Index to Consolidated Financial Statements.................. F-1
</TABLE>
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"Daleen(TM)," "Daleen Technologies(TM)," "BillPlex(TM)," the Daleen logo
and the BillPlex logo are trademarks of our company. Other trademarks or service
marks appearing in this prospectus are the property of their respective holders.
i
<PAGE> 4
SUMMARY
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the consolidated financial statements and notes, before
deciding to invest in shares of our common stock.
DALEEN TECHNOLOGIES, INC.
We are a leading provider of next-generation billing and customer care
software that can serve as the core of an enterprise solution for integrated
communications providers. Our flagship product, BillPlex, is designed to enable
providers of multiple communications services, such as voice, data, video and
application hosting, to compete more effectively while lowering the total costs
of their strategic billing and customer care services. The majority of our
customers have indicated to us that they are utilizing or planning to utilize
BillPlex to support data services in addition to traditional voice services.
BillPlex's innovative software architecture gives service providers the ability
to rapidly and cost-effectively deploy a truly convergent service
offering -- including multiple, usage-based services; a single, unified invoice;
and a single point for customer management across all services. Our solution
provides mission-critical functions such as account and service provisioning,
subscriber care and management, rating, billing and payment processing. BillPlex
is designed to serve as the central integration point for a service provider's
enterprise information systems. We utilize our direct sales organization and a
variety of strategic marketing alliances to reach our targeted customer base of
companies that are seeking to provide multiple, convergent communications
services.
We believe that emerging communications providers are seeking a
next-generation of billing and customer care software. From inception, BillPlex
has been designed as a convergent software solution to enhance a service
provider's specific business model and to enable the provider to respond rapidly
to dynamic market conditions and to offer new services and marketing programs.
BillPlex is designed to enable service providers to capture the key benefits of:
- Increased revenue and market share by shortening a provider's time to
launch its business and new services, immediately activating new
subscribers and enabling providers to offer targeted marketing programs
and service bundles;
- A pre-configured, whole-product software solution with a comprehensive
suite of billing and customer care functions, as well as market-based
packages that enable providers to enter specific markets and rapidly
launch targeted services with minimal system implementation costs;
- Improved customer service and customer retention by creating customized,
convergent invoices for all segments of a provider's customer base; by
enabling customer service representatives to provide superior customer
care and responsiveness through real-time access to all necessary
subscriber account information; and by allowing subscribers to access
their own account information over the internet;
- Enterprise integration and interoperability with other applications in a
service provider's information systems environment, making future system
upgrades easier and less expensive to implement;
- Flexibility, scalability and reliability so that BillPlex can grow with a
service provider's future needs as the provider adds more users or more
communications service offerings; and
- Increased productivity and lower total operating costs by utilizing a
single, comprehensive software platform to support multiple, convergent
service offerings, by providing an intuitive graphical user interface for
customer service representatives, and by reducing the amount of
customization, reprogramming and integration required to operate the
system.
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OUR MARKET OPPORTUNITY
The deregulation of the communications industry in the United States and
abroad has spurred the proliferation of new service providers that are fiercely
competing with each other and with existing service providers for market share.
As core communications services have become commoditized and new technologies
have emerged, service providers have begun to bundle a variety of communications
services, such as wireline and wireless voice, internet access and data, video,
internet telephony and application hosting, in order to distinguish themselves
and attract and retain customers. The new generation of service providers who
offer multiple communications services are known as integrated communications
providers, or ICPs.
Billing and customer care, or BACC, systems are a key component of a
service provider's information systems because they enable the provider to
better manage its customers and revenue and to dynamically change and expand its
service offerings, marketing programs and rate plans. However, many of the BACC
systems currently in use were created before the emergence of today's
competitive and converging market. These legacy systems typically utilize older
technologies, are highly complex, are difficult and costly to develop and
maintain, have limited interoperability and flexibility and do not support
multiple service offerings. Over the last decade, a first generation of
third-party BACC vendors emerged, but many of their products employ older
technologies and architectures, were designed before the proliferation of ICPs,
and require a substantial amount of costly customization and maintenance. We
believe that existing and emerging ICPs are looking for a next-generation BACC
solution that is designed to support multiple communications services, to be
easily interoperable with other components of a service provider's information
system, to allow for rapid implementation with little customization, and to be
easily modified and maintained without a costly information technology staff.
OUR STRATEGY
Our goal is to become the leading provider of billing and customer care
software solutions to the ICP industry. We are pursuing this objective by:
- Aggressively targeting ICPs with a whole-product solution based on our
BillPlex product and its market-based packages;
- Building a scalable, software-based business model designed to meet our
customers' needs and to permit us to achieve rapid revenue growth with
high margins;
- Leveraging our strategic marketing alliances with leading information
systems integrators and providers of complementary information systems
components to accelerate our growth by extending our market coverage and
implementation resources;
- Developing and maintaining long-term customer relationships to attract
and retain customers through all phases of their growth, to drive
additional BillPlex sales, customer references and ongoing support and
maintenance revenues; and
- Expanding into new geographic markets and industry segments to pursue
market leadership and sustained profitable growth.
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OUR COMPANY
From our founding in 1989 through 1996, we operated as a software
consulting company performing contract consulting and software development
services and contract placement and staffing services. In 1996, we discontinued
our consulting work, sold our contract placement and staffing business to a
third party and began development of the BillPlex product. We introduced
BillPlex in 1997 and first recognized revenue from BillPlex license fees and
related professional services in 1998.
We were originally incorporated in Illinois in 1990, were reincorporated in
Florida in 1996, and will be reincorporated in Delaware in July 1999. Our
principal executive offices are located at 902 Clint Moore Road, Boca Raton,
Florida 33487 and our telephone number is (561) 999-8000. Our worldwide web
address is www.daleen.com, although information contained on our website does
not constitute part of this prospectus.
THE OFFERING
Common stock offered............... shares
Common stock to be outstanding
after this offering................ shares
Use of proceeds.................... Working capital and other general
corporate purposes, including product
development and expansion of our sales
and marketing capabilities.
Proposed Nasdaq National Market
symbol............................. DALN
The number of shares to be outstanding after the offering is based on
shares outstanding at June 30, 1999 and excludes shares that may be issued upon
exercise of the following options and warrants:
- 2,335,238 shares subject to outstanding options at a weighted average
exercise price of $3.54 per share;
- 1,865,000 shares subject to outstanding warrants at a weighted average
exercise price of $4.04 per share; and
- 241,881 additional shares reserved for issuance under our stock incentive
plan.
-------------------------
Except as otherwise indicated, all information in this prospectus:
- reflects the conversion of each outstanding share of preferred stock into
one share of common stock, which will occur automatically upon the
completion of this offering;
- assumes no exercise of the underwriters' over-allotment option; and
- reflects our planned reincorporation in Delaware before the effectiveness
of this offering.
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary financial data for our business. You
should read this information together with the consolidated financial statements
and the related notes appearing at the end of this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The pro forma net loss applicable to common
stockholders per share calculations and the pro forma balance sheet data reflect
the sale of shares of preferred stock in a private placement in June 1999 and
the automatic conversion of all outstanding shares of our preferred stock,
including the shares issued in the June 1999 private placement, into shares of
common stock upon the closing of this offering. The pro forma as adjusted
balance sheet data also reflect the sale of the common stock offered by us,
after deducting underwriting discounts and estimated offering expenses payable
by us. See note 1 to the consolidated financial statements appearing elsewhere
in this prospectus for information regarding net loss applicable to common
stockholders and shares used in computing net loss applicable to common
stockholders per share -- basic and diluted and pro forma net loss applicable to
common stockholders per share -- basic and diluted.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
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1996 1997 1998 1998 1999
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees............................................. $ -- $ -- $ 1,879 $ 57 $ 949
Professional services and other.......................... 2,550 156 3,352 138 830
Total revenue..................................... 2,550 156 5,231 195 1,779
Operating loss............................................. (2,809) (6,472) (12,923) (3,031) (3,017)
Net loss................................................... (1,526) (7,984) (12,169) (2,962) (2,959)
Net loss applicable to common stockholders................. (1,526) (7,984) (12,234) (2,962) (2,998)
Net loss applicable to common stockholders per
share -- basic and diluted............................... $(0.81) $ (3.48) $ (3.78) $ (0.92) $ (0.93)
Weighted average shares -- basic and diluted............... 1,879 2,295 3,237 3,218 3,240
Pro forma net loss applicable to common stockholders....... $(12,937) $(3,662)
Pro forma net loss applicable to common stockholders per
share -- basic and diluted............................... $ (0.93) $ (0.26)
Pro forma weighted average shares -- basic and diluted..... 13,856 13,859
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MARCH 31, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 824 $14,294 $
Working capital............................................. 1,793 15,263
Total assets................................................ 8,448 21,918
Stockholders' (deficit) equity.............................. (16,895) 18,411
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RISK FACTORS
You should carefully consider the following risks in addition to the
remainder of this prospectus before purchasing our common stock. The risks and
uncertainties described below are not the only ones facing our company. If any
of the following risks actually occur, our business, financial condition and
results of operations would likely suffer. In this case, the market price of our
common stock could decline, and you might lose all or part of the money you paid
to buy our common stock.
RISKS RELATED TO DALEEN
WE HAVE NOT ACHIEVED PROFITABILITY AND MAY CONTINUE TO INCUR NET LOSSES FOR AT
LEAST THE NEXT SEVERAL QUARTERS.
We incurred net losses of approximately $12.2 million in 1998, $8.0 million
in 1997 and $1.5 million in 1996. As of March 31, 1999, we had an accumulated
deficit of approximately $25.5 million. We have not yet realized any profit and
we cannot predict when, if ever, we will achieve profitability. We expect to
significantly increase our sales and marketing, product development and
administrative expenses. As a result, we will need to generate significant
additional revenue from sales of our products to achieve and maintain
profitability. For this reason, we expect to continue to incur net losses for at
least the next several quarters, even if sales of our products continue to grow.
Even if we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis in the future.
IT IS DIFFICULT TO EVALUATE OUR BUSINESS BECAUSE WE HAVE A LIMITED HISTORY
OPERATING AS A SOFTWARE COMPANY.
We have a limited operating history as a software company. As a result, the
progress of our business to date and our historical financial information are of
limited value in predicting our future operating results. In 1996, we changed
our business from providing consulting services to operating as a software
company. We introduced our principal product, BillPlex, in 1997 and we had no
license revenue until 1998. As of June 30, 1999, we had licensed BillPlex to
only 20 customers and, of these, only five had completed implementation and were
using BillPlex in their day-to-day operations. Because our software offering is
new, we have little revenue from recurring sources and must depend heavily on
revenue from new sales. Changing our business also required us to adjust our
business processes and make a number of significant personnel changes, including
changes and additions to our sales and marketing, professional services and
support, research and development and management teams. For all these reasons,
as you evaluate our business, you must consider the risks and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets. Our new business strategy may not be successful and we may not
successfully address these and other risks.
5
<PAGE> 9
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, AND WE MAY FAIL
TO MEET EXPECTATIONS.
Our revenue and operating results may vary significantly from quarter to
quarter due to a number of factors. In future quarters, our operating results
may be below the expectations of public market analysts and investors, and the
price of our common stock may fall. Factors that could cause quarterly
fluctuations include:
- variations in demand for our products and services;
- the timing and execution of individual contracts, particularly large
contracts that would materially affect our operating results in a given
quarter;
- our ability to develop and attain market acceptance of enhancements to
BillPlex and any new products and services;
- delays in introducing new products and services;
- the pace of product implementation and the timing of customer acceptance;
- the timing of implementation of our product by third-party systems
integrators;
- new product introductions by competitors;
- changes in our pricing policies or the pricing policies of our
competitors;
- delays of purchases in 1999 and early 2000 by customers who temporarily
stop purchasing software or reduce information technology spending due to
year 2000 concerns;
- the mix of products and services sold;
- the mix of sales channels through which our products and services are
sold; and
- the timing of releases of new versions of third-party software and
hardware products that work with our products.
In any given quarter, most of our revenue has been attributable to a small
number of relatively large orders and we expect this may continue. As a result,
the cancellation or deferral of even a small number of licenses of BillPlex in a
particular quarter could significantly reduce our revenue, which would hurt our
quarterly financial performance. In addition, a substantial portion of our costs
are relatively fixed and based upon anticipated revenue. A failure to book an
expected order in a given quarter would not be offset by a corresponding
reduction in costs and could adversely affect our operating results. As a result
of these factors and others, we believe that period-to-period comparisons of our
revenue and operating results are not necessarily meaningful.
OUR BUSINESS IS HIGHLY DEPENDENT ON A LIMITED NUMBER OF CUSTOMERS.
All of our revenue is currently derived from a very limited number of
customers. If a large contract is cancelled or deferred or an anticipated
contract does not materialize, our financial results could be materially harmed.
We had one customer who accounted for 100% of our total revenue in 1997, five
customers who accounted for 99% of our total revenue in 1998, and four customers
who accounted for 82% of our total revenue in the first three months of 1999.
Most of our major customers typically pay us up-front license fees and they do
not have any obligation to
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<PAGE> 10
purchase additional licenses. There can be no assurance these customers will
purchase licenses for additional seats or processors or continue with our
maintenance programs.
INDUSTRY CONSOLIDATION COULD HURT OUR BUSINESS.
The telecommunications industry has been consolidating for a number of
years. Continued industry consolidation or the formation of alliances among
network operators and service providers could reduce our customer base, reduce
the number of potential customers we can target and decrease the demand for our
products and services. The merger of one of our customers may result in our
product not being selected for use by the new combined entity, which could
reduce or eliminate ongoing revenue from that customer. Continued industry
consolidation could also increase the size of market participants and our
product might be less suitable for the resulting larger companies.
WE FACE SIGNIFICANT COMPETITION AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The communications billing and customer care systems business is very
competitive. We expect competition to increase in the future. Our principal
competitors include:
- Kenan Systems Corporation, a wholly owned subsidiary of Lucent
Technologies Inc.;
- Saville Systems, PLC, the subject of a recently announced proposed
acquisition by ADC Telecommunications, Inc.;
- Intertech Management Group, Inc.;
- LHS Group, Inc.;
- Amdocs Limited; and
- Portal Software, Inc.
We also compete with other billing and customer care system providers, such
as Intasys Corporation, International Telecommunications Data Systems, Inc. and
Sema Group, PLC, and operation support system providers, systems integrators and
service bureaus. In addition, we compete with the internal information
technology departments of larger communications companies, which may elect to
develop functionalities such as those provided by our product in-house rather
than buying them from outside suppliers.
Many of our competitors may have advantages over us, including:
- longer operating histories;
- larger customer bases;
- substantially greater financial, technical, sales, marketing and other
resources; and
- greater name recognition.
In addition, some of our competitors, namely Kenan Systems and Saville Systems,
recently have been acquired or have announced acquisitions by communications
hardware vendors, which may give them a competitive advantage because of their
ability to more easily provide a comprehensive hardware and software solution.
Our current and potential competitors have established, and may continue to
establish in the future, cooperative relationships among themselves or with
third parties that would increase
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<PAGE> 11
their ability to compete with us. In addition, competitors may be able to adapt
more quickly than we can to new or emerging technologies and changes in customer
needs, or to devote more resources to promoting and selling their products. New
competitors or alliances among existing competitors could also result in these
competitors quickly gaining significant market share.
As we expand, we will market our products and services to customers in
markets that we do not currently serve. We may encounter new competitors upon
entry into these markets and they may also have greater financial, technical,
personnel and marketing resources than we do. We cannot assure you that we will
be able to successfully identify and address the demands of these new markets.
If we fail to adapt to market demands and to compete successfully with
existing and new competitors, our business and financial performance would
suffer.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EFFECTIVELY MANAGE OUR GROWTH.
Our business could suffer if we fail to effectively manage our growth. We
continue to increase the scope of our operations and have grown our employee
headcount substantially. On June 30, 1999, we had a total of 169 full-time
employees, compared to a total of 112 employees on January 1, 1999. We expect to
continue to hire new employees at a rapid pace at least for the near future.
Similarly, our revenue grew from $156,000 in 1997 to $5.2 million in 1998. Our
revenue for the three months ended March 31, 1999 was $1.8 million. Our growth
has placed, and will continue to place, a significant strain on our management
systems and resources. We expect that we will need to continue to improve our
financial and managerial controls and reporting systems and procedures, and will
need to expand, train and manage our work force. We are currently attempting to
expand our facilities, and we may face difficulties and significant expenses
identifying and moving into suitable space.
OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO ANTICIPATE THE TIMING OF SALES,
AND REVENUE MAY VARY FROM PERIOD TO PERIOD.
The sales cycle associated with the purchase of our products is lengthy,
and the time between the initial proposal to a prospective customer and the
signing of a license agreement can be as long as one year. Our products involve
a commitment of capital which may be significant to the customer, with attendant
delays frequently associated with large capital expenditures and implementation
procedures within an organization. These delays may reduce our revenue in a
particular period without a corresponding reduction in our costs, which could
hurt our results of operations for that period.
THE SKILLED EMPLOYEES THAT WE NEED MAY BE DIFFICULT AND EXPENSIVE TO HIRE AND
RETAIN IN TODAY'S TIGHT LABOR MARKET.
Our success depends in large part on our ability to attract, train,
motivate and retain highly skilled information technology professionals,
software programmers and communications engineers. Qualified personnel in these
fields are in great demand and are likely to remain a limited resource for the
foreseeable future. We may be unable to attract or continue to retain the
skilled employees we require. Any inability to do so could prevent us from
managing and competing for existing and future projects or to compete for new
customer contracts. In addition, an increase in expenses required to attract and
retain such personnel may reduce our operating margins.
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WE DEPEND IN SOME CASES ON STRATEGIC BUSINESS ALLIANCES TO SELL AND IMPLEMENT
OUR PRODUCTS, AND ANY FAILURE TO DEVELOP OR MAINTAIN THESE ALLIANCES COULD HURT
OUR FUTURE GROWTH.
Third parties such as operation support system providers, consulting firms
and systems integration firms help us with marketing, sales, lead generation,
customer support and implementation of our products. In some instances, these
third parties provide most or all of the sales and implementation efforts. In
order to grow successfully, we must maintain our relationships with these firms,
develop additional similar relationships and generate new business opportunities
through joint marketing and sales efforts.
We may encounter difficulties in forging and maintaining long-term
relationships with these firms for a variety of reasons. For example, they may
have more established relationships with our principal competitors or they may
decide to compete directly with us by developing their own products and
services.
These firms may discontinue their relationships with us, fail to devote
sufficient resources to market our products or develop relationships with our
competitors. Our agreements with these organizations typically are in the form
of a non-exclusive referral fee or license and package discount arrangement that
may be terminated by either party without cause or penalty and with limited
notice.
IF THIRD-PARTY SYSTEMS INTEGRATORS FAIL TO CORRECTLY IMPLEMENT OUR PRODUCTS AND
TRAIN CUSTOMERS TO USE THEM, WE COULD LOSE BUSINESS.
We sometimes use third-party consulting firms and systems integration firms
to implement our products and to train end-users to use our products. Failure by
these firms to correctly implement our products, properly train the end-user or
generally to satisfy the customer could have a negative effect on our
relationships with the contracting firm and the customer. This could delay
revenue recognition, force us to incur expenses for which we may not be
reimbursed and damage our reputation, as well as the reputation of our products
and services.
WE RELY HEAVILY ON SALES OF ONE PRODUCT.
Since the introduction of BillPlex in 1997, substantially all of our
revenue has been attributable to this product. We expect this to continue for
the foreseeable future. As a result, a decline in demand for BillPlex or failure
to achieve broad market acceptance of BillPlex would cause our business and
financial performance to suffer.
IF WE FAIL TO DEVELOP LONG-TERM RELATIONSHIPS WITH SUCCESSFUL CUSTOMERS, OUR
FUTURE SUCCESS WILL BE JEOPARDIZED.
We believe that our future success depends to a significant extent on our
ability to develop long-term relationships with successful communications
service providers, who will give us repeat business, referrals and ongoing
maintenance revenue. We may be unable to develop new customer relationships and
our new or existing customers may be unsuccessful. Our failure to attract new
customer relationships or the failure of new or existing customers to be
successful would result in a loss of future business.
IF OUR CUSTOMERS CANNOT SECURE ADEQUATE FINANCING, WE MAY NOT GET THEIR
BUSINESS.
Many of our potential customers are new entrants into the communications
market and lack significant financial resources. These companies rely to a large
degree on access to the capital
9
<PAGE> 13
markets for growth. Their failure to raise capital, due to conditions in the
capital markets or otherwise, would hurt their financial viability and their
demand for our products. If our potential customers cannot obtain the resources
to purchase our products, they may turn to other options such as service
bureaus, which would hurt our business.
IF WE DO NOT CONTINUALLY ENHANCE OUR PRODUCTS TO MEET THE CHANGING NEEDS OF
SERVICE PROVIDERS, WE WILL LOSE FUTURE BUSINESS TO OUR COMPETITORS.
We believe that our future success will depend to a significant extent upon
our ability to enhance our existing products and to introduce new products and
features to meet the requirements of our customers in a rapidly developing and
evolving market. We are currently devoting significant resources to refining and
expanding our core software and developing additional pre-configured
market-based packages. We believe our product currently meets customer
requirements regarding scalability and throughput, and we are working to improve
our system performance. However, due to potential customer growth, acquisitions
and mergers, the requirements of our customers may change. Our present or future
products may not satisfy the evolving needs of the communications market. If we
are unable to anticipate or respond adequately to customer needs, or achieve
sufficient throughput and scalability, we will lose business and our financial
performance will suffer.
CHANGES IN THE COMMUNICATIONS INDUSTRY AND GOVERNMENT REGULATION OF OUR
CUSTOMERS COULD REDUCE DEMAND FOR OUR PRODUCTS, AND OUR BUSINESS COULD SUFFER.
Future developments in the communications business could adversely affect
our customers and thus our business prospects. Also, changes in the regulatory
environment, either domestic or foreign, could adversely affect our existing or
potential customers, most of whom are subject to extensive governmental
regulations in domestic and foreign jurisdictions. As a result, we may be unable
to effectively market and profitably sell our products to potential customers.
IF WE CANNOT CONTINUE TO OBTAIN OR IMPLEMENT THE THIRD-PARTY SOFTWARE THAT WE
INCORPORATE INTO OUR PRODUCTS, WE MAY HAVE TO DELAY PRODUCT DEVELOPMENT OR
REDESIGN OUR PRODUCTS.
Our products involve integration with products and systems developed by
third parties. If any of these third-party products should become unavailable
for any reason, fail under operation with our products or fail to be supported
by their respective vendors, it would be necessary for us to redesign our
products. We might encounter difficulties in accomplishing any necessary
redesign in a cost-effective or timely manner. We also could experience
difficulties integrating our products with other hardware and software.
Furthermore, if new releases of third-party products and systems occur before we
develop products compatible with these new releases, we could experience a
decline in demand for our products, which could cause our business and financial
performance to suffer.
WE DEPEND ON OUR KEY EXECUTIVES FOR OUR FUTURE SUCCESS.
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly James
Daleen, our founder and Chief Executive Officer. If we lost the services of Mr.
Daleen or other key employees it would likely hurt our business. We have
employment and non-compete agreements with some of our executive officers,
including Mr. Daleen. However, these agreements do not obligate them to continue
working for us.
10
<PAGE> 14
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, AND OUR COMPETITORS MAY
INFRINGE ON OUR TECHNOLOGY.
Any misappropriation of our technology or the development of competitive
technology could seriously harm our business. We regard a substantial portion of
our software products as proprietary and rely on a combination of patent,
copyright, trademark and trade secret laws, customer license agreements,
employee and third-party non-disclosure agreements and other methods to protect
our proprietary rights. We do not include in our software any mechanisms to
prevent or inhibit unauthorized use, but we generally enter into confidentiality
agreements with our employees, consultants, customers and potential customers
and limit access to and distribution of proprietary information.
The steps we have taken to protect our proprietary rights may not be
adequate. If so, we might not be able to prevent others from using what we
regard as our technology to compete with us. Existing patent, copyright,
trademark and trade secret laws offer only limited protection. Policing
unauthorized use of our products is difficult, and we cannot be certain that the
steps we have taken will prevent misappropriation of our intellectual property,
particularly in foreign countries where the laws may not protect proprietary
rights as fully as do the laws of the United States. Other companies could
independently develop similar or superior technology without violating our
proprietary rights.
If we have to resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive and could
involve a high degree of risk.
CLAIMS BY OTHERS THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD DIVERT OUR
RESOURCES, RESULT IN UNEXPECTED LICENSE FEES AND HARM OUR BUSINESS.
Although we have not received any notices from third parties alleging
infringement claims, third parties could claim that our current or future
products or technology infringe their proprietary rights. Any claim of
infringement by a third party could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from the operation of our business. Furthermore, a party making
such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from selling our products. Any of these events could seriously
harm our business.
If anyone asserts a claim against us relating to proprietary technology or
information, we might seek to license their intellectual property or to develop
non-infringing technology. We might not be able to obtain a license on
commercially reasonable terms, if at all. Alternatively, our efforts to develop
non-infringing technology could be unsuccessful. Our failure to obtain the
necessary licenses or other rights or to develop non-infringing technology could
prevent us from selling our products and could therefore seriously harm our
business.
PRODUCT DEFECTS OR SOFTWARE ERRORS COULD ADVERSELY AFFECT OUR BUSINESS DUE TO
COSTLY REDESIGNS, PRODUCTION DELAYS AND CUSTOMER DISSATISFACTION.
Design defects or software errors in our product may cause delays in
product introductions or damage customer satisfaction, either of which could
seriously harm our business. Our software products are highly complex and may,
from time to time, contain design defects or software errors that may be
difficult to detect and correct. Because our products are generally used by our
customers to perform critical functions, design defects, software errors or
other potential problems with our products could result in financial or other
damages to our customers. This
11
<PAGE> 15
could result in the termination of our relationship with that customer or could
give rise to claims against us. Although we have license agreements with our
customers that contain provisions designed to limit our exposure to potential
claims and liabilities arising from customer problems, these provisions may not
effectively protect us against such claims in all cases. In addition, claims and
liabilities arising from customer problems could significantly damage our
reputation and hurt our business.
YEAR 2000 ISSUES MAY DISRUPT OUR OPERATIONS AND CAUSE US TO LOSE REVENUE.
Failure of BillPlex to be year 2000 compliant could result in a significant
decrease in market acceptance of our product and legal liability. If a claim
were to be brought against us, regardless of its merit, the claim would likely
be time-consuming and expensive to defend, would divert management time and
attention and could result in adverse publicity. We intend to have this testing
process completed during the third quarter of 1999. As of the date of this
prospectus, we have no material year 2000 compliance issues with respect to the
product that we currently license. However, BillPlex operates in complex network
environments and directly and indirectly interacts with a number of other
hardware and software systems. We have not performed extensive tests on all
hardware, software, switches and other devices that may operate in conjunction
with BillPlex, or provide data to or receive data from BillPlex. We also have
not tested custom interfaces written for BillPlex. Accordingly, some customers
may have year 2000 problems with products that we believe are year 2000 ready.
We may also be affected by year 2000 issues related to non-compliant
internal systems developed by us or by third-party vendors. If our internal
systems developed by us prove to be non-compliant, or if our third-party vendors
or any suppliers of non-information technology systems do not identify year 2000
problems with their products or fail to correct their year 2000 problems, any
such failures could result in an interruption in our normal business activities
or operations.
PURCHASING PATTERNS OF OUR CUSTOMERS COULD BE AFFECTED BY YEAR 2000 ISSUES.
Our potential customers may cease or delay the purchase and implementation
of complex software systems, such as BillPlex, as a result of their own internal
year 2000 testing and remediation. Any resulting delay or decrease in orders for
our products could cause our revenue to decline, either on a quarterly or annual
basis.
OUR PLANS FOR INTERNATIONAL EXPANSION MAY NOT SUCCEED.
Our strategy includes expansion into international markets through a
combination of strategic relationships and internal business expansion. Our
future international operations might not succeed for a number of reasons,
including:
- difficulties in staffing and managing foreign operations;
- competition from local and foreign-based suppliers;
- legal uncertainties inherent in transnational operations such as export
and import regulations, tariffs and other trade barriers;
- taxation issues;
- unexpected changes in trading policies, regulatory requirements and
exchange rates;
12
<PAGE> 16
- operational issues such as longer customer payment cycles and greater
difficulties in collecting accounts receivable;
- seasonal reductions in business activity;
- language and cultural differences;
- issues relating to uncertainties of laws and enforcement relating to the
protection of intellectual property; and
- general political and economic trends.
Accordingly, we may not be able to successfully execute our business plan
in foreign markets. If revenue from international ventures is not adequate to
cover our investment in those ventures, our business and financial performance
could suffer.
ACQUISITIONS OF COMPANIES OR TECHNOLOGIES COULD RESULT IN DISRUPTIONS TO OUR
BUSINESS, DIVERSION OF MANAGEMENT AND COULD REQUIRE THAT WE ENGAGE IN FINANCING
TRANSACTIONS THAT COULD HURT OUR FINANCIAL PERFORMANCE.
Although we have not done so in the past, we may in the future make
acquisitions of other companies, products or technologies. If we make any
acquisitions, we will be required to assimilate the operations, products and
personnel of the acquired businesses and train, retain and motivate key
personnel from the acquired businesses. We may be unable to maintain uniform
standards, controls, procedures and policies if we fail in these efforts.
Similarly, acquisitions may cause disruptions in our operations and divert
management's attention from the day-to-day operations of our business, which
could impair our relationships with our current employees, customers and
strategic marketing alliances.
We may have to incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities for any acquisition could be
substantially dilutive to our stockholders. In addition, our profitability may
suffer because of acquisition-related costs or amortization costs for acquired
goodwill and other intangible assets.
RISKS RELATED TO THIS OFFERING AND TO OUR COMMON STOCK
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE, AND YOU MAY EXPERIENCE
INVESTMENT LOSSES.
Many factors could cause the market price of our common stock to rise and
fall. Some of these factors are:
- variations in our quarterly operating results;
- announcements of technological innovations;
- introduction of new products or new pricing policies by us or our
competitors;
- trends in the communications industry;
- acquisitions or strategic alliances by us or others in our industry;
- changes in estimates of our performance or recommendations by financial
analysts; and
13
<PAGE> 17
- market conditions in the industry and the economy as a whole.
In addition, the stock market experiences significant price and volume
fluctuations. These fluctuations particularly affect the market prices of the
securities of many high-technology companies. These broad market fluctuations
could adversely affect the market price of our common stock. When the market
price of a stock has been volatile, holders of that stock have often instituted
securities class action litigation against the company that issued the stock. If
any of our stockholders brought a securities class action lawsuit against us, we
could incur substantial costs defending the lawsuit. The lawsuit could also
divert the time and attention of our management. Any of these events could
seriously harm our business.
OUR OFFICERS AND DIRECTORS WILL BE ABLE TO EXERT SIGNIFICANT CONTROL OVER OUR
COMPANY.
Following this offering, our officers and directors will beneficially own
approximately % of our common stock. James Daleen, our Chief Executive
Officer, will beneficially own approximately % of our common stock
following this offering. As a result, our officers and directors will
effectively be able to:
- elect or defeat the election of our directors;
- amend or prevent amendment of our certificate of incorporation or bylaws;
- effect or prevent a merger, sale of assets or other corporate
transaction; and
- control the outcome of any other matter submitted to the stockholders for
a vote.
Our public stockholders, for so long as they hold less than 50% of our
common stock, will be unable to control the outcome of these matters.
Management's stock ownership may discourage a potential acquirer from making a
tender offer or otherwise attempting to obtain control of our company, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price. See "Principal Stockholders."
WE HAVE BROAD DISCRETION AS TO HOW TO USE THE PROCEEDS FROM THIS OFFERING.
Our management has broad discretion on how to spend the proceeds from this
offering and may spend these proceeds in ways with which our stockholders may
not agree. Furthermore, we cannot predict that investment of the proceeds will
yield any return.
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND THE PRICE OF OUR
COMMON STOCK MAY BE VOLATILE.
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained upon the completion
of this offering. We will negotiate the initial offering price of the common
stock with the underwriters. However, the initial offering price may not be
indicative of the prices that will prevail in the public market after the
offering, and the market price of the common stock could fall below the initial
public offering price.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE CAUSING INVESTOR
LOSSES.
Sales of a substantial number of shares of our common stock in the public
market following this offering could adversely affect the market price of our
common stock. After this offering, shares of our common stock will be
outstanding. All of the shares sold in this offering
14
<PAGE> 18
will be freely tradable unless held by our affiliates. The remaining shares of
common stock outstanding after this offering will be restricted as a result of
securities laws or lock-up agreements signed by the holders and will be
available for sale in the public market as follows:
- shares will be eligible for sale as of the date of this
prospectus;
- approximately shares will be eligible for sale 90 days after the
date of this prospectus;
- approximately shares will be eligible for sale 180 days after the
date of this prospectus upon the expiration of lock-up agreements with
BancBoston Robertson Stephens Inc.; and
- approximately shares will become eligible for sale thereafter at
various times.
BancBoston Robertson Stephens Inc. may, in its sole discretion and at any
time without prior notice, release all or any portion of the common stock
subject to lock-up agreements. See "Shares Eligible for Future Sale."
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
If you purchase shares of our common stock, you will incur immediate and
substantial dilution in pro forma net tangible book value per share. If other
security holders exercise options or warrants to purchase our common stock, you
will suffer further dilution. See "Dilution."
ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD-PARTY ACQUISITION OF OUR COMPANY DIFFICULT EVEN IF AN ACQUISITION WOULD BE
BENEFICIAL TO US.
We are a Delaware corporation. Certain provisions of our charter and bylaws
and anti-takeover provisions of Delaware law could make it more difficult for a
third party to acquire control of us, even if a change in control would be
beneficial to stockholders. In addition, our bylaws provide for a classified
board, with board members serving staggered three-year terms. The Delaware
anti-takeover provisions and the existence of a classified board could make it
more difficult for a third party to acquire us.
After this offering, the board of directors will have the authority to
issue up to 10,000,000 shares of preferred stock. Without any further vote or
action on the part of the stockholders, the board of directors will have the
authority to determine the price, rights, preferences, privileges and
restrictions of the preferred stock. This preferred stock, if it is ever issued,
may have preference over the rights of the holders of common stock. Although the
ability to issue preferred stock provides us with flexibility in connection with
possible acquisitions and other corporate purposes, the issuance may also make
it more difficult for a third party to acquire a majority of our outstanding
voting stock. We currently have no plans to issue preferred stock.
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<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus are forward-looking
statements. These statements relate to future events or our future financial
performance, and involve known and unknown risks, uncertainties and other
factors that may cause our or our industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these
forward-looking statements.
In some cases, you can identify forward-looking statements by words such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," or the negative of these and
other similar words.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform these statements to actual results.
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<PAGE> 20
USE OF PROCEEDS
We estimate the net proceeds that we will receive from the sale of shares
of common stock in this offering will be approximately $ million, assuming
an initial public offering price of $ per share and after deducting the
underwriting discounts and commissions and estimated offering expenses. If the
underwriters exercise their over-allotment option, we will receive $ million
in additional net proceeds. We will not receive any proceeds from the sale of
shares by the selling stockholder in connection with the exercise of the
underwriters' over-allotment option.
We currently expect to use the net proceeds primarily for working capital
and general corporate purposes, including funding product development and
expanding our sales and marketing organization. In addition, we may use a
portion of the net proceeds for further development of our product lines through
acquisitions of products, technologies and businesses, although we have no
present commitments or agreements to make any acquisitions. The amount of net
proceeds that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue growth,
if any, and the amount of cash we generate from operations. Thus, management
will have significant discretion in applying the net proceeds of this offering.
Pending the uses described above, we will invest the net proceeds in short-term,
investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to fund the development and growth of
our business. We are currently negotiating a line of credit with a commercial
bank which may contain restrictions on our ability to pay dividends.
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<PAGE> 21
CAPITALIZATION
The following table describes our capitalization as of March 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect our June 1999 private placement of
preferred stock and the automatic conversion of all of our outstanding
shares of convertible preferred stock, including the shares issued in the
June 1999 private placement, into common stock on the closing of this
offering; and
- on a pro forma as adjusted basis to reflect the sale of the shares of
common stock offered by us in this offering and our receipt of the
estimated net proceeds, after deducting the estimated underwriting
discounts and commissions and the estimated offering expenses that we
expect to pay in connection with this offering.
This table gives effect to a change in the number of authorized shares of common
stock and preferred stock after March 31, 1999 that will result from our planned
reincorporation in Delaware.
You should read this table along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," our consolidated financial
statements and the related notes to them and the other financial information in
this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current maturities............... $ -- $ -- $ --
Redeemable preferred stock:
Mandatorily redeemable convertible series A preferred
stock; 3,000,000 shares authorized, issued and
outstanding, actual; no shares authorized issued and
outstanding, pro forma and pro forma as adjusted....... 7,500 -- --
Mandatorily redeemable convertible series D and D-1
preferred stock; 4,908,379 shares authorized, issued
and outstanding, actual; no shares authorized, issued
and outstanding, pro forma and pro forma adjusted...... 14,336 -- --
Mandatorily redeemable convertible series E preferred
stock; no shares authorized, issued and outstanding,
actual, pro forma and pro forma as adjusted............ -- -- --
Stockholders' (deficit) equity:
Convertible series C preferred stock, $.01 par value per
share; 1,222,222 shares authorized, 1,213,584 shares
issued and outstanding, actual; no shares authorized,
issued and outstanding, pro forma and pro forma as
adjusted............................................... 5,301 -- --
Preferred stock, par value $0.01 per share; 10,000,000
shares authorized; none issued and outstanding, actual,
pro forma and pro forma as adjusted.................... -- -- --
Common stock, par value $0.01 per share; 70,000,000
shares authorized; 3,240,020 shares issued and
outstanding actual; 13,858,596 shares issued and
outstanding, pro forma; shares issued and
outstanding, pro forma as adjusted..................... 32 139
Additional paid in capital............................... 3,278 43,778
Accumulated deficit...................................... (25,506) (25,506)
-------- -------- --------
Total stockholders' (deficit) equity................ (16,895) 18,411
-------- -------- --------
Total capitalization.............................. $ 4,941 $ 18,411 $
======== ======== ========
</TABLE>
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<PAGE> 22
In June 1999, we sold 1,496,615 shares of mandatorily redeemable
convertible series E preferred stock for approximately $13.5 million. The pro
forma capitalization data reflect both the issuance of these shares and their
conversion into common stock upon the closing of this offering.
The number of shares of common stock outstanding as of March 31, 1999 does
not reflect 4,289,869 shares issuable under options and warrants outstanding as
of March 31, 1999 at a weighted average exercise price of $3.54 per share,
324,000 shares issuable under options issued after March 31, 1999 at an exercise
price of $6.00 per share and 565,881 additional shares reserved for issuance
under our Stock Incentive Plan.
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<PAGE> 23
DILUTION
Our pro forma net tangible book value as of March 31, 1999 was $18.4
million, or $1.58 per share of common stock. The formula for calculating pro
forma net tangible book value per share is pro forma total tangible assets less
total liabilities, divided by the total pro forma number of shares of common
stock outstanding, after giving effect to the June 1999 private placement and
conversion of the preferred stock into common stock, including the preferred
stock which was issued in the June 1999 private placement. After giving effect
to the sale of shares of common stock in this offering, our
adjusted pro forma net tangible book value as of March 31, 1999 would have been
$ , or $ per share. This amount represents an immediate
increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to
new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of March
31, 1999............................................... $ 1.58
Pro forma increase in net tangible book value per share
attributable
to this offering.......................................
------
Pro forma net tangible book value per share after the
offering...............................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on the pro forma basis discussed above, as
of March 31, 1999, the total number of shares of common stock purchased, the
total consideration paid and the average price per share paid by existing
stockholders and to be paid by new investors in this offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 13,858,596 % $43,916,513 % $3.17
New investors...................... $
----------- ----- ----------- -----
Total.................... 100.0% $ 100.0%
=========== ===== =========== =====
</TABLE>
If the underwriters exercise their over-allotment option in full, the
number of shares held by existing stockholders will decrease to ,
or % of the total shares outstanding, and the number of shares held by new
investors will increase to , or %, of the total shares
outstanding.
The above computations exclude 4,289,869 shares of common stock issuable
upon the exercise of options or warrants outstanding as of March 31, 1999 at an
exercise price of $3.54 per share and 324,000 shares of common stock issuable
upon the exercise of options granted after March 31, 1999 at an exercise price
of $6.00 per share. If any of those options and warrants are exercised,
investors will incur further dilution. From April 1, 1999 through June 30, 1999,
options were exercised to purchase an aggregate of 413,631 shares of common
stock.
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<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
at the end of this prospectus. The consolidated statement of operations data and
balance sheet data set forth below as of and for each of the years in the five
year period ended December 31, 1998 have been derived from our consolidated
financial statements, which have been audited by KPMG LLP, independent certified
public accountants. Our consolidated balance sheets as of December 31, 1994,
1995 and 1996 and the consolidated statements of operations for the years ended
December 31, 1994 and 1995 are not included in this prospectus. The selected
financial data as of March 31, 1999 and for the three months ended March 31,
1998 and March 31, 1999 have been derived from our unaudited consolidated
financial statements, which appear elsewhere in this prospectus and, in the
opinion of management, have been prepared on the same basis as the audited
consolidated financial statements and contain all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation. See note 1
to the consolidated financial statements for a discussion of the shares and
amounts used to compute net loss applicable to common stockholders per share and
pro forma net loss applicable to common stockholders per share. The pro forma
net loss applicable to common stockholders per share calculation reflects the
automatic conversion of all outstanding shares of preferred stock, including the
shares issued in our June 1999 private placement, into shares of common stock
upon the closing of this offering. The historical results are not necessarily
indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees............................. $ -- $ -- $ -- $ -- $ 1,879 $ 57 $ 949
Professional services and other.......... 2,090 4,324 2,550 156 3,352 138 830
------ ------ ------- ------- -------- ------- -------
Total revenue.................... 2,090 4,324 2,550 156 5,231 195 1,779
------ ------ ------- ------- -------- ------- -------
Cost of revenue:
License fees............................. -- -- -- -- 3 0 2
Professional services and other.......... 1,310 2,437 1,396 293 4,239 264 1,266
------ ------ ------- ------- -------- ------- -------
Total cost of revenue............ 1,310 2,437 1,396 293 4,242 264 1,268
------ ------ ------- ------- -------- ------- -------
Gross profit............................... 780 1,887 1,154 (137) 989 (69) 511
Operating expenses:
Sales and marketing...................... 210 359 450 962 2,435 576 485
Research and development................. -- -- 1,067 1,669 6,653 1,388 1,577
General and administrative............... 894 1,767 2,446 3,704 4,824 998 1,466
------ ------ ------- ------- -------- ------- -------
Total operating expenses......... 1,104 2,126 3,963 6,335 13,912 2,962 3,528
------ ------ ------- ------- -------- ------- -------
Operating loss............................. (324) (239) (2,809) (6,472) (12,923) (3,031) (3,017)
Nonoperating income (expense).............. (61) (154) 1,283 (1,512) 754 69 58
------ ------ ------- ------- -------- ------- -------
Net loss................................... (385) (393) (1,526) (7,984) (12,169) (2,962) (2,959)
------ ------ ------- ------- -------- ------- -------
Accretion of preferred stock............... -- -- -- -- (65) -- (39)
------ ------ ------- ------- -------- ------- -------
Net loss applicable to common
stockholders............................. $ (385) $ (393) $(1,526) $(7,984) $(12,234) $(2,962) $(2,998)
====== ====== ======= ======= ======== ======= =======
Net loss applicable to common stockholders
per share -- basic and diluted........... $(0.21) $(0.21) $ (0.81) $ (3.48) $ (3.78) $ (0.92) $ (0.93)
====== ====== ======= ======= ======== ======= =======
Weighted average shares -- basic and
diluted.................................. 1,879 1,879 1,879 2,295 3,237 3,218 3,240
====== ====== ======= ======= ======== ======= =======
</TABLE>
21
<PAGE> 25
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro forma data:
Pro forma net loss applicable to common
stockholders.......................... $(12,937) $(3,662)
======== =======
Pro forma net loss applicable to common
stockholders per share -- basic and
diluted............................... $ (0.93) $ (0.26)
======== =======
Pro forma weighted average shares -- basic
and diluted........................... 13,856 13,859
======== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
----- ----- ------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 121 $ 105 $ 813 $ 5,030 $ 723 $ 824
Total assets....................................... 406 833 2,065 8,516 11,025 8,448
Notes payable...................................... 300 271 3,200 1,618 -- --
Current portion of long-term debt and obligations
under capital leases............................. 42 151 146 -- -- --
Long-term debt and obligations under capital
leases, less current portion..................... 63 204 77 -- -- --
Stockholders' deficit.............................. (177) (556) (1,914) (1,946) (13,897) (16,895)
</TABLE>
22
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results anticipated in these forward-looking statements as a result of factors
including, but not limited to, those under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
We are a leading provider of next-generation billing and customer care
software that can serve as the core of an enterprise solution for integrated
communications providers. From our founding in 1989 through 1996, we operated as
a software consulting company, performing contract consulting and software
development services and contract placement and staffing business. We
discontinued our consulting business and sold the contract placement and
staffing business to a third party in 1996. We began development work on our
flagship product, BillPlex, in 1996. In 1997, we introduced BillPlex and
installed the product at our first customer site. We recognized $156,000 in
revenue from the sale of third-party hardware and software products to this
customer during 1997. We recognized the first revenue from BillPlex license fees
and related professional services in 1998.
We derive our revenue primarily from license sales of BillPlex and from
related professional services, including implementation and customization
services, maintenance and support activities and training services. In addition,
professional services and other revenue include the net revenue derived from the
sale of third-party software, which we provide when our customers require it.
Since the introduction of BillPlex, we had signed contracts with 20
communications service providers through June 30, 1999, nine of which were
signed in the six months ended June 30, 1999. As we have signed new contracts,
our revenue from license fees has grown both in absolute terms and as a
percentage of total revenue.
Revenue from license fees is based on the number of authorized system users
and computer processors. We receive license fees from our customers upon initial
license, and we expect to receive additional license fees when they add new
users and processors under our "pay as you grow" pricing model. We also derive
license fee revenue from existing customers who purchase upgrades for additional
functionality. We have also entered into arrangements with service bureau
providers that will utilize our products to service their customers. We expect
to receive fees from these activities in the future.
The nature of each licensing arrangement determines how we recognize
revenue:
- If the contract requires us to perform significant production,
modification or customization of software, revenue is recognized using
the percentage of completion method, based on the ratio of total labor
hours incurred to date to total estimated labor hours. The total revenue
under these contracts represents license fees and professional services.
To date, most of our revenue has been recognized on this basis.
- If the contract requires us to deliver the product to the end user with
no future obligation to perform the implementation, we follow the
provisions of Statement of Position 97-2, as amended, and recognize
revenue upon shipment of the product if the fee is fixed and determinable
and collectibility is probable.
23
<PAGE> 27
- If the contract requires us to deliver the product to a third-party
integrator, we also follow the provisions of SOP 97-2, as amended.
However, we do not recognize revenue until the software implementation is
complete because of our obligation under the contract to be available to
assist the third-party integrator throughout the implementation process.
In the future, as our third-party systems integrators gain more
experience with our products, we may change our contracts so that we have
no further obligation subsequent to the delivery of the software, thereby
enabling us to recognize revenue upon shipment.
- When we are performing professional services on a time-and-materials
basis, revenue is recognized as the services are performed.
Sales and marketing expenses have been increasing since the introduction of
BillPlex in 1997, and are expected to increase in the future as we add
additional sales and marketing personnel and as we enter new geographical
markets.
Since 1996, we have invested heavily in research and development. All of
these costs have been expensed as incurred and we had no capitalized software
development costs as of March 31, 1999. To enhance our product offering and
market position, we believe that it will be essential for us to continue to make
significant investments in research and development. Accordingly, we anticipate
that research and development expenses are likely to increase in future periods.
As we grow and add additional facilities and personnel, we expect to incur
additional general and administrative expenses to support this growth.
We currently have a net operating loss carryforward for Federal income tax
purposes in excess of $20 million, and are continuing to experience operating
losses for tax purposes. Therefore, we currently do not pay any Federal income
taxes. However, the amount of the net operating loss and credit carryforwards
that we may utilize each year may be limited due to changes in stock ownership
that have occurred over the past several years.
24
<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
expressed as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Revenue:
License fees......................... --% --% 35.8% 29.2% 53.6%
Professional services and other...... 100.0 100.0 64.2 70.8 46.4
------ -------- ------ -------- ------
Total revenue................ 100.0 100.0 100.0 100.0 100.0
------ -------- ------ -------- ------
Cost of revenue:
License fees......................... -- -- 0.1 0.2 0.1
Professional services and other...... 54.8 187.8 81.0 135.2 71.2
------ -------- ------ -------- ------
Total cost of revenue........ 54.8 187.8 81.1 135.4 71.3
------ -------- ------ -------- ------
Gross profit........................... 45.2 (87.8) 18.9 (35.4) 28.7
Operating expenses:
Sales and marketing.................. 17.7 617.4 46.6 294.9 27.3
Research and development............. 41.8 1,069.8 127.2 710.2 88.7
General and administrative........... 95.9 2,374.5 92.2 510.6 82.4
------ -------- ------ -------- ------
Total operating expenses..... 155.4 4,061.7 266.0 1,515.7 198.4
Operating loss......................... (110.2) (4,149.5) (247.1) (1,551.1) (169.7)
------ -------- ------ -------- ------
Nonoperating income (expense).......... 50.3 (968.9) 14.4 35.5 3.3
------ -------- ------ -------- ------
Net loss............................... (59.9)% (5,118.4)% (232.7)% (1,515.6)% (166.4)%
====== ======== ====== ======== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenue
Total revenue increased $1.6 million to $1.8 million for the three months
ended March 31, 1999 from $195,000 for the three months ended March 31, 1998.
Revenue from both licenses and services accounted for this increase due to a
significant increase in the number of implementations and newly booked contracts
in the three months ended March 31, 1999 compared to the three months ended
March 31, 1998.
License Fees. License fees increased $892,000 to $949,000 for the three
months ended March 31, 1999 from $57,000 for the three months ended March 31,
1998. License fees increased to 53.6% of total revenue for the three months
ended March 31, 1999 from 29.2% for the three months ended March 31, 1998. These
increases were due to the fact that we had more booked contracts and product
implementations for the three months ended March 31, 1999 than for the three
months ended March 31, 1998, shortly after we introduced BillPlex. As our
business grows and as we continue to pursue our software-based business model,
we expect license fees to account for an increasing proportion of total revenue
for the near future.
Professional Services and Other. Professional services and other revenue
increased $692,000 to $830,000 for the three months ended March 31, 1999 from
$138,000 for the three months ended March 31, 1998. This increase was due to
increased implementation activity directly related to increased sales of
BillPlex. Professional services and other revenue decreased to 46.4%
25
<PAGE> 29
of total revenue for the three months ended March 31, 1999 from 70.8% for the
three months ended March 31, 1998.
Cost of Revenue
Total cost of revenue increased $1.0 million to $1.3 million for the three
months ended March 31, 1999 from $264,000 for the three months ended March 31,
1998. Total cost of revenue as a percentage of total revenue decreased to 71.3%
for the three months ended March 31, 1999 from 135.3% for the three months ended
March 31, 1998.
Cost of License Fees. Cost of license fees includes direct cost of labor,
benefits and packaging material for fulfillment and shipment of the BillPlex
software and related documentation, which is typically an insignificant
component of total cost of license fees. Cost of license fees increased to
$2,000 for the three months ended March 31, 1999 from $0 for the three months
ended March 31, 1998. This increase was due to increased license sales of
BillPlex.
Cost of Professional Services and Other. Cost of professional services and
other revenue includes direct cost of labor, benefits, materials and related
corporate overhead costs to provide professional services to customers. Cost of
professional services and other increased $1.0 million to $1.3 million for the
three months ended March 31, 1999 from $264,000 for the three months ended March
31, 1998. These costs increased as we deployed more resources to support the
greater number of implementations that we performed during the period. Cost of
professional services and other revenue as a percentage of professional services
and other revenue decreased to 152.5% for the three months ended March 31, 1999
from 191.3% for the three months ended March 31, 1998. Cost of professional
services and other revenue for both periods includes expenses related to the
following activities performed after the initial release of BillPlex:
- Buildup of the infrastructure of the professional services organization
in order to better serve anticipated customers; and
- Performing beta testing and engineering services for initial reference
customers.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales and marketing personnel,
travel and entertainment, promotional and related corporate overhead costs.
These expenses decreased $91,000, or 15.8%, to $485,000 for the three months
ended March 31, 1999 from $576,000 for the three months ended March 31, 1998.
The overall decrease in these expenses was due to a decrease in the number of
sales and marketing personnel as we transitioned our direct sales organization
to our software-based business model. As a percentage of total revenue, these
expenses decreased to 27.3% for the three months ended March 31, 1999 from
294.9% for the three months ended March 31, 1998, due to the growth in our total
revenue.
Research and Development. Research and development expenses consist
primarily of salaries and benefits for software developers, management and
quality assurance personnel and related corporate overhead costs. Our research
and development expenses increased $189,000, or 13.6%, to $1.6 million for the
three months ended March 31, 1999 from $1.4 million for the three months ended
March 31, 1998, because we hired additional technical personnel at the beginning
of the second half of 1998. As a percentage of total revenue, these expenses
decreased to 88.7% for the three months ended March 31, 1999 from 710.2% for the
three months ended March 31, 1998.
26
<PAGE> 30
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits for our executive, finance, administrative,
human resources and information systems personnel, and related corporate
overhead costs. Our general and administrative expenses increased $468,000, or
46.8%, to $1.5 million for the three months ended March 31, 1999 from $998,000
for the three months ended March 31, 1998. This increase was primarily due to
the addition of finance, executive, information systems and human resources
personnel needed to support the growth of our business. As a percentage of total
revenue, general and administrative expenses decreased to 82.4% for the three
months ended March 31, 1999 from 510.6% for the three months ended March 31,
1998, due to the growth in our total revenue.
Nonoperating Income (Expense)
Nonoperating income consists primarily of interest income, net of interest
expense. Nonoperating income decreased $11,000, or 16.3%, to $58,000 for the
three months ended March 31, 1999 from $69,000 for the three months ended March
31, 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue
Total revenue increased $5.1 million to $5.2 million in 1998 from $156,000
in 1997. Revenue increases from both license fees and professional services
accounted for this increase due to the increased number of contracts and related
implementations of BillPlex, which began in 1998.
License Fees. License fees increased to $1.9 million in 1998 from none in
1997. License fees increased to 35.8% of total revenue in 1998 from 0% in 1997.
We recognized our first license revenues from BillPlex in 1998 after the
introduction of the BillPlex product in 1997.
Professional Services and Other. Professional services and other revenue
increased $3.2 million to $3.4 million in 1998 from $156,000 in 1997. This
increase was due to increased implementation services performed directly related
to increase in license fees. Professional services and other revenue decreased
to 64.2% of total revenue in 1998 from 100.0% in 1997.
Cost of Revenue
Total cost of revenue increased $3.9 million to $4.2 million in 1998 from
$293,000 in 1997. Total cost of revenue as a percentage of total revenue
decreased to 81.1% in 1998 from 187.8% in 1997.
Cost of License Fees. Cost of license fees increased to $3,000 in 1998
from none in 1997 due to initiation of BillPlex license sales in 1998.
Cost of Professional Services and Other. Cost of professional services and
other revenue increased $3.9 million to $4.2 million in 1998 from $293,000 in
1997. These costs increased with the increase in revenue from services for 1998.
Cost of professional services and other revenue decreased to 126.5% of
professional services and other revenue in 1998 compared to 187.8% in 1997.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased $1.5 million,
or 152.9%, to $2.4 million in 1998 from $962,000 in 1997. This increase was
primarily due to the addition of
27
<PAGE> 31
personnel in sales and marketing, and the costs of recruiting and relocating
these personnel. As a percentage of total revenue, these expenses decreased to
46.6% in 1998 from 617.4% in 1997.
Research and Development. Research and development expenses increased $5.0
million, or 298.7%, to $6.7 million in 1998 from $1.7 million for 1997. The
increase in these expenses was due to the significantly increased investment in
software developers, quality assurance personnel and outside contractors to
support the continued development of BillPlex. As a percentage of total revenue,
these expenses decreased to 127.2% in 1998 from 1,069.8% in 1997.
General and Administrative. General and administrative expenses increased
$1.1 million, or 30.2%, to $4.8 million in 1998 from $3.7 million for 1997. This
increase was primarily due to the addition of finance, executive, information
services and human resources personnel to support the growth of our business. As
a percentage of total revenue, these expenses decreased to 92.2% in 1998 from
2,374.5% in 1997.
Nonoperating Income (Expense)
Nonoperating income was $754,000 in 1998 compared to nonoperating expense
of $1.5 million in 1997. Nonoperating income for 1998 was primarily attributable
to the investment of the proceeds of our preferred stock offering received
during 1998 and to a gain on sale of an unrelated software product. Interest
expense in 1997 was primarily attributable to interest on our notes payable.
Notes payable in the amount of $1.6 million plus accrued interest were repaid
from the proceeds of the preferred stock offering.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenue
Total revenue decreased $2.4 million to $156,000 in 1997 from $2.6 million
in 1996. This decrease was due primarily to our discontinuance of contract
consulting services in June 1996 and the sale of our placement services business
in November 1996. We performed no contract consulting services in 1997 while we
were engaged in the development and release of BillPlex.
License Fees. We had no license fees in either period as our first
BillPlex license fees were recognized in 1998. We installed our first BillPlex
system in 1997, but we did not recognize any revenue from this installation
until 1998.
Professional Services and Other. Professional services and other revenue
decreased $2.4 million to $156,000 in 1997 from $2.6 million in 1996. We derived
all of our 1996 revenue from our contract consulting and contract placement
services business, which we discontinued and sold in 1996. In 1997, we received
$156,000 in revenue, attributable entirely to the sale of third-party software
products in connection with our first BillPlex installation.
Cost of Revenue
Total cost of revenue decreased $1.1 million to $293,000 due to the
decrease in revenue generating activities discussed above. Personnel and other
resources that had previously performed contract consulting services for us were
primarily reassigned to research and development activities. The $293,000 in
total cost of revenue in 1997 represented compensation and travel expenses of
our professional services employees in connection with our first BillPlex
installation.
28
<PAGE> 32
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased $513,000, or
113.9%, to $962,000 in 1997 from $450,000 in 1997. This increase was primarily
due to additional personnel in sales and marketing, and the costs of recruiting
and relocating these personnel. As a percentage of total revenue, these expenses
increased to 617.4% in 1997 from 17.6% in 1996.
Research and Development. Research and development expenses increased
$602,000, or 56.4%, to $1.7 million in 1997 from $1.1 million for 1996. The
increase in these expenses was primarily related to increases in the number of
software developers and quality assurance personnel required to support our
product development and testing activities for BillPlex. As a percentage of
total revenue, these expenses increased to 1,069.8% in 1997 from 41.8% in 1996.
General and Administrative. General and administrative expenses increased
$1.3 million, or 51.5%, to $3.7 million in 1997 from $2.4 million for 1996. This
increase was primarily the result of our addition of finance, executive, and
administrative personnel necessary to support the growth of our business during
this period. As a percentage of total revenue, these expenses increased to
2,374.5% in 1997 from 95.9% in 1996.
Nonoperating Income (Expense)
We had nonoperating expense of $1.5 million in 1997 compared to
nonoperating income of $1.3 million in 1996. The expense in 1997 was primarily
attributable to interest on our notes payable. The income in 1996 was primarily
attributable to gains on the sale of the placement division and the sale of
marketing rights to an unrelated software product totaling $1.8 million. In
addition, interest expense was higher in 1997 than in 1996 due to higher levels
of debt during 1997.
29
<PAGE> 33
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations data
for the last five quarters, as well as such data expressed as a percentage of
total revenue for those periods. This data has been derived from our unaudited
consolidated financial statements, which have been prepared on the same basis as
the audited consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees........................... $ 57 $ 531 $ 872 $ 419 $ 949
Professional services and other........ 138 921 1,473 820 830
------- ------- ------- ------- -------
Total revenue................... 195 1,452 2,345 1,239 1,779
------- ------- ------- ------- -------
Cost of revenue:
License fees........................... 0 1 1 1 2
Professional services and other........ 264 845 2,016 1,114 1,266
------- ------- ------- ------- -------
Total cost of revenue........... 264 846 2,017 1,115 1,268
------- ------- ------- ------- -------
Gross profit............................. (69) 606 328 124 511
Operating expenses:
Sales and marketing.................... 576 577 694 588 485
Research and development............... 1,388 2,086 1,411 1,768 1,577
General and administrative............. 998 857 1,354 1,615 1,465
------- ------- ------- ------- -------
Total operating expenses........ 2,962 3,520 3,459 3,971 3,527
------- ------- ------- ------- -------
Operating loss........................... (3,031) (2,914) (3,131) (3,847) (3,017)
Nonoperating income (expense)............ 69 (26) 528 183 58
------- ------- ------- ------- -------
Net loss................................. $(2,962) $(2,940) $(2,603) $(3,664) $(2,959)
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees........................... 29.2% 36.6% 37.2% 33.8% 53.6%
Professional services and other........ 70.8 63.4 62.8 66.2 46.4
--------- ------- ------- ------- -------
Total revenue................... 100.0 100.0 100.0 100.0 100.0
--------- ------- ------- ------- -------
Cost of revenue:
License fees........................... 0.1 0.1 0.0 0.1 0.1
Professional services and other........ 135.2 58.2 86.0 89.9 71.2
--------- ------- ------- ------- -------
Total cost of revenue........... 135.3 58.3 86.0 90.0 71.3
--------- ------- ------- ------- -------
Gross profit............................. (35.3) 41.7 14.0 10.0 28.7
--------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.................... 294.9 39.8 29.6 47.4 27.3
Research and development............... 710.2 143.6 60.2 142.8 88.7
General and administrative............. 510.6 59.0 57.7 130.3 82.4
--------- ------- ------- ------- -------
Total operating expenses........ 1,515.7 242.4 147.5 320.5 198.4
--------- ------- ------- ------- -------
Operating loss........................... (1,551.0) (200.7) (133.5) (310.5) (169.7)
Nonoperating income (expense)............ 35.5 (1.8) 22.5 14.8 3.3
--------- ------- ------- ------- -------
Net loss................................. (1,515.5)% (202.5)% (111.0)% (295.7)% (166.4)%
========= ======= ======= ======= =======
</TABLE>
30
<PAGE> 34
Our operating results have varied significantly from quarter to quarter in
the past and may continue to vary significantly from quarter to quarter in the
future due to a variety of factors. For example, our revenues decreased in the
fourth quarter of 1998 as compared to the second and third quarters of 1998
primarily because of delays in completing contract negotiations with several new
customers. Quarterly fluctuations have occurred as a result of the timing of the
completion of contracts with customers since we derive a large part of our
revenue each quarter from a small number of customers. Due to the recent
introduction of BillPlex, we have not experienced the same seasonal fluctuations
as some of our competitors, such as a slowdown during the summer months and an
increase in revenue during the last quarter of the year. However, as we grow, we
may experience similar quarterly fluctuations due to seasonality. For all these
reasons, we believe that results of operations for interim periods should not be
relied upon as any indication of the results to be expected in any future
period. See "Risk Factors -- Our quarterly operating results may fluctuate in
future periods, and we may fail to meet expectations."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations primarily through sales of
equity securities and, to a lesser degree, through notes payable. Through March
31, 1999, we have raised approximately $28.0 million of equity capital and have
raised $6.2 million through the issuance of notes payable. All notes payable had
been repaid or converted to equity securities as of March 31, 1999. From 1996
through March 31, 1999, we have invested $4.1 million in capital expenditures.
Beyond our capital expenditures, the funds we have raised have been applied to
support our working capital needs. Our working capital needs have expanded
significantly as our client base has grown. Our sources of liquidity as of March
31, 1999 consisted principally of cash and cash equivalents and securities
available for sale of $2.9 million. We are presently negotiating a line of
credit with a commercial bank.
On June 30, 1999, we completed a $13.5 million sale of convertible
preferred stock to a private investor.
Net cash used in operating activities was $2.9 million for the three months
ended March 31, 1999, $11.2 million in 1998, $5.9 million in 1997, and $1.3
million in 1996. The principal use of cash for all periods was to fund our
losses from operations.
Net cash used in investing activities was $6.0 million in 1998, $2.9
million in 1997 and $332,000 in 1996 and net cash provided by investing
activities was $3.0 million for the three months ended March 31, 1999, all
attributable to purchases, maturities and sales of securities available for
sale.
Net cash provided by financing activities was $12.9 million in 1998, $13.0
million in 1997 and $2.4 million in 1996. No cash was used in or provided by
financing activities during the three months ended March 31, 1999. Cash provided
by financing activities was attributable to sales of our common and preferred
stock and the issuance of notes payable.
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents, and the proceeds of the June 1999 private
placement of convertible preferred stock discussed above, will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next 18 months. Thereafter, we may require additional funds to
support our working capital requirements or for other purposes and we may seek
to raise additional funds through public or private equity financing or from
other sources. There can be
31
<PAGE> 35
no assurance that additional financing will be available at all or that if
available, such financing will be obtainable on terms favorable to us or that
any additional financing would not be dilutive.
YEAR 2000 READINESS
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if, for example, "00" is interpreted to mean 1900, rather than
2000. These problems are widely expected to increase in frequency and severity
as the year 2000 approaches and are commonly referred to as the "year 2000
problem".
State of Readiness of our BillPlex Product. Our review of the year 2000
readiness of BillPlex is performed as a part of our normal quality assurance
program. This program requires testing of certain functionality with the
hardware system clock set to dates in the year 2000 and includes testing of
certain dates in the year 2000 as inputs. We have created version 2.3 of
BillPlex on which we are currently conducting systematic year 2000 tests based
on a variety of test plans and system test scenarios. We intend to have this
testing process completed during the third quarter of 1999. As of the date of
this prospectus, we have identified no material year 2000 compliance issues with
respect to BillPlex as currently licensed. However, BillPlex operates in complex
network environments and directly and indirectly interacts with a number of
other hardware and software systems. We have not performed extensive tests on
all hardware, software, switches and other devices that may operate in
conjunction with BillPlex, or provide data to or receive data from BillPlex. We
also have not tested custom interfaces written for BillPlex. Accordingly, some
customers using BillPlex may have year 2000 problems.
State of Readiness of our Internal Information Technology Systems. We may
be affected by year 2000 issues related to non-compliant internal systems
developed by us or by third-party vendors. We believe that we have identified
substantially all major computers, software applications and related equipment
used with our internal operations that must be modified, upgraded or replaced to
minimize the possibility of a material disruption to our business. We have begun
modifying, upgrading and replacing these systems and expect to complete this
process before the end of the third quarter of 1999. We have also received
assurances from our third-party vendors for their material systems in use by us
that their systems are year 2000 ready.
Systems Other Than Information Technology Systems. Our internal operations
and businesses are also dependent upon computer-controlled systems of third
parties such as suppliers, customers and service providers. The operation of our
office and facilities equipment, such as fax machines, photocopiers, telephone
switches, security systems, elevators, other common devices and utilities, may
be affected by the year 2000 problem. We are currently assessing the potential
effect of, and costs of remediating, the year 2000 problem on this equipment. We
believe that, absent a critical failure beyond our control, such as prolonged
loss of electrical or telephone service, year 2000 problems experienced by third
parties will not have a material impact upon us.
Cost Assessment. We do not separately track expenditures to achieve year
2000 readiness. Those expenditures are primarily absorbed within our development
organization. To date, our costs related to year 2000 readiness have not been
material relative to our overall development expenditures. Furthermore, based on
our experience to date, and our assessment as of the date of this prospectus, we
do not anticipate that costs associated with remediating non-compliant
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products or internal systems, if any, will be material. However, as we have not
completed the assessment of our internal systems, we cannot assure you of that
outcome.
Risks. Any failure of our products to achieve year 2000 readiness could
result in a decrease of sales of our products, an increase in allocation of
resources to address year 2000 problems of our customers without additional
revenue commensurate with such dedication of resources, or an increase in
litigation costs relating to losses suffered by our customers due to such year
2000 problems. Failures of our internal systems could prevent us from processing
orders, issuing invoices, and developing products, and could require us to
devote significant resources to correcting such problems. Due to the general
uncertainty inherent in the year 2000 computer problem, resulting from the
uncertainty of the year 2000 readiness of third-party suppliers and vendors, we
are unable to determine at this time whether the consequences of year 2000
failures will have a material impact on our business, results of operation, and
financial condition.
Contingency Plans. We are currently developing contingency plans to be
implemented as part of our efforts to identify and correct year 2000 problems
affecting our internal systems. We expect to complete our contingency plans by
the end of the third quarter of 1999. Depending on the systems affected, these
plans could include:
- accelerated replacement of affected equipment or software;
- short- to medium-term use of backup equipment and software;
- increased work hours for our employees or use of contract personnel to
correct on an accelerated schedule any year 2000 problems which arise or
to provide manual workarounds for information systems; and
- other similar approaches.
If we are required to implement any of these contingency plans, these plans
could have a material adverse effect on our business, financial condition or
operating results.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use, or SOP
98-1. We have adopted SOP 98-1 and its adoption did not have a material effect
on our financial position or results of operations.
In March 1998, the AICPA issued Statement of Position 98-5 Reporting on the
Costs of Start-Up Activities (SOP 98-5). Pursuant to the provisions of SOP 98-5,
all costs associated with start-up activities, including organization costs,
should be expensed as incurred. Companies that previously capitalized such costs
are required to write off the unamortized portion of such costs as a cumulative
effect of a change of accounting principle. We had no such costs capitalized as
of January 1, 1999 and therefore the adoption of this statement had no impact on
our consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires the recognition of all
derivatives as either assets or liabilities in the balance sheet and the
measurement of those instruments at fair value. The accounting change in the
fair value of a derivative depends on the planned use of the derivative and the
resulting designation. We are required to implement the statement in the first
quarter of
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2000. We have not used derivative instruments and believe the adoption of this
statement will not have significant effect on our financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments consist of cash that is invested in institutional
money market accounts. At March 31, 1999, the carrying value of our financial
instruments approximated their fair values based on current market prices and
rates. We do not use derivative financial instruments in our operations or
investments and do not have significant operations subject to fluctuations in
commodities prices or foreign currency exchange rates.
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BUSINESS
OVERVIEW
We are a leading provider of next-generation billing and customer care
software that can serve as the core of an enterprise solution for integrated
communications providers. Our flagship product, BillPlex, is designed to enable
providers of multiple communications services, such as voice, data, video and
application hosting, to compete more effectively while lowering the total costs
of their strategic billing and customer care services. BillPlex's innovative
software architecture gives service providers the ability to rapidly and
cost-effectively deploy a truly convergent service offering -- including
multiple, usage-based services; a single, unified invoice; and a single point
for customer management across all services. Our solution provides mission-
critical functions such as account and service provisioning, subscriber care and
management, rating, billing and payment processing. BillPlex was designed to
serve as the central integration point for a service provider's enterprise
information systems. We utilize our direct sales organization and a variety of
strategic marketing alliances to reach our targeted customer base of companies
that are seeking to provide multiple, convergent communications services.
INDUSTRY BACKGROUND
The Communications Industry
There is significant competition in the communications industry today in
the United States, due to deregulation that began with the breakup of AT&T in
1984 and intensified as a result of the Telecommunications Act of 1996. These
events, along with similar deregulation and privatization trends in Canada,
Latin America, Europe and Asia, have increased competition worldwide by allowing
new entrants into the market. Many new service providers have emerged that seek
to gain market share from incumbent service providers, such as local exchange
carriers, long distance service providers, and wireless companies. At the same
time, customers have begun to demand, and service providers are making
available, an increasing variety of communications services, including:
- traditional voice services, such as local exchange and long distance;
- wireless services, such as cellular, paging, personal communication
services, or PCS, and satellite communications;
- data services, such as internet access and digital subscriber lines;
- video services, such as cable television and pay-per-view services;
- new voice services, such as voice over internet protocol, or internet
telephony; and
- application hosting services, such as those provided by application
solution providers.
Customers now have greater freedom of choice for their communications needs
and, consequently, core communications services have become commoditized in this
highly competitive market. As customers seek the lowest priced communications
services, the rate of customer turnover among providers, or churn, has increased
dramatically. As a result, service providers must find new ways to distinguish
themselves from their competitors to win new customers and retain their existing
customers. Service providers are seeking to acquire new customers by focusing on
rapid new service deployment, increased marketing activities, attractive new
rate programs and creative discounting. These service providers are also trying
to attract new customers as well as retain existing customers by providing
superior customer care. In
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addition, many service providers have increasingly begun to bundle together and
cross-discount various combinations of communications services to differentiate
themselves.
Emergence of Integrated Communications Providers and Convergent Services
These vast changes in the communications environment, particularly the
growth of internet usage and other data services, have spawned a new generation
of integrated communications providers, or ICPs, that bundle a variety of
communications services. This merging of formerly separate services, known as
"convergence," has created the framework for new market entrants and incumbent
providers to aggressively move toward multi-service market offerings. ICPs can
be incumbent service providers, such as AT&T, Worldcom, Sprint and BellSouth,
who historically offered a single service but are adding cable television,
wireless telephony, internet access or other services, or new market entrants,
such as Level 3 Communications and Qwest Communications International and other
emerging regional ICPs.
Service Provider Information Systems
Convergence has far-reaching effects on a service provider's business model
and the processes and systems that support it. Service providers rely on
information systems to perform mission-critical operations such as service
activation, provisioning, customer service and billing. Limitations in a
provider's information system can increase the provider's operating costs, as
well as prevent it from offering new services or marketing programs, thereby
impairing its competitiveness and financial performance.
Billing and customer care systems, or BACC systems, are among the key
components of a service provider's information systems because they enable the
provider to better manage its customers and revenues and to dynamically change
and grow service offerings, marketing programs and rate plans. In today's
intensely competitive communications market, we believe BACC systems can provide
a competitive advantage as service providers attempt to differentiate themselves
by providing superior features such as bundled service offerings,
cross-discounting, one-call customer service and a single bill for multiple
services.
Many of the BACC systems currently in use were created prior to the
emergence of today's convergent market. Service providers have been forced to
repeatedly modify these legacy systems over time as they have introduced new
offerings, marketing promotions and rate plans in response to intense
competition. As a result, many existing service providers maintain an extremely
complex information systems environment consisting of numerous proprietary
systems. These systems have only a limited interoperability with other elements
of the information system that may be acquired by a service provider or created
as a result of a new product or service offering. These patchwork systems
frequently employ older technologies, are costly to maintain and were designed
to support a single communications service. They require significant time,
resources and effort to modify, making it difficult for service providers to
respond quickly and competitively with innovative marketing promotions and new
service offerings.
Next-Generation BACC Requirements
Over the past decade, a first-generation of third-party BACC vendors
emerged as service providers began to replace their older BACC software. While
several sizable and profitable BACC vendors have emerged, we believe the
first-generation BACC systems still have not delivered the performance and
functionality that service providers demand. In general, first-generation BACC
systems still employ older technologies and architectures, were designed
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before the proliferation of ICPs, are inflexible and require substantial amounts
of costly customization and maintenance.
BACC systems must enable service providers to respond quickly to
competition and changing market conditions in today's fast-growing, dynamic
environment. We believe that both existing and emerging ICPs are looking for
next-generation BACC solutions that are designed to:
- support multiple, convergent communications services;
- speed deployment of new services and pricing programs;
- interoperate with other components of the service provider's information
system; and
- enable easy modification and maintenance without a costly information
technology staff.
THE DALEEN SOLUTION
We are a leading provider of next-generation BACC software that can serve
as the core of an enterprise solution for integrated communications providers.
Our flagship product, BillPlex, enables our customers to provide comprehensive
billing, provisioning, and customer care for a wide array of communications
services that include local, long distance and wireless voice; internet access
and other data services; and application hosting. The majority of our customers
have indicated to us that they are utilizing or planning to utilize BillPlex to
support data services in addition to traditional voice services. BillPlex plays
a key strategic role in a service provider's business by improving its ability
to compete effectively while simultaneously lowering the total cost of providing
BACC services. BillPlex is designed to enable service providers to capture the
key business benefits of:
Increased revenue and market share. From inception, BillPlex has been
designed as a next-generation, convergent software solution to provide billing
and customer care for companies seeking to provide multiple communications
services. BillPlex's innovative architecture has the inherent flexibility to
enable the offering of new communications services and marketing programs and to
respond rapidly to dynamic market conditions without being constrained by its
BACC system. BillPlex enables a service provider to increase revenue and market
share by:
- shortening the initial time required for a new market entrant to launch
its business;
- shortening the time to market for an existing provider to offer new
promotions and services;
- allowing a provider to immediately activate services when a subscriber is
added to the system;
- enabling a provider to offer targeted marketing programs and service
bundles that are optimized for maximum revenue and market penetration;
and
- generating real-time bills that are accurate and easy to understand,
reducing fraud, disputed charges and uncollected revenue.
A pre-configured, whole-product solution. BillPlex is a complete BACC
solution, providing a comprehensive suite of functions and the ability to offer
multiple, convergent communications services under a single, unified invoice. In
addition, BillPlex is available in pre-configured market packages, which enable
providers to enter specific markets and rapidly launch customized services with
minimal system implementation costs. We currently offer a package for
competitive local exchange carriers, or CLECs, and are in the process of
developing packages for the
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markets for internet service providers, or ISPs, integrated communications
providers, or ICPs, application service providers, or ASPs, and wireless
providers.
Improved customer service and customer retention. BillPlex enables a
service provider to offer superior customer care and responsiveness, thus
increasing customer retention. With BillPlex, service providers can create
flexible, unified invoices for all segments of their customer bases. For
example, BillPlex enables service providers to better serve business subscribers
through custom-tailored invoices that match individual organizational structures
and accounting needs. For residential customers, BillPlex allows service
providers to create personalized service bundles that increase customer loyalty
and the costs of switching to a different service provider. In addition,
BillPlex enables a customer service representative to provide superior customer
care and responsiveness through real-time access to all necessary subscriber
account information. Customers are also able to access their own account
information 24 hours per day over the internet.
Enterprise integration and interoperability. BillPlex was designed as a
next-generation BACC software platform, enabling seamless integration with other
applications in a service provider's enterprise operations environment. Our
industry standards-based, open application programming interfaces, or APIs,
allow BillPlex to interoperate with other software programs without writing
custom interfaces. Our open APIs lower the cost of installation and allow
customers to upgrade BillPlex and other enterprise applications independently,
reducing the lifetime costs of system operation and maintenance.
Flexibility, scalability and reliability. BillPlex can grow with a service
provider's needs, scaling down to the needs of the smallest new market entrant
or scaling up for the environment of a large, incumbent service provider. Our
"pay as you grow" pricing model permits customers to purchase additional
licenses and functionality only as they need them. In addition, BillPlex's
flexible architecture enables our customers to easily support additional
communication service offerings, should they choose to bundle more services in
the future. BillPlex allows providers to distribute database information and
processing across multiple servers, which minimizes the impact of a server
failure and maximizes system availability and reliability.
Increased productivity and lower total operating costs. BillPlex
simplifies system management and user training, because it is a comprehensive
billing solution that allows multi-service rating, customer management, and
invoicing from a common platform. Because additions and modifications to service
offerings, rate plans, and subscribers do not require changes to core BillPlex
software, customers have significantly lower maintenance costs in comparison
with first-generation systems due to reduced reprogramming and information
technology support required to operate and maintain the system. We provide a
toolkit and related training that allow our customers to perform all functions
necessary to adapt, extend, maintain and update their BillPlex solution.
Finally, the ability of BillPlex to integrate quickly with other existing
enterprise software programs and to operate in a Windows NT, Unix or mixed
configuration protects a customer's investment in software, hardware and
supporting personnel, knowledge and data.
STRATEGY
Our goal is to become the leading provider of BACC software solutions to
ICPs by:
Aggressively targeting ICPs. We believe our flagship product, BillPlex, is
well suited for the ICP market because it has been designed from inception as a
truly convergent, rapid time-to-market solution. BillPlex provides a
comprehensive product solution for billing and customer care that a
communications service provider needs to be competitive. We believe that our
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innovative solution provides us with an opportunity for significant growth as
broad industry trends continue to drive the dynamic expansion of the ICP market.
Building a scalable, software-based business model. We provide
pre-configured software solutions that require minimal customization, as
compared to the highly customized nature of most legacy and first-generation
systems. We believe that our pre-integrated packaged solution provides us with a
competitive advantage that we intend to exploit as we pursue our market
leadership goal. This approach is designed to permit us to achieve the high
margins and rapid growth typical of software companies.
Leveraging strategic marketing alliances. We have established strategic
marketing alliances with industry-leading information systems integrators, such
as CAP Gemini, Danet, Integris Groupe Bull and Unisys, and with providers of
complementary information system components, such as Eftia, Oracle, Telcordia
and Vertex. These alliances help extend our market coverage and provide us with
new business leads and access to a large pool of highly trained implementation
personnel. We are continually seeking to expand the number of partners we work
with to further penetrate the market and accelerate our growth.
Developing and maintaining long-term customer relationships. We seek to
develop and maintain long-term, mutually beneficial relationships with our
customers. Our "pay as you grow" pricing model is targeted to attract and retain
customers through all phases of their growth. We believe that long-term
relationships with rapidly growing customers will lead to additional product
sales, customer references and ongoing support and maintenance revenue.
Expanding into new geographic markets and industry segments. Our current
customers are located primarily in the United States and Latin America. We
intend to target and penetrate new geographic markets, particularly Europe and
other international markets, as these markets continue to experience market
trends similar to those that have driven growth in the United States. Further,
we intend to penetrate additional market segments, such as the cable television
and utilities markets, through the development and release of pre-configured
packages specifically targeted at those market segments.
PRODUCTS
Our flagship product, BillPlex, is a next-generation BACC software platform
that provides centralized integration of a comprehensive enterprise solution,
enabling communications service providers to perform complex, mission-critical
functions such as account and service provisioning, subscriber care and
management, rating, billing and payment processing. BillPlex's design gives
service providers the ability to rapidly and cost effectively deploy a
convergent service offering -- including multiple, usage-based services, a
single, unified invoice, and a single point for customer relationship
management. The BillPlex system's flexible, distributed architecture supports
the Windows NT and Unix operating systems. Its industry-standard open APIs allow
rapid integration with a variety of operational and business support systems.
BillPlex also provides an optional web interface that allows subscribers to view
their account status and perform other self-care functions at any time over the
internet.
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Key features of BillPlex are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CATEGORY DESCRIPTION
- ------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNT AND - Allows a service provider to add, change or delete
SERVICE residential and business subscribers and set up
PROVISIONING multi-tier organizational relationships; assign services
to each subscriber; and bundle services through an
easy-to-use Windows wizard-based graphical user interface
- Supports an easy-to-use drag-and-drop interface for
managing complex accounting and organizational invoicing
requirements
- Supports dynamically configurable subscriber
characteristics for capturing demographic information
customized to the provider's needs
- Enables commission calculation by allowing a service
provider to keep track of sales agent information for
each subscriber and service
- Manages inventory of connection numbers, such as
telephone numbers and internet protocol addresses
- Provisions services at network elements and application
servers through its network mediation interface and
optional third-party network mediation devices
- Enables subscriber access to account information through
the internet
- ------------------------------------------------------------------------------------
SUBSCRIBER - Allows a service provider to provide real-time access to
MANAGEMENT information about the account and each service subscribed
to a single customer service representative
- Logs all customer interactions for quality assurance
- Enables analysis of marketing program effectiveness
- ------------------------------------------------------------------------------------
USAGE PROCESSING - Allows a service provider to collect and process usage
data for multiple services from a variety of sources in
real time, batch mode or both
- Provides a graphical user interface for configuring usage
data import formats to accommodate differences among the
network elements of various vendors
- Archives usage data based on a service provider's policy
- ------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CATEGORY DESCRIPTION
- ------------------------------------------------------------------------------------
<S> <C> <C>
BILLING - Provides an easy-to-read, accurate, unified bill that
enables flexible, competitive marketing programs through
bundling of convergent services, including cross-service
and volume discounting
- Supports flexible billing hierarchies so that volume
discounts can be applied to various organizational
structures
- Supports comprehensive taxation plans
- Allows a service provider to extend and adapt BillPlex
functions such as creating new rate plans and integrating
with existing enterprise applications, such as general
ledger
- Allows subscribers to access and view their account
statements from the internet
- ------------------------------------------------------------------------------------
PAYMENT PROCESSING - Enables fast, low-cost payment processing for cash,
credit card and batch lockbox payments
- Reduces potential losses through effective collection and
credit management
- Supports prepaid deposit, refund and returned check
processing
- Verifies customer credit information through BillPlex's
real-time credit bureau link
- Allows payment to one or more open invoices for a given
subscriber
- ------------------------------------------------------------------------------------
REPORTING - Offers 32 standard reports
- Provides a toolkit including a custom report generation
utility
- ------------------------------------------------------------------------------------
SYSTEM - Allows a service provider to assign different levels of
ADMINISTRATION authorization to customer service representatives so that
they can only access and perform functions for which they
are authorized
- Allows a service provider to define system-wide rules and
policies for system operation
- ------------------------------------------------------------------------------------
INTERNATIONAL - Encapsulates language sensitive components for easy
SUPPORT language translation
- Supports a different currency selection for each account
- ------------------------------------------------------------------------------------
</TABLE>
BillPlex Market Packages. Our current market packages and those under
development are designed to provide a complete, service-ready rating and billing
system that includes:
- pre-configured data reports that enable the provision of services, a
standard invoice, rate plans, payment applications and documentation that
tailor BillPlex to meet the requirements for particular markets; and
- external interface plug-ins for third-party applications, such as
taxation and address validation, for a particular market.
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In addition, we provide standardized set-up, configuration and testing of
BillPlex and our market packages to ensure proper implementation and optimal
performance within predefined parameters.
We believe service providers gain a number of advantages from our
pre-configured market packages. Providers are able to launch service much faster
and at lower costs than if they implemented a traditional BACC system since all
of the business processes and program settings appropriate to their market model
have already been pre-configured in the BillPlex market package software.
Because the market packages are based on the core BillPlex product, the service
provider retains all of the system flexibility, adaptability, and low total cost
of ownership that the BillPlex architecture provides. Providers can quickly add
new services, rate plans, and promotional programs as needed without expensive
and time-consuming customization.
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We currently have or plan to make available the following market packages:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
PACKAGE DESCRIPTION
- ----------------------------------------------------------------------------------
<S> <C>
CLEC (CURRENTLY A complete, service-ready BACC system that enables a CLEC to
AVAILABLE) bill for:
- Residential and business local and long distance services,
such as switched and dedicated services and custom calling
features
- Calling card services
- Wholesale service offering support
- Includes basic local calling area taxation setup
- ----------------------------------------------------------------------------------
ISP/DATA SERVICES A complete, service-ready BACC system that will enable an
(UNDER ISP to bill for:
DEVELOPMENT)
- Residential and business dial-up, digital subscriber loop,
or DSL, and dedicated internet access
- Web and content hosting
- Virtual private network, or VPN
- ----------------------------------------------------------------------------------
ICP A complete, service-ready BACC system that will enable an
(UNDER ICP to bill for:
DEVELOPMENT)
- Residential and business local and long distance services,
such as switched and dedicated services and custom calling
features,
- Calling card services
- Wholesale service offering support
- Residential and business dial-up, DSL, and dedicated
internet access
- Web and content hosting
- VPN
- Integrated voice and data services on a single invoice
- ----------------------------------------------------------------------------------
ASP A complete, service-ready BACC system that will enable an
(UNDER ASP to bill for:
DEVELOPMENT)
- Flat-rate application hosting services
- Usage-sensitive application billing services
- ----------------------------------------------------------------------------------
WIRELESS (UNDER A complete, service-ready BACC system that will enable a
DEVELOPMENT) wireless carrier to bill for:
- Residential and business zoned wireless and personal
communications services, or PCS, such as free airtime
minutes and tiered airtime rating charges and discounts
- Long distance services, such as zoned toll areas and
custom calling wireless features
- Support for roaming processing, clearing and billing
- ----------------------------------------------------------------------------------
</TABLE>
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CUSTOMER SERVICE AND TECHNICAL SUPPORT
Our customer services are designed to provide customers with superior
support while giving them the tools and knowledge they need to independently run
their day-to-day operations. We provide the following services:
Professional consulting services. We provide a variety of professional
consulting services to assist customers in the implementation, modification and
customization of the BillPlex product and its market-based packages. We work
with customers to establish business models and processes that utilize BillPlex
to increase their market power and lower their operating costs.
Training. We offer training programs for system operators, billing
administrators and supervisors of customer service representatives. Our training
programs are designed to provide customers with the tools and education they
need to be able to train their own personnel for maximum effectiveness.
Maintenance. We have a comprehensive maintenance and support program,
which provides customers with timely and high quality maintenance and support
services for our products. These services are generally provided pursuant to
maintenance agreements between our customers and us. These agreements entitle
our customers to multiple levels of telephone technical support for prompt and
professional response to customer questions or problems and maintenance. We also
provide customer self-service capabilities 24 hours per day through our on-line
maintenance tracking system.
Third-party software fulfillment. When our customers require it, we
provide a complete solution by offering third-party products they may need in
order to rapidly implement their systems. We provide enabling platform products,
such as the Windows NT operating system and Oracle database software;
complementary products that integrate with BillPlex, such as QMS address
validation software; and tools that support development and reporting on the
data in BillPlex, like Crystal Reports or Borland's development toolkit
software.
TECHNOLOGY
BillPlex's object-oriented N-tier architecture modularizes product
components and supports an enterprise-wide, distributed environment, with the
following benefits: (1) increased system price/performance, reliability,
scalability and manageability; (2) a plug-and-play environment in which
applications can be integrated rapidly and upgraded independently; (3)
simplified, lower-cost application development and maintenance efforts; (4) the
ability to easily extend and adapt BillPlex functionality; and (5)
interoperability with a large number of applications and systems. The N-tier
architecture consists of the following:
Billing application framework. This tier employs a flexible and scalable
messaging protocol to support a distributed, event-driven framework for
extending and adapting BillPlex functions to meet the most complex customer
requirements. The API provided by the billing application framework allows a
customer to tailor BillPlex's functions like rating and enables its
interoperability with external third-party systems like taxation or mediation.
The billing application framework allows applications to run on any server in a
network environment, offering greater scalability and throughput.
Data tier. Using a business data object layer, enterprise applications can
access not only BillPlex's Oracle relational database but also third-party data
sources, enabling the development of applications with transparent access to any
data source.
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Enterprise application framework. This three-layer framework consists of
business process objects, business rule objects, and business data objects.
Business process objects encapsulate processes such as service order creation.
Business rule objects enforce rules required by customers and the underlying
data model. Business data objects encapsulate data access functions for entities
such as subscriber, service, and rate plans. This partitioning offers greater
flexibility by allowing dynamic modification of business rules and processes
without changing data objects. The enterprise application framework supports
transaction integrity and resource pooling, offering a scalable, reliable
environment for mission-critical enterprise applications.
Enterprise application tier. This tier includes enterprise applications,
such as customer relationship management, decision support, enterprise resource
planning software and network management systems, that use the BillPlex
enterprise application framework API to access BillPlex's data and functions, as
well as other databases and applications supported by the framework.
Client tier. The client tier includes any application that allows an end
user to access BillPlex. For example, such an application can be a customer
service representative using BillPlex's graphical user interface client, an
internet user browsing for self-care, a sales agent using a customer
relationship management application to sell services to customers or a network
administrator using an operating support system application to manage network
inventory.
[GRAPHIC INSERT HERE]
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CUSTOMERS
Our typical customers are companies that are seeking to provide multiple
communications services including local, long distance and wireless voice
communications, internet access and other data communications services. Our
customers benefit from BillPlex's design for multiple, convergent services, as
well as its scalability and flexibility. They value BillPlex's comprehensive
design, rapid installation time, ease and speed of downstream changes,
pre-integration with other enterprise applications and low operating costs.
As of June 30, 1999, we had 20 customers, consisting of local and
competitive local exchange carriers, interexchange carriers, internet service
and other data services providers, wireless carriers, and ICPs. These customers
are located in the United States, Canada, Latin America and Europe. Our
customers include:
- America Latina Telecomunicacoes Avencades, SA;
- KINI L.C.;
- PaeTec Corp.;
- PacWest Telecom, Inc.;
- NewSouth Communications Corp.;
- Network Access Solutions; and
- 2nd Century Communications, Inc.
During the years ended December 31, 1996, 1997 and 1998, 60%, 100% and 99%,
respectively, of our total revenue was attributable to four, one and five major
customers, respectively. Sales to these customers each accounted for more than
10% of our total revenue for the respective year.
SALES AND MARKETING
Sales. We sell BillPlex through our direct sales organization and through
indirect sales channels. Our sales strategy is focused on emerging ICPs,
including carriers who need a solution that supports multiple communications
services, as well as carriers with a single-service offering who plan to migrate
to a multiple-service offering. Through our direct sales approach, we have
developed relationships with service providers through a problem-solving sales
process and work closely with them to define and determine how their needs can
be fulfilled by our BillPlex product. Through our indirect sales channel
approach, we have developed relationships with leading professional services
providers that can sell, implement and customize our products. In addition, we
have developed relationships with other leading communications-focused companies
that offer products complementary to ours, and who can sell our products jointly
with their solutions.
Due to the sophisticated nature of our products and services, the duration
of a sales cycle can typically range anywhere from 30 days to one year. We
intend to gradually increase the size of our direct sales organization while
also focusing on the ongoing development of the indirect sales channel through
our marketing alliances.
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<PAGE> 50
Marketing. Our marketing programs are focused on creating awareness,
interest and preference for our products and services. We engage in a variety of
marketing activities, including:
- supporting our strategic marketing alliances;
- conducting seminars, trade shows, and special events;
- creating and placing advertisements;
- creating direct mail and direct response programs;
- conducting ongoing public and press relations programs;
- creating, managing, and maintaining our web site;
- participating in industry consortia and partnership programs with key
influencers; and
- establishing and maintaining close relationships with recognized industry
analysts.
STRATEGIC MARKETING ALLIANCES
We have developed strategic marketing alliances that expand the coverage of
our direct sales organization and provide implementation and customization
services for our products. These alliances enable us to focus our resources on
product development, enhancement and customer service. Our strategy is to
leverage our current marketing relationships and to develop new marketing
alliances to help achieve our sales and implementation targets.
Our marketing alliance program is based on two types of relationships,
business alliances and enterprise alliances:
- Our business alliances are primarily with systems integrators that can
sell, implement and customize our products, and include American
Management Systems, Incorporated, CAP Gemini America, LLC, Danet, Inc.
and Unisys Corp. These and our other business alliances have successfully
completed BillPlex projects to the satisfaction of our customers and
within our quality standards. To become an affiliate in our business
alliance program, a company must establish an implementation team that
has been trained and certified by us.
- Enterprise alliances are with companies in the business of developing and
marketing enterprise information system products that are complementary
to and interoperable with our products. Some of our enterprise alliance
affiliates include Oracle, The Hutton Company and Vertex, Inc. These
companies are able to effectively market our products, because customers
purchase them together as part of the deployment of a comprehensive
enterprise information solution.
RESEARCH AND DEVELOPMENT
Our product development capabilities are essential to our strategy of
enhancing our core technology, developing additional applications incorporating
that technology and maintaining the competitiveness of BillPlex and related
products and services. We have invested heavily in software development in order
to ensure that we have the product design skills and tools for achieving our
market leadership objective. We recognize that our ability to create and extend
our products with each release comes from hiring exceptionally talented software
engineers, quality
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<PAGE> 51
assurance testers and billing and telecommunications specialists. We have also
created a structured process for both platform and market package releases that
serves as a framework for minimizing our product development cycle times and
ensuring quality software releases that meet or exceed our customers'
requirements.
Our research and development expenses totaled approximately $1.1 million
for 1996, $1.7 million for 1997, and $6.7 million for 1998. As of June 30, 1999,
approximately 52 employees were engaged in research and development activities.
COMPETITION
The markets in which we compete are relatively new, intensely competitive,
highly fragmented and rapidly changing. We expect this competition to increase
in the future. Our products compete on the basis of performance, scalability,
extensibility, ease of integration and cost of ownership. The principal
competitive factors in our market include responsiveness to the needs of our
customers, product features, timeliness of implementation, quality and
reliability of products, price, project management capability and technical
expertise.
We believe that our ability to compete depends in part on the performance
of the competition, including the development by others of software that is
competitive with our products and services, the price at which others offer
competitive software and services, the extent of competitors' responsiveness to
customer needs and the ability of our competitors to hire, retain and motivate
key personnel.
Our main competitors include:
- Kenan Systems Corporation, a wholly owned subsidiary of Lucent
Technologies Inc.;
- Saville Systems, PLC, the subject of a recently announced proposed
acquisition by ADC Telecommunications, Inc.;
- Intertech Management Group, Inc.;
- Amdocs Limited; and
- Portal Software, Inc.
Other companies with which we compete are International Telecommunications
Data Systems, Inc.; Sema Group, PLC; and Intasys Corporation. We also compete
with systems integrators, service bureaus and with the internal information
technology departments of large communications companies, who may elect to
develop functionalities such as those provided by our product in-house rather
than buying them from outside suppliers.
We anticipate continued growth and competition in the communications
industry and the entrance of new competitors into the billing and customer care
software market, and that the market for our products will remain intensely
competitive. We compete with a number of companies that have longer operating
histories, larger customer bases, substantially greater financial, technical,
sales, marketing and other resources, and greater name recognition than us.
In addition, as we expand, we will market our products and services to
service providers in geographic and industry markets that we do not currently
serve. Upon our entrance into these markets, we may encounter new competitors,
some of which could have significantly greater resources than we have.
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<PAGE> 52
INTELLECTUAL PROPERTY
We regard significant portions of our software products and related
processes as proprietary and rely on a combination of patent, copyright,
trademark and trade secret law, contractual provisions and nondisclosure
agreements to protect our intellectual property rights. We currently have four
patent applications pending in the United States. In addition, we have filed a
number of trademark applications to protect our trademarks and tradenames. There
is no guarantee that our pending patent or trademark applications will result in
issued patents or trademarks, or will provide us with any competitive
advantages. In addition, our patent and trademark applications may be challenged
by third parties.
We generally enter into confidentiality or license agreements with our
employees and consultants. When we license our products, we use signed license
agreements that limit access to and distribution of our intellectual property
and contain confidentiality terms customary in the industry. We license our
products in object code only, a format that does not allow the user to change
the software source code. However, certain of our license agreements do require
us to place the source code for BillPlex into escrow. Such agreements generally
provide that these licensees' would have a limited, non-exclusive right to use
the software source code if there is a bankruptcy proceeding by or against us,
if we cease to do business without a successor or if we discontinue providing
maintenance and support on BillPlex.
EMPLOYEES
As of June 30, 1999, we had 169 full-time employees, of whom 64 were in
product implementation and support, 12 in sales and marketing, 52 in product
development and 32 in administration. We have never had a work stoppage and none
of our employees are represented under collective bargaining agreements. We
consider our employee relations to be good.
FACILITIES
We lease an aggregate of approximately 31,000 square feet in two separate
offices in an office complex located in Boca Raton, Florida. We occupy these
premises under two leases, which expire in May 2000 and January 2001. In
addition to our corporate office space in Boca Raton, Florida, we also lease
approximately 24,000 square feet of office space in Atlanta, Georgia. The
Atlanta lease commences on September 1, 1999, and expires on August 31, 2004. We
also have sales offices in Boston, Massachusetts, Charlotte, North Carolina, and
Chicago, Illinois. We currently are seeking additional facilities of
approximately 50,000 square feet in the Boca Raton area to meet our growth
needs.
LEGAL PROCEEDINGS
We are not a party to any material legal proceeding.
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<PAGE> 53
MANAGEMENT
The following table sets forth certain information about our executive
officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James Daleen.............. 39 Chairman of the Board of Directors and Chief
Executive Officer
David B. Corey............ 39 President, Chief Operating Officer and Director
Richard A. Schell......... 48 Chief Financial Officer, Treasurer and Director
Stephen M. Wagman......... 39 Executive Vice President of Corporate Development
and Secretary
Phillip R. Davis.......... 32 Vice President of Human Resources
Frank D. Dickinson........ 29 Vice President of Development
David McTarnaghan......... 37 Vice President of Sales
Timothy C. Moss........... 33 Vice President of Operations
John Z. Yin............... 40 Vice President of Technology and Product Management
Paul G. Cataford(1)....... 35 Director
Daniel Foreman(2)......... 40 Director
Stephen J. Getsy(1)....... 54 Director
Elliot Levine(2).......... 62 Director
Ofer Nemirovsky(1)........ 41 Director
William A. Roper, Jr...... 53 Director
</TABLE>
- -------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
JAMES DALEEN, our founder, has served as Chairman of the Board and Chief
Executive Officer since our inception in 1989. Mr. Daleen served as President
and Chief Executive Officer of Sound Impulse Company, an electrical construction
company, from 1983 until 1995.
DAVID B. COREY has served as President and Chief Operating Officer since
February 1998 and as a director since June 1998. Prior to joining us, Mr. Corey
served as Senior Vice President of Global Marketing for Westell, Inc., a
telecommunications equipment company, from November 1996 to February 1998, and
as Vice President and Managing Director/Asia Pacific for Westell International,
a telecommunications company, from January 1994 to November 1996.
RICHARD A. SCHELL has served as Chief Financial Officer since November 1994
and as a director since December 1995. Mr. Schell was also elected Secretary and
Treasurer in December 1995 and resigned as Secretary in June 1999. Mr. Schell
served as Vice President of Finance and Chief Financial Officer of Fibercorp
International, Inc., a telephone-lines monitoring company, from 1993 until 1994.
Mr. Schell has been a certified public accountant since 1973 and was an audit
partner with KPMG LLP until 1993.
STEPHEN M. WAGMAN joined us in June 1999 as Executive Vice President of
Corporate Development. Mr. Wagman was appointed Secretary in June 1999. Prior to
joining us, Mr. Wagman served in various capacities with PowerCerv Corporation,
an enterprise resource
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<PAGE> 54
planning company, from August 1995 to June 1999, including Chief Financial
Officer, Treasurer, Senior Vice President of Administration, Chief Counsel and
Secretary. Prior to that, Mr. Wagman served as Vice President, Treasurer and
Secretary for International Data Matrix, Inc., a bar code and machine vision
technology company, from July 1988 until August 1995.
PHILLIP R. DAVIS joined us as Vice President of Human Resources in June
1999. Prior to joining us, he served as the Senior Vice President of Human
Resources for HomeBanc Mortgage Corporation from December 1997 to June 1999.
Prior to that, Mr. Davis was Human Resources Manager for Chase Manhattan
Mortgage Corporation from July 1995 to December 1997, Director of Human
Resources for Main Street Mortgage, L.P., a mortgage service, from November 1994
to June 1995 and Process Manager of Chase Manhattan Bank from July 1989 to
November 1994.
FRANK D. DICKINSON has served as Vice President of Development since
December 1996. Prior to assuming his current position, Mr. Dickinson worked for
us as Director of Research and Development from April 1996 to December 1996, as
Project Manager from November 1994 to April 1996 and as a software engineer from
November 1991 to November 1993.
DAVID J. MCTARNAGHAN has served as Vice President of Global Sales since
June 1998. Prior to joining us, Mr. McTarnaghan was employed by Fujitsu BCS, a
communications services company, from May 1991 to June 1998, last serving as a
District General Manager.
TIMOTHY C. MOSS has served as Vice President of Operations since January
1999. Prior to joining us, Mr. Moss was employed by Carolina PCS, a wireless
communications company, as Executive Vice President of Operations from April
1998 to December 1998. From June 1995 to January 1998, Mr. Moss was Vice
President of Information Technology for Powertel, Inc., a wireless
communications company, and from January 1994 to June 1995, Director of
Information Systems and Customer Support for InterCel, a cellular communications
company.
JOHN Z. YIN joined us as Director of Technology in April 1997, was promoted
to Vice President of Technology in June 1997 and since December 1998 has served
as Vice President of Technology and Product Management. Prior to joining us, Mr.
Yin served as Vice President of Technology of Fleet.Net, Inc., a software
development and internet service company, from October 1996 until April 1997.
Mr. Yin was a senior member of the technical staff of Pacific Communications
Sciences, Inc., a hardware and software development company in the wireless
communications market, from August 1995 until October 1996. From December 1987
until August 1995, Mr. Yin held various positions with IBM Corp., a
multinational hardware and software services company, last serving as senior
programmer.
PAUL G. CATAFORD has served as a director since August 1998. Mr. Cataford
has served as Vice President of Investments for BCE Capital, Inc., a management
company charged with all venture capital activities of Bell Canada, from August
1997 to present. From January 1994 until July 1997, Mr. Cataford was the Team
Leader of Investments of Working Ventures Canadian Fund, a venture capital fund.
Mr. Cataford also serves on the board of directors of the audit committee of
Sierra Wireless Inc., a company that develops wireless data modems.
DANIEL FOREMAN has served as a director since June 1998. Mr. Foreman has
served as Managing Director of ABN AMRO Capital (U.S.A.) Inc., a small business
investment company, since October 1997 and was previously Vice President of
Investments and Acquisitions for Ameritech Corporation, a communications
company, from October 1987 to October 1997.
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<PAGE> 55
STEPHEN J. GETSY has served as a director since October 1997. Mr. Getsy has
been the President and Chief Executive Officer of On-Line Ventures, Inc., a
business consulting and investment company, from November 1993 to present.
ELLIOT LEVINE has served as a director since December 1996. Mr. Levine
served as Executive Vice President and Chief Financial Officer of Cheyenne
Software, Inc., a software development company, from 1989 through December 1996.
Mr. Levine is currently a self-employed business consultant.
OFER NEMIROVSKY has served as a director since September 1997. Mr.
Nemirovsky has been a Managing Director of HarbourVest Partners, LLC since
January 1997. HarbourVest Partners, LLC was formed by the management team of
Hancock Venture Partners where Mr. Nemirovsky had served in various capacities
since 1986. Mr. Nemirovsky is a director of The Ultimate Software Group,
Paradigm Geophysical Ltd. and Primax Solutions, Inc.
WILLIAM A. ROPER, JR. has served as a director since July 1999. Mr. Roper
has been the Senior Vice President and Chief Financial Officer of Science
Applications International Corporation, or SAIC, a technology research and
development company, since April 1990. Prior to joining SAIC, Mr. Roper served
as Executive Vice President and Chief Financial Officer of Intelogic Trace,
Inc., from 1987 to 1990. Mr. Roper is also a director of Network Solutions, Inc.
a provider of Internet address registration, intranet development and network
security services, and ODS Networks, Inc., a provider of high performance
telecommunications and security products.
Pursuant to agreements that will terminate upon completion of this
offering:
- Holders of common stock were entitled to elect three directors, who are
currently Messrs. Daleen, Corey and Schell;
- Holders of series A convertible preferred stock were entitled to elect
three directors and have elected Mr. Nemirovsky to serve on the board;
- BCE Capital, Inc., a holder of series D convertible preferred stock, was
entitled to elect one director, who is currently Mr. Cataford;
- Holders of series D and D-1 convertible preferred stock, other than BCE
Capital, Inc., were entitled to elect one director, who is currently Mr.
Foreman; and
- Holders of series E convertible preferred stock were entitled to elect
one director, who is currently Mr. Roper.
OBSERVER RIGHTS AFTER THE OFFERING
After the offering, several existing stockholders will have the right
pursuant to their respective preferred stock purchase agreements to have one
representative attend each meeting of the board of directors so long as they
continue to own a specified number of shares of the common stock they receive
upon the automatic conversion in the offering of the convertible preferred stock
held by them. Specifically, St. Paul Venture Capital IV, L.L.C. and JK&B
Capital, L.P. each have the right to have an observer present so long as they
continue to hold 198,891 and 163,612 shares of common stock, respectively.
COMMITTEES OF THE BOARD OF DIRECTORS
The members of the audit committee are Daniel Foreman and Elliot Levine.
The audit committee reviews the scope and timing of our audit services and any
other services our
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<PAGE> 56
independent auditors are asked to perform, the auditor's report on our financial
statements following completion of their audit and their policies and procedures
with respect to internal accounting and financial control. In addition, the
audit committee makes annual recommendations to the board of directors for the
appointment of independent auditors for the following year.
The members of the compensation committee are Paul G. Cataford, Stephen J.
Getsy and Ofer Nemirovsky. The compensation committee reviews and evaluates the
compensation and benefits of all our officers, reviews general policy matters
relating to compensation and benefits of our employees and makes recommendations
concerning these matters to the board of directors. The compensation committee
also administers our stock option plans.
COMPENSATION OF DIRECTORS
Neither employee nor non-employee directors receive compensation for
services performed in their capacity as directors. We reimburse each director
for reasonable out-of-pocket expenses incurred in attending meetings of the
board of directors and any of its committees. In addition, directors who are not
employed by us are eligible to receive options to purchase our common stock
under the 1999 Stock Incentive Plan. Under this plan, the board of directors may
issue at its discretion non-qualified stock options to non-employee directors.
The board of directors determines the vesting schedule for options granted to
non-employee directors pursuant to the 1999 Stock Incentive Plan.
The board of directors granted Mr. Levine options to purchase 15,000 shares
of common stock on each of December 16, 1996 and December 18, 1998 at a purchase
price of $3.00 and $3.25 per share, respectively. The options became fully
exercisable upon grant. In October 1997, the board of directors granted Mr.
Getsy an option to purchase 75,000 shares of common stock at $3.25 per share.
Our board of directors also granted Mr. Getsy an option to purchase 15,000
shares at $3.25 per share in December 1998. The options become exercisable at
the rate of 25% of the total number of shares per year. None of these options
have been exercised.
TERMS OF DIRECTORS AND EXECUTIVE OFFICERS
Immediately after this offering, our board of directors will be divided
into three classes, each of whose members will serve for a staggered three-year
term. At each annual meeting of stockholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. Our bylaws provide that such directors will be elected
by a plurality of all votes cast at such meeting. The board will consist of
three Class I Directors, Messrs. Cataford, Roper and Schell; three Class II
Directors, Messrs. Corey, Foreman and Levine; and three Class III Directors,
Messrs. Daleen, Getsy and Nemirovsky. The terms of the Class I Directors, Class
II Directors and Class III Directors expire upon the election and qualification
of successor directors at the annual meeting of stockholders to be held during
the calendar years 2000, 2001 and 2002, respectively.
Each executive officer serves at the discretion of the board of directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of our directors or executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee of the board of directors are
currently Paul G. Cataford, Stephen J. Getsy and Ofer Nemirovsky, none of whom
have ever been an officer or employee of our company.
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<PAGE> 57
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by us
in 1998 for our Chief Executive Officer and our four other most highly
compensated executive officers who were serving as executive officers as of
December 31, 1998 and whose total annual salary and bonuses were in excess of
$100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS OPTIONS(#) COMPENSATION
- ------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
James Daleen................................... $260,000 $136,500 204,651 $ --
Chairman of the Board and
Chief Executive Officer
David B. Corey................................. 176,154 93,500 181,423 101,725(3)
President and Chief Operating
Officer(2)
Richard A. Schell.............................. 165,000 86,625 10,268 --
Chief Financial Officer
and Treasurer
Frank Dickinson................................ 105,000 29,183 2,661 --
Vice President of Development
John Yin....................................... 115,000 30,454 -- --
Vice President of Technology
and Product Manager
</TABLE>
- -------------------------
(1) Mr. Stephen M. Wagman, Executive Vice President of Corporate Development and
Secretary, joined our company in June 1999. His 1999 base salary is
$170,000.
(2) Mr. Corey commenced employment with Daleen on February 10, 1998; his
annualized base salary for fiscal 1998 was $200,000.
(3) Includes closing cost reimbursement for relocation expenses of $58,554 and a
tax gross-up payment of $43,171.
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<PAGE> 58
OPTION GRANTS IN 1998
The following table sets forth all individual grants of stock options
during the year ended December 31, 1998 to each of the named executive officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED EXERCISE FOR OPTION TERM(4)
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR PER SHARE(1) DATE 5% 10%
- ---- ---------- ---------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James Daleen................... 76,923(2) 6.8% $2.50 1/5/03 $ 53,131 $117,406
124,536(3) 11.0 3.25 12/31/08 254,540 645,055
David B. Corey................. 86,923(2) 7.7 2.50 2/5/03 60,038 132,668
94,500(3) 8.3 3.25 12/31/08 193,149 489,478
123,077(3) 10.8 3.25 2/5/03 110,513 244,204
Richard A. Schell.............. 81,000(3) 7.1 3.25 12/31/08 165,557 419,553
Frank D. Dickinson............. 30,000(3) 2.6 3.25 12/31/08 61,317 155,390
John Z. Yin.................... 30,000(3) 2.6 3.25 12/31/08 61,317 155,390
</TABLE>
- -------------------------
(1) These options were granted with an exercise price equal to the fair market
value of our common stock on the date of grant as determined by our board of
directors.
(2) This option is a nonqualified stock option, vests over two years and has a
five-year term.
(3) This option is an incentive stock option, vests over four years and has a
ten-year term.
(4) The 5% and 10% assumed annual rates of compound stock price appreciation are
prescribed by the rules and regulations of the Securities and Exchange
Commission and do not represent our estimate or projection of the future
trading prices of our common stock. There can be no assurance that the
actual stock price appreciation over the ten-year option term will be at the
assumed 5% and 10% levels or at any other defined level. Actual gains, if
any, on stock option exercises are dependent on numerous factors, including
our future performance, overall market conditions and the option holder's
continued employment with us throughout the entire vesting period and option
term, which factors are not reflected in this table. The potential
realizable value is calculated by multiplying the fair market value per
share of the common stock on the date of grant as determined by the board of
directors, which is equal to the exercise price per share, by the stated
annual appreciation rate compounded annually for the option term,
subtracting the exercise price per share from the product, and multiplying
the remainder by the number of shares underlying the option granted.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table summarizes the value of the outstanding options held by
the named executive officers at December 31, 1998. No stock options were
exercised by any of these individuals during 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
--------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
James Daleen........................ 330,909 146,536 $515,394 $63,192
David B. Corey...................... -- 304,500 -- 65,192
Richard A. Schell................... 84,559 182,199 91,750 3,333
Frank D. Dickinson.................. 29,921 62,917 20,897 1,667
John Z. Yin......................... 16,250 68,750 833 1,667
</TABLE>
- -------------------------
(1) Represents the difference between the fair market value of the shares of
common stock underlying the options at December 31, 1998 as determined by
our board of directors, $3.25 per share, less the exercise price payable
upon exercise of such options.
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<PAGE> 59
STOCK OPTION AND OTHER COMPENSATION PLANS
New Stock Incentive Plan. We have established a new stock incentive plan,
the Stock Incentive Plan, to promote our interests by providing employees and
key persons the opportunity to purchase shares of common stock and to receive
compensation which is based upon appreciation in the value of those shares. We
have reserved 598,881 shares of common stock for issuance under this plan. The
plan provides for the grant of incentive stock options, non-qualified stock
options, restricted stock awards and stock appreciation rights to help us obtain
these goals. This plan supercedes a number of prior plans that we adopted as
"incentive stock option" and "non-qualified stock option" plans that are
described below. Under this plan, options have been granted to purchase 357,000
shares of our common stock at a weighted average exercise price of $5.77 per
share.
Beginning in year 2000, this plan authorizes us to automatically adjust the
number of shares of common stock available for issuance under this plan on the
first day of each fiscal year by a number of shares such that the total number
of shares reserved for issuance under this plan equals the sum of (i) the
aggregate number of shares previously issued under this plan; (ii) the aggregate
number of shares subject to outstanding options granted under this plan; and
(iii) 5% of the number of shares outstanding on the last day of the preceding
fiscal year.
Prior Stock Option Plans. We adopted six stock option plans between 1994
and 1998. Some of these plans provided for "incentive stock options" within the
meaning of Subsection 422 of the Internal Revenue Code while others provided for
non-qualified stock options. All of these plans are administered by a stock
option committee consisting of not less than two nor more than five members
appointed by our board of directors.
As of June 30, 1999, options to purchase an aggregate of 2,011,238 shares
of common stock were outstanding under these plans at a weighted average
exercise price of $3.15 per share. 413,631 shares of common stock have been
issued upon exercise of options granted under these plans. We are not authorized
to issue any more options under any of these plans.
EMPLOYMENT AGREEMENTS
We entered into a five-year employment agreement with James Daleen, our
Chief Executive Officer, on December 1, 1994, which was amended on September 5,
1997 and March 1, 1999. Upon expiration of the current term in December 1999,
the agreement automatically renews for additional terms of three years each
unless either party notifies the other of its intent to terminate the agreement.
The agreement provides for a base salary of $286,000 in 1999 and an annual bonus
to be determined by our compensation committee, with the annual bonus targeted
at 50% of his base salary. The agreement also provides for annual salary
increases, as determined by our compensation committee, and option grants under
our stock option plans, as determined by our board of directors. In the event of
the termination of his employment without substantial cause, Mr. Daleen is
entitled to severance payment equal to two years' base salary in effect at the
time of termination and a bonus in addition to the payment of all related
excise, federal or state income taxes incurred by the executive as a result of
the lump sum cash payment.
We entered into a three-year employment agreement with Richard Schell, our
Chief Financial Officer and Treasurer, on November 15, 1994, which was amended
on January 31, 1997. Upon expiration of the current term in November 2000, the
agreement automatically extends for additional three-year terms unless either
party notifies the other of its intent to terminate the agreement. The agreement
provides for a base salary of $181,000 per annum and an annual bonus to be
determined by our compensation committee, with the annual bonus
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<PAGE> 60
targeted at 50% of his base salary. The agreement also provides for salary
increases as determined by our compensation committee. In the event of the
termination of Mr. Schell's employment without substantial cause, he is entitled
to a severance payment equal to one year's base salary in effect at the time of
termination.
We entered into an employment agreement with David Corey, our President and
Chief Operating Officer, on January 31, 1998. The agreement is at-will and Mr.
Corey may be terminated at any time. The agreement provides for a base salary of
$220,000 per annum, an annual salary increase to be determined by our
compensation committee, and an annual bonus to be determined by our compensation
committee, with the annual bonus targeted at 50% of his base salary. In the
event of the termination of his employment without substantial cause, Mr. Corey
is entitled to a severance payment equal to one year's base salary in effect at
the time of termination. In connection with his employment, in February 1998, we
granted Mr. Corey an incentive stock option to purchase up to 123,077 shares of
our common stock, at an exercise price of $3.25 per share, that vests ratably
over a four-year period and a non-qualified stock option to purchase 86,923
shares of common stock, at an exercise price of $2.50 per share, that vests
ratably over a two-year period. We can elect to pay Mr. Corey only six months of
severance if we release him from his non-compete agreement.
We entered into an employment agreement with Stephen Wagman, our Executive
Vice President of Corporate Development and Secretary, on April 28, 1999. The
agreement is at-will and Mr. Wagman can be terminated at any time. The agreement
provides for a base salary of $170,000 per annum and an annual salary increase
to be determined by our compensation committee, with an annual bonus targeted at
40% of the executive's base salary. In addition to his base salary, benefits and
bonus compensation, Mr. Wagman was granted a stock option to purchase 100,000
shares of common stock at an exercise price of $6.00 per share. The option vests
over a four-year period. In the event of the termination of his employment
without substantial cause, Mr. Wagman is entitled to a severance payment equal
to one year's base salary in effect at the time of termination, or six months'
base salary if he has been employed for less than 180 days. We can elect to pay
Mr. Wagman only six months of severance if we release him from his non-compete
agreement.
Each of our executive officers and other of our employees have signed
invention assignment and confidentiality agreements as well as non-compete
agreements. Under the invention assignment and confidentiality agreement, these
individuals have assigned to us all of their respective copyrights, trade
secrets and patent rights that relate to our business. Under the terms of the
non-compete agreement, each of these people has agreed not to compete, directly
or indirectly, with us in the billing and customer care industry during the term
of employment and for one year after termination. Each also has agreed not to
solicit our customers or employees, directly or indirectly, during the period of
employment and for one year following termination of employment.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation provides that the liability of the
directors for monetary damages shall be eliminated to the fullest extent
permissible under Delaware law and that we shall indemnify our officers,
employees and agents to the fullest extent permitted under the Delaware law.
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Our bylaws and the Delaware corporate statute require us to indemnify:
- a director who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which he was a party because he was a
director against reasonable expenses incurred by him in connection with
the proceeding; and
- an individual who is made a party to a proceeding because he is or was a
director or officer against liability incurred by him in the proceeding
if he acted in a manner believed in good faith to be in or not opposed to
our best interests and, in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
Any amendment, modification or repeal of these provisions will not
eliminate or reduce their effect in respect of any act or failure to act, or any
cause of action, suit or claim that would accrue or arise prior to any
amendment, repeal or adoption of this inconsistent provision. If Delaware law is
amended to provide for further limitations on the personal liability of
directors of corporations for breach of duty of care or other duty as a
director, then the personal liability of the directors will be so further
limited to the greatest extent permitted by Delaware law.
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CERTAIN TRANSACTIONS
SERIES A PREFERRED STOCK AND WARRANTS FOR SERIES B PREFERRED STOCK
In September 1997, we issued and sold 3,000,000 shares of series A
preferred stock and warrants to purchase up to 1,250,000 shares of series B
preferred stock to HarbourVest Partners V Direct Fund, L.P. The aggregate
purchase price was $7.5 million, of which $7.4 million was allocated to the
series A preferred stock and $100,000 was allocated to the warrants. The
warrants have an exercise price of $4.00 per share. Mr. Ofer Nemirovsky, one of
our directors, is associated with HarbourVest. Immediately prior to the
consummation of this offering, each outstanding share of series A preferred
stock will be automatically converted into one share of common stock and the
warrant will become exercisable to purchase 1,250,000 shares of common stock.
SERIES C PREFERRED STOCK
In November 1997, we issued and sold 1,213,584 shares of series C preferred
stock at an aggregate purchase price of approximately $5.5 million, or $4.50 per
share, to accredited investors in a private offering. Stephen J. Getsy, one of
our directors, purchased 22,223 shares of series C preferred stock in this
offering at $4.50 per share. Immediately prior to the consummation of this
offering, each outstanding share of series C preferred stock will be
automatically converted into one share of common stock at a conversion price of
$4.50 per share.
SERIES D AND D-1 PREFERRED STOCK
In August 1998, we issued and sold 4,221,846 shares of series D preferred
stock and 686,533 shares of series D-1 preferred stock for aggregate net
proceeds of $15.0 million, or approximately $3.06 per share. The investors in
this offering were:
<TABLE>
<CAPTION>
NAME OF INVESTOR NO. OF SHARES PURCHASE PRICE
- ---------------- ------------- --------------
<S> <C> <C>
JK&B Capital, L.P......................................... 654,450 $ 1,999,999
JK&B Capital II, L.P...................................... 327,225 1,000,000
I Eagle Trust............................................. 248,459 759,291
ABN AMRO, Inc............................................. 46,685 142,669
ABS Ventures IV, L.P...................................... 523,561 1,600,002
ABX Fund, L.P............................................. 130,890 400,000
St. Paul Venture Capital IV, L.L.C........................ 795,566 2,431,250
St. Paul Venture Capital Affiliates Fund I, L.L.C......... 22,497 68,751
HarbourVest Partners V Direct Fund, L.P................... 818,063 2,500,001
BCE Capital, Inc.......................................... 654,450 1,999,999
ABN AMRO Capital (U.S.A.) Inc.(1)......................... 686,533 2,098,045
--------- -----------
Total........................................... 4,908,379 $15,000,006
</TABLE>
- -------------------------
(1) The shares purchased by ABN AMRO Capital (U.S.A.) Inc. are of the
series D-1 preferred stock. All other shares indicated are shares of
series D preferred stock.
Two of our current directors, Ofer Nemirovsky and Paul G. Cataford, are
associated with HarbourVest Partners and BCE, respectively. Immediately prior to
the consummation of this offering, each outstanding share of series D and series
D-1 preferred stock will be automatically converted into one share of common
stock.
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<PAGE> 63
SERIES E PREFERRED STOCK
In June 1999, we issued and sold 1,496,615 shares of series E preferred
stock to SAIC for an aggregate purchase price of $13.5 million, or $9.00 per
share. Mr. Roper, one of our directors, is Senior Vice President and Chief
Financial Officer of SAIC.
REGISTRATION RIGHTS
Holders of shares of preferred stock are entitled to certain registration
rights with respect to the common stock issued or issuable upon conversion
thereof. See "Description of Capital Stock -- Registration Rights."
LOANS TO EXECUTIVES
In June 1999, we offered loans to our employees for the purposes of
providing funds for the exercise of vested, non-qualified stock options and
payment of tax obligations resulting from the exercise of those options. James
Daleen, Richard Schell, and Frank Dickinson have entered into loan agreements
with us in the amount of $356,976, $54,347 and $21,332, respectively. The loans
are evidenced by promissory notes that bear interest at a rate of 8.75% per
annum and that require interest to be paid annually. All principal and accrued
interest payable under the notes is due no later than June 2004. The loans are
fully recourse to the executive officers and each officer has pledged the stock
issued upon exercise of his options as security for his loan and has agreed to
repay the portion of the principal and unpaid interest for any shares of the
pledged stock that he may transfer prior to repayment of the entire principal
and interest amounts owed. Our board of directors considered and approved the
loan requests and forms of the loan documents.
TRANSACTIONS WITH COMPANIES ASSOCIATED WITH SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
Mr. Roper, a member of our board of directors, is the Senior Vice President
and Chief Financial Officer of SAIC and SAIC is a significant stockholder of our
company. SAIC owns 43% of all voting stock of Danet, Inc. and 100% of the voting
stock of Telcordia. Danet whereby Danet is both a customer of ours as well as a
distributor of our products. As a customer, Danet paid us $334,794 in 1998 and
$140,613 in 1999. We paid Danet, in its capacity as distributor of our products,
$2.2 million in 1998 and approximately $96,000 in 1999. While we had a strategic
alliance relationship with Telcordia, we had no revenue and made no payments in
connection with this relationship as of June 30, 1999.
OTHER RELATED PARTY TRANSACTIONS
We intend to enter into an indemnification agreement with each of our
executive officers and directors containing provisions that may require us,
among other things, to indemnify these individuals against certain liabilities
that may arise by reason of their status or service as officers and directors,
other than liabilities arising from willful misconduct of a culpable nature, and
to advance expenses incurred as a result of any proceedings against them as to
which they could be indemnified.
POLICY ON FUTURE TRANSACTIONS
Our board of directors has adopted a resolution providing that all future
transactions with related parties, including our officers, directors, principal
stockholders or affiliates, must be approved by a majority of the board of
directors, including a majority of the independent and disinterested members of
the board of directors, or a majority of the disinterested stockholders and must
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.
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<PAGE> 64
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of June 30, 1999 by:
- each stockholder known by us to be the beneficial owner of more than 5%
of the outstanding shares of common stock;
- each director and each executive officer named in the Summary
Compensation Table; and
- all of our executive officers and directors as a group.
One of our stockholders, James Daleen, has granted to the underwriters the
option to purchase up to shares of common stock to cover
over-allotments. See "Underwriting." Footnote 5 to the table provides
information concerning the stock holdings of Mr. Daleen after the offering in
the event the over-allotment option is exercised in full.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The number of shares beneficially owned by a
person includes shares of common stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of June 30, 1999.
The shares issuable pursuant to these options are deemed outstanding for
computing the percentage ownership of the person holding these options but are
not deemed outstanding for the purposes of computing the percentage ownership of
any other person.
<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY
OWNED(2)
-------------------
NUMBER OF BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED OFFERING OFFERING
- --------------------------- ------------------------- -------- --------
<S> <C> <C> <C>
HarbourVest Partners V-Direct Fund L.P.(3).... 5,068,063 35.5% %
One Financial Center, 44th Floor
Boston, MA 02111
James Daleen(4)(5)............................ 1,762,599 12.3
Science Applications International
Corporation................................. 1,496,615 10.5
ABN AMRO Capital (U.S.A.) Inc.(6)............. 981,677 6.9
200 S. LaSalle St, 10th Floor
Chicago, IL 60604
JK&B Capital L.P.(7).......................... 981,675 6.9
205 North Michigan Avenue, Suite 808
Chicago, Illinois 60601
St. Paul Venture Capital IV, L.L.C.(8)........ 818,063 5.7
10400 Viking Drive, Suite 5500
Eden Prairie, MN 55344
Bruns Grayson(9).............................. 654,451 4.6
1 South Street, Suite 2150
Baltimore, MD 21202
</TABLE>
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<PAGE> 65
<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY
OWNED(2)
-------------------
NUMBER OF BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED OFFERING OFFERING
- --------------------------- ------------------------- -------- --------
<S> <C> <C> <C>
Bell Canada................................... 654,450 4.6% %
200 Bay Street, Suite 3120
Toronto, Ontario, Canada MSJ 2J2
Ofer Nemirovsky(10)........................... 5,068,063 35.5
William A. Roper(11).......................... 1,496,615 10.5
Daniel Foreman(12)............................ 981,667 6.9 *
Paul G. Cataford(13).......................... 654,450 4.6 *
Richard A. Schell(14)......................... 128,810 * *
Elliot Levine(15)............................. 87,089 * *
David B. Corey(16)............................ 74,230 * *
Frank D. Dickinson(17)........................ 33,255 * *
Stephen J. Getsy(18).......................... 23,151 * *
John Z. Yin(19)............................... 16,250 * *
All directors and executive officers as a
group
(15 persons)(20)............................ 10,353,679 74.2% %
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of common stock.
(1) Except as set forth herein, the business address of the named beneficial
owner is c/o Daleen Technologies, Inc., 902 Clint Moore Road, Suite 230,
Boca Raton, Florida 33487.
(2) For purposes of calculating the percentage beneficially owned, the number
of shares of common stock deemed outstanding prior to and after the
offering consists of 14,272,227 shares outstanding as of June 30, 1999,
plus shares issuable upon automatic conversion of our preferred stock as a
result of this offering.
(3) Includes 1,250,000 shares issuable upon exercise of a warrant within 60
days after June 30, 1999.
(4) Includes 48,027 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999, 50,000 shares held by The
James Daleen Irrevocable Trust, 38,000 shares held by Linda Brodsky over
which Mr. Daleen has sole voting power, and 1,804 shares held by Judith
Daleen, wife of Mr. Daleen. Mr. Daleen disclaims ownership of all shares
held by his wife.
(5) If the underwriters exercise their over-allotment option in full, Mr.
Daleen will sell shares of common stock in this offering and
thereafter would beneficially own shares, representing % of the
total shares outstanding.
(6) Consists of 686,533 shares held by ABN AMRO Capital (U.S.A.) Inc., 248,459
by I Eagle Trust, and 46,685 by ABN AMRO, Inc.
(7) Consists of 654,450 shares held by JK&B Capital L.P. and 327,225 by JK&B
Capital II L.P.
(8) Consists of 795,566 shares held by St. Paul Venture Capital IV, L.L.C. and
22,497 by St. Paul Venture Capital Affiliates Fund I, L.L.C.
(9) Includes 523,561 shares held by ABS Ventures IV, L.P. ("ABS") and 130,890
shares held by ABX Fund, L.P. ("ABX"). Mr. Grayson is the managing member
of Calvert Capital L.L.C., the general partner of ABS, and is the managing
member of Calvert Capital II, L.L.C., the general partner of ABX, and
therefore may be considered to share beneficial ownership of the shares
held by ABS and ABX. Mr. Grayson disclaims beneficial ownership of these
shares.
(10) Consists of 5,068,063 shares held by HarbourVest Partners V -- Direct Fund
L.P. HarbourVest Partners, LLC is the Managing Member of the General
Partner of HarbourVest Partners V-Direct Fund L.P. Mr. Nemirovsky is a
Managing Director of HarbourVest Partners, LLC and a member of the General
Partner of HarbourVest Partners V -- Direct Fund L.P. and therefore may be
considered to share beneficial ownership of the shares held by HarbourVest.
Mr. Nemirovsky disclaims beneficial ownership of these shares.
(11) Consists of 1,496,615 shares held by Science Applications International
Corporation, of which Mr. Roper is a Senior Vice President and the Chief
Financial Officer.
(12) Consists of 981,677 shares held by ABN AMRO. Mr. Foreman is a Managing
Director of this firm and therefore may be considered to share beneficial
ownership of these shares.
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(13) Consists of 654,450 shares held by Bell Canada. Mr. Cataford is the Vice
President of Investments for BCE Capital, Inc., a management company
charged with all venture capital activities of Bell Canada, and therefore
may be considered to share beneficial ownership of these shares.
(14) Includes 47,133 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(15) Includes 30,000 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(16) Includes 30,769 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999. Also includes 6,000 shares
held in custodian accounts for Mr. Corey's children for which Mr. Corey
serves as custodian.
(17) Includes 20,943 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(18) Includes 18,750 shares issuable upon exercise of options that will be
exercisable within 60 days of June 30, 1999 and 22,223 shares held by
Stephen Getsy Living Trust.
(19) Includes 16,250 shares issuable upon exercise of an option that will be
exercisable within 60 days of June 30, 1999.
(20) Includes 239,372 shares issuable upon exercise of options that will be
exercisable within 60 days of June 30, 1999. See also footnotes (4), (5)
and (10) through (19) above.
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<PAGE> 67
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 70,000,000 shares of common stock,
par value $0.01 per share, and 25,000,000 shares of preferred stock, $0.01 par
value per share. The following summary of certain provisions of the common stock
and preferred stock is not complete, and you should read the provisions of our
certificate of incorporation and bylaws, which have been filed as exhibits to
the Registration Statement of which this prospectus is a part.
As of June 30, 1999, 3,653,651 shares of common stock were outstanding and
10,618,578 shares of preferred stock were outstanding. Each share of preferred
stock will automatically convert into one share of common stock upon the closing
of this offering. At June 30, 1999, we had 178 stockholders.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, the holders of common stock are entitled
to receive ratably such dividends, if any, as may be declared by the board of
directors out of funds legally available for the payment of dividends. In the
event of a liquidation, dissolution or winding up, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and liquidation preferences of any outstanding shares of preferred
stock. Holders of common stock have no preemptive rights or rights to convert
their common stock into any other securities. There are no redemption or sinking
fund provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
sold in this offering will be fully paid and nonassessable.
PREFERRED STOCK
Pursuant to our certificate of incorporation, the board of directors has
the authority, without further action by the stockholders, to issue up to
10,000,000 shares of preferred stock in one or more series and to fix the
designations, powers, preferences, privileges and relative, participating,
optional or special rights and the qualifications, limitations or restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than
the rights of the common stock. The board of directors, without stockholder
approval, can issue preferred stock with voting, conversion or other rights that
could adversely affect the voting power and other rights of the holders of
common stock. Preferred stock could be issued quickly with terms calculated to
delay or prevent a change of control or make removal of management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of the common stock and may adversely affect the
voting and other rights of the holders of common stock. We have no plans to
issue any preferred stock.
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WARRANTS
As of June 30, 1999 there were outstanding warrants to purchase 1,865,000
shares of stock, including:
- Warrants to purchase 90,000 shares of common stock at an exercise price
of $3.25 per share;
- Warrants to purchase 240,000 shares of common stock at an exercise price
of $3.25 per share;
- Warrants to purchase 1,250,000 shares of series B preferred stock at an
exercise price of $4.00 per share; and
- Warrants to purchase 285,000 shares of series C preferred stock at an
exercise price of $4.50 per share.
ANTI-TAKEOVER PROVISIONS
Under Delaware law, all stockholder actions must be effected at a duly
called annual or special meeting or by written consent and may not be taken by
written action in lieu of a meeting. Our bylaws provide that, except as
otherwise required by law, special meetings of the stockholders can only be
called by the board of directors, the chairman of the board of directors, the
Chief Executive Officer or stockholders holding shares in the aggregate entitled
to cast not less than % of the votes at such meeting. In addition, our
bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual meeting of stockholders, including proposed nominations
of persons for election to the board. Stockholders at an annual meeting may only
consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of the board of directors or by a
stockholder who was a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered timely written
notice in proper form to our Secretary of the stockholder's intention to bring
such business before the meeting.
These provisions of our bylaws are intended to enhance the likelihood of
continuity and stability in the composition of our board of directors and in the
policies formulated by the board of directors and to discourage certain types of
transactions which may involve an actual or threatened change of control. Such
provision are designed to reduce vulnerability to an unsolicited acquisition
proposal and, accordingly, could discourage potential acquisition proposals and
could delay or prevent a change in control. Such provisions are also intended to
discourage certain tactics that may be used in proxy fights but could have the
effect of discouraging others from making tender offers for our shares and,
consequently, may also inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts. These provisions may
also have the effect of preventing changes in our management.
EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE
We are subject to Section 203 of the Delaware corporate statute which
regulates corporate acquisitions. This law prevents Delaware corporations whose
securities are listed for trading on the Nasdaq National Market from engaging
under certain circumstances in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder became an
interested stockholder. For purposes of this law, a "business combination"
includes, among other things, a merger or consolidation involving our company,
and this interested stockholder and the sale of more than 10% of assets. In
general, the law
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<PAGE> 69
defines an "interested stockholder" as any entity or person beneficially owning
15% or more of our outstanding voting stock and any entity or person affiliated
with or controlling or controlled by such entity or person. A Delaware
corporation may "opt out" of this statute if such action is approved by the
holders of at least a majority of its outstanding voting stock. These charter
provisions and provisions of Delaware law may have the effect of delaying,
deterring or preventing a change of control.
REGISTRATION RIGHTS
Pursuant to stock purchase agreements entered into among our company and
the holders of our series A preferred stock, series D and D-1 preferred stock
and series E preferred stock, investors holding an aggregate of 9,121,963 shares
of common stock they will receive upon the conversion of their preferred stock
are entitled to certain rights with respect to the registration of these shares
under the Securities Act. At any time following this offering, any investor or
group of investors described above may request that we file a registration
statement that covers the sale of at least 50% of the shares of common stock
held by those investors. These investors may require the we register our common
stock for resale only twice, other than as described below. After we qualify to
file our registration statements on Form S-3, the investors may request an
unlimited number of times that we register their common stock for resale using a
Form S-3, except that the investors cannot request more that two Form S-3
registrations in any year. In addition, if we propose to register any of our
securities under the Securities Act, either for our own account or for the
account of other security holders, the investors described above and three
additional stockholders holding 151,274 shares of our common stock are entitled
to notice of the registration and to include shares of common stock in the
registration at our expense. All of these registration rights are subject to
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in the registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is SunTrust Bank,
Atlanta, Georgia.
NASDAQ NATIONAL MARKET LISTING
We have applied for approval of our common stock to be listed on the Nasdaq
National Market under the symbol "DALN."
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<PAGE> 70
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price of our common stock and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares
of common stock. Of these shares, the shares sold in the offering,
plus any shares issued upon exercise of the underwriters' over-allotment option,
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates" as that term is defined in Rule 144 under the
Securities Act. In general, affiliates include officers, directors or 10%
stockholders.
The remaining shares outstanding are restricted securities within
the meaning of Rule 144. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of restricted securities in the public market, or the
availability of these shares for sale, could adversely affect the market price
of the common stock.
Our directors, officers and stockholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or convertible
into our common stock owned by them for a period of 180 days after the date of
this prospectus without the prior written consent of BancBoston Robertson
Stephens. Notwithstanding possible earlier eligibility for sale under the
provisions of Rules 144, 144(k)and 701, shares subject to lock-up agreements
will not be salable until these agreements expire or are waived by BancBoston
Robertson Stephens. Taking into account the lock-up agreements, and assuming
BancBoston Robertson Stephens does not release stockholders from these
agreements, the following restricted shares will be eligible for sale in the
public market at the following times:
- Beginning on the effective date of this prospectus, shares will
be immediately available for sale in the public market.
- Beginning 90 days after the effective date, approximately
shares will be eligible for sale, none of which will be subject, in some
cases, to volume, manner of sale and other limitations under Rule 144.
- Beginning 180 days after the effective date, approximately
shares will be eligible for sale, of which will be subject to
volume, manner of sale and other limitations under Rule 144.
- The remaining shares will become eligible for sale pursuant to
Rule 144 upon the expiration of various one-year holding periods during
the six months following 180 days after the effective date.
In general, under Rule 144 a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after the offering; or
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- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner of
sale, notice, and the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
his or her shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell these shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell their shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file registration statements under the Securities
Act as promptly as possible after the effective date to register shares to be
issued pursuant to our employee benefit plans. As a result, any options or
rights exercised under any of our existing stock option plans or any other
benefit plan after the effectiveness of the registration statements will also be
freely tradable in the public market. However, such shares held by affiliates
will still be subject to the volume limitation, manner of sale, notice and
public information requirements of Rule 144 unless otherwise resoluble under
Rule 701. As of June 30, 1999 there were outstanding options for the purchase of
2,335,238 shares of common stock, of which options to purchase shares
were exercisable.
Following this offering, the holders of an aggregate of 9,273,237 shares of
outstanding common stock will have rights to require Daleen to register their
shares for future sale. See "Description of Capital Stock -- Registration
Rights."
68
<PAGE> 72
UNDERWRITING
The underwriters named below acting through their representatives,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC, SG Cowen Securities
Corporation and Robert W. Baird & Co. Incorporated, have severally agreed with
us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the number of shares of common stock set forth opposite their
respective names below. The underwriters are committed to purchase and pay for
all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Hambrecht & Quist LLC.......................................
SG Cowen Securities Corporation.............................
Robert W. Baird & Co. Incorporated..........................
--------
Total.............................................
========
</TABLE>
We have been advised by the representatives that the underwriters propose
to offer the shares of common stock to the public at the public offering price
set forth on the cover page of this prospectus and to certain dealers at such
price less a concession of not more than $ per share, of which $ may
be reallowed to other dealers. After this offering, the public offering price,
concession, and reallowance to dealers may be reduced by the representatives. No
such reduction will change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus.
We and James Daleen, our Chief Executive Officer, have granted to the
underwriters an option, exercisable during the 30-day period after the date of
this prospectus, to purchase up to additional shares of common stock
to cover over-allotments, if any, at the public offering price less the
underwriting discount set forth on the cover page of this prospectus. If the
underwriters exercise the option in full, we will sell additional shares and
Mr. Daleen will sell additional shares. If the underwriters exercise this
option only in part, the option shares will be sold first by Mr. Daleen and we
will sell shares only if, and to the extent, the total number of shares to be
purchased by the underwriters exceeds . To the extent that the
underwriters exercise such option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage of such additional
shares that the number of shares of common stock to be purchased by it shown in
the above table represents as a percentage of the shares offered
hereby. If purchased, such additional shares will be sold by the underwriters on
the same terms as those on which the shares are being sold. We and the
selling stockholder will be obligated, pursuant to the option, to sell shares to
the extent the option is exercised. The underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the shares of
common stock offered in this offering.
The underwriting agreement contains covenants of indemnity among the
underwriters, us and the selling stockholder against certain civil liabilities,
including liabilities under the
69
<PAGE> 73
Securities Act and liabilities arising from breaches of representations and
warranties contained in the underwriting agreement.
Each officer and director of Daleen and substantially all other holders of
shares of common stock have agreed, for the lock-up period, subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock
or any options to purchase any shares of common stock, or any securities
convertible into or exchangeable for shares of common stock owned as of the date
of this prospectus or thereafter acquired directly by such holders or with
respect to which they have the power of disposition, without the prior written
consent of BancBoston Robertson Stephens Inc. However, BancBoston Robertson
Stephens Inc. may, in its sole discretion and at any time without notice,
release all or any portion of securities subject to lock-up agreements. There
are no existing agreements between the representatives and any of our
stockholders providing consent to the sale of shares prior to the expiration of
the lock-up period. In addition, we have agreed that during the lock-up period
we will not, without the prior written consent of BancBoston Robertson Stephens
Inc., subject to certain exceptions, (i) consent to the disposition of any
shares held by stockholders subject to lock-up agreements prior to the
expiration of the lock-up period or (ii) issue, sell, contract to sell, or
otherwise dispose of, any shares of common stock, any options to purchase any
shares of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of common stock upon the exercise of outstanding options
or warrants, and the our issuance of options and shares under existing stock
option and incentive plans. See "Shares Eligible for Future Sale."
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus will be determined through negotiations among the
representatives and us. Among the factors to be considered in such negotiations
will be prevailing market conditions, certain of our financial information,
market valuations of other companies that we and the representatives believe to
be comparable to us, estimates of our business potential, the present state of
our development and other factors deemed relevant.
The representatives have advised us that, pursuant to Regulation M under
the Securities Act, some persons participating in this offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of common stock on behalf of the underwriters for the purpose of
fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or the purchase of common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with this offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by such underwriter or syndicate member. The
representatives have advised us that such transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
70
<PAGE> 74
LEGAL MATTERS
The validity of the common stock in this offering will be passed upon for
us by Morris, Manning & Martin, LLP, Atlanta, Georgia. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Hale
and Dorr LLP, Washington, D.C.
EXPERTS
The consolidated financial statements and financial statement schedule of
Daleen Technologies Inc. and subsidiary as of December 31, 1997 and 1998, and
for each of the years in three-year period ended December 31, 1998, have been
included herein and in the registration statement in reliance upon the reports
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act with respect to the shares of
common stock offered hereby. This prospectus is only a part of the registration
statement and does not contain all of the information included in the
registration statement. Further information with respect to us and the common
stock offered hereby can be found in the registration statement. Statements made
in this prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. Documents filed as an exhibit to the
registration statement, and all descriptions in this prospectus are qualified in
all respects by reference to the registration statement. The registration
statement and the exhibits and schedules thereto may be inspected without charge
at the Public Reference Room maintained by the Commission in Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, Room 1400, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, Room 1024, at prescribed rates. You may obtain information on the
operation of the Commission's Public Reference Room by calling the Commission at
1-800-SEC-0330. In addition, we are required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. The Commission maintains an
internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Information concerning us is also available
for inspection at the offices of The Nasdaq Stock Market, Reports Section, 1735
K Street, N.W., Washington, D.C. 20006.
71
<PAGE> 75
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998 and as of March 31, 1999 (unaudited) and pro forma
as of March 31, 1999 (unaudited)....................... F-3
Consolidated Statements of Operations for each of the
years in the three-year period ended December 31, 1998,
and the three months ended March 31, 1998 and 1999
(unaudited)............................................ F-4
Consolidated Statements of Redeemable Preferred Stock and
Stockholders' Deficit for each of the years in the
three-year period ended December 31, 1998, and the
three months ended March 31, 1999 (unaudited).......... F-5
Consolidated Statements of Cash Flows for each of the
years in the three-year period ended December 31, 1998,
and the three months ended March 31, 1998 and 1999
(unaudited)............................................ F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Daleen Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Daleen
Technologies, Inc. and Subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' deficit and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Daleen
Technologies, Inc. and Subsidiary as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Miami, Florida
May 10, 1999 except as to notes 2 and 15
which are as of June 30, 1999
F-2
<PAGE> 77
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, HISTORICAL PRO FORMA
------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999
-------- -------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,030 $ 723 $ 824 $ 14,294
Securities available for sale............................. 1,770 5,753 2,040 2,040
Accounts receivable, less allowance for doubtful accounts
of $17 at December 31, 1997, and $9 at December 31,
1998.................................................... 19 1,202 1,078 1,078
Costs in excess of billings............................... -- 503 1,011 1,011
Other current assets...................................... 229 176 347 347
-------- -------- -------- --------
Total current assets............................... 7,048 8,357 5,300 18,770
Property and equipment, net (note 3)........................ 1,379 2,516 2,992 2,992
Other assets................................................ 89 152 156 156
-------- -------- -------- --------
Total assets....................................... $ 8,516 $ 11,025 $ 8,448 $ 21,918
======== ======== ======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Notes payable (note 5).................................... $ 1,618 $ -- $ -- $ --
Accounts payable.......................................... 292 459 686 686
Accrued payroll and other accrued expenses................ 905 2,237 1,811 1,811
Billings in excess of costs............................... -- 429 1,010 1,010
Other current liabilities................................. 147 -- -- --
-------- -------- -------- --------
Total current liabilities.......................... 2,962 3,125 3,507 3,507
-------- -------- -------- --------
Commitments and contingencies (notes 7 and 8)
Redeemable preferred stock (note 9):
Mandatorily redeemable convertible Series A Preferred
Stock -- 3,000,000 shares authorized, issued and
outstanding ($7,500 liquidation value) as of December
31, 1997 and 1998 and (unaudited) March 31, 1999; none
issued and outstanding pro forma as of March 31, 1999
(unaudited)............................................. 7,500 7,500 7,500 --
Mandatorily redeemable convertible Series D and D-1
Preferred Stock -- 4,908,379 shares authorized, issued
and outstanding at December 31, 1998 and (unaudited)
March 31, 1999 ($15,000 liquidation value); none issued
and outstanding pro forma as of March 31, 1999
(unaudited)............................................. -- 14,297 14,336 --
Stockholders' (deficit) equity (note 8):
Series C Convertible Preferred stock -- $.01 par value.
Authorized 1,222,222 shares; issued and outstanding
1,150,493 shares in 1997 and 1,213,584 shares in 1998
($4.50 per share liquidation value) and (unaudited) as
of March 31, 1999; and none issued and outstanding pro
forma as of March 31, 1999 (unaudited).................. 5,092 5,301 5,301 --
Preferred stock -- $.01 par value. Authorized 15,869,399
shares; none issued or outstanding...................... -- -- -- --
Common stock -- $.01 par value. Authorized 20,000,000
shares; issued and outstanding 3,209,987 shares in 1997
and 3,240,020 shares in 1998 and (unaudited) March 31,
1999; issued and outstanding 13,858,596 shares pro forma
as of March 31, 1999 (unaudited)........................ 32 32 32 139
Additional paid-in capital................................ 3,204 3,278 3,278 43,778
Accumulated deficit....................................... (10,274) (22,508) (25,506) (25,506)
-------- -------- -------- --------
Total stockholders' (deficit) equity............... (1,946) (13,897) (16,895) 18,411
-------- -------- -------- --------
Total liabilities, redeemable preferred stock and
stockholders' (deficit) equity................... $ 8,516 $ 11,025 $ 8,448 $ 21,918
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 78
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees............................. $ -- $ -- $ 1,879 $ 57 $ 949
Professional services and other.......... 2,550 156 3,352 138 830
------- ------- -------- ------- --------
Total revenue......................... 2,550 156 5,231 195 1,779
------- ------- -------- ------- --------
Cost of revenue:
License fees............................. -- -- 3 0 2
Professional services and other.......... 1,396 293 4,239 264 1,266
------- ------- -------- ------- --------
Total cost of revenue................. 1,396 293 4,242 264 1,268
------- ------- -------- ------- --------
Gross profit............................... 1,154 (137) 989 (69) 511
Operating expenses:
Sales and marketing...................... 450 962 2,435 576 485
Research and development................. 1,067 1,669 6,653 1,388 1,577
General and administrative............... 2,446 3,704 4,824 998 1,466
------- ------- -------- ------- --------
Total operating expenses.............. 3,963 6,335 13,912 2,962 3,528
------- ------- -------- ------- --------
Operating loss............................. (2,809) (6,472) (12,923) (3,031) (3,017)
------- ------- -------- ------- --------
Nonoperating income (expense):
Interest income (expense)................ (528) (1,570) 249 36 52
Other income (notes 12 and 13)........... 1,811 58 505 33 6
------- ------- -------- ------- --------
Total nonoperating income (expense)... 1,283 (1,512) 754 69 58
------- ------- -------- ------- --------
Net loss................................... (1,526) (7,984) (12,169) (2,962) (2,959)
Accretion of preferred stock............... -- -- (65) -- (39)
------- ------- -------- ------- --------
Net loss applicable to common
stockholders............................. $(1,526) $(7,984) $(12,234) $(2,962) $ (2,998)
======= ======= ======== ======= ========
Net loss applicable to common stockholders
per share -- basic and diluted........... $ (0.81) $ (3.48) $ (3.78) $ (0.92) $ (0.93)
======= ======= ======== ======= ========
Weighted average shares -- basic and
diluted.................................. 1,879 2,295 3,237 3,218 3,240
======= ======= ======== ======= ========
Pro forma data:
Pro forma net loss applicable to common
stockholders (unaudited).............. $(12,937) $ (3,662)
======== ========
Pro forma net loss applicable to common
stockholders per share -- basic and
diluted (unaudited)................... $ (0.93) $ (0.26)
======== ========
Pro forma weighted average shares --basic
and diluted (unaudited)............... 13,856 13,859
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 79
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
STOCKHOLDERS' DEFICIT
REDEEMABLE PREFERRED STOCK ---------------------------------------
-------------------------------------------------- SERIES C
SERIES A SERIES D AND D-1 PREFERRED STOCK COMMON STOCK
------------------ ------------------- ------------------ ------------------
NUMBER NUMBER NUMBER NUMBER PAR
OF SHARES AMOUNT OF SHARES AMOUNT TOTAL OF SHARES AMOUNT OF SHARES VALUE
--------- ------ --------- ------- ------- --------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995....... -- $ -- -- $ -- $ -- -- $ -- 1,879,153 $19
Stock options granted........... -- -- -- -- -- -- -- -- --
Stock purchase warrants
granted....................... -- -- -- -- -- -- -- -- --
Net loss........................ -- -- -- -- -- -- -- -- --
--------- ------ --------- ------- ------- --------- ------ ---------- ---
Balance, December 31, 1996....... -- -- -- -- -- -- -- 1,879,153 19
Warrants issued on bridge
loan.......................... -- -- -- -- -- -- -- -- --
Warrants issued as part of
inducement on bridge loan..... -- -- -- -- -- -- -- -- --
Exercise of bridge loan
warrants...................... -- -- -- -- -- -- -- 619,080 6
Stock issued for convertible
debt.......................... -- -- -- -- -- -- -- 688,264 7
Issuance of preferred stock --
Series A...................... 3,000,000 7,500 -- -- 7,500 -- -- -- --
Issuance of preferred stock --
Series C...................... -- -- -- -- -- 1,150,493 5,092 -- --
Stock options issued for
consulting services........... -- -- -- -- -- -- -- -- --
Stock options exercised......... -- -- -- -- -- -- -- 23,490 --
Net loss........................ -- -- -- -- -- -- -- -- --
--------- ------ --------- ------- ------- --------- ------ ---------- ---
Balance, December 31, 1997....... 3,000,000 7,500 -- -- 7,500 1,150,493 5,092 3,209,987 32
Issuance of preferred stock --
Series D and D-1.............. -- -- 4,908,379 14,232 14,232 -- -- -- --
Accretion of preferred stock --
Series D and D-1.............. -- -- -- 65 65 -- -- -- --
Issuance of preferred stock --
Series C...................... -- -- -- -- -- 63,091 279 --
Stock issued for consulting
services related to Series C
issuance...................... -- -- -- -- -- -- (70) 21,600 0
Redemption of bridge warrants... -- -- -- -- -- -- -- -- --
Stock issued for options and
bridge loan warrants
exercised..................... -- -- -- -- -- -- -- 8,433 0
Net loss........................ -- -- -- -- -- -- -- -- --
--------- ------ --------- ------- ------- --------- ------ ---------- ---
Balance, December 31, 1998....... 3,000,000 7,500 4,908,379 14,297 21,797 1,213,584 5,301 3,240,020 32
Accretion of preferred stock --
Series D and D-1
(unaudited)................... -- -- -- 39 39 -- -- -- --
Net loss (unaudited)............ -- -- -- -- -- -- -- -- --
--------- ------ --------- ------- ------- --------- ------ ---------- ---
Balance, March 31, 1999
(unaudited)..................... 3,000,000 $7,500 4,908,379 $14,336 $21,836 1,213,584 $5,301 3,240,020 $32
========= ====== ========= ======= ======= ========= ====== ========== ===
<CAPTION>
STOCKHOLDERS' DEFICIT
----------------------------------------
ADDITIONAL
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
---------- ----------- -------------
<S> <C> <C> <C>
Balance, December 31, 1995....... $ 189 $ (764) $ (556)
Stock options granted........... 81 -- 81
Stock purchase warrants
granted....................... 87 -- 87
Net loss........................ -- (1,526) (1,526)
------ -------- --------
Balance, December 31, 1996....... 357 (2,290) (1,914)
Warrants issued on bridge
loan.......................... 120 -- 120
Warrants issued as part of
inducement on bridge loan..... 375 -- 375
Exercise of bridge loan
warrants...................... 613 -- 619
Stock issued for convertible
debt.......................... 1,714 -- 1,721
Issuance of preferred stock --
Series A...................... -- -- --
Issuance of preferred stock --
Series C...................... -- -- 5,092
Stock options issued for
consulting services........... 25 -- 25
Stock options exercised......... -- -- --
Net loss........................ -- (7,984) (7,984)
------ -------- --------
Balance, December 31, 1997....... 3,204 (10,274) (1,946)
Issuance of preferred stock --
Series D and D-1.............. -- -- --
Accretion of preferred stock --
Series D and D-1.............. -- (65) (65)
Issuance of preferred stock --
Series C...................... -- -- 279
Stock issued for consulting
services related to Series C
issuance...................... 70 -- --
Redemption of bridge warrants... (4) -- (4)
Stock issued for options and
bridge loan warrants
exercised..................... 8 -- 8
Net loss........................ -- (12,169) (12,169)
------ -------- --------
Balance, December 31, 1998....... 3,278 (22,508) (13,897)
Accretion of preferred stock --
Series D and D-1
(unaudited)................... -- (39) (39)
Net loss (unaudited)............ -- (2,959) (2,959)
------ -------- --------
Balance, March 31, 1999
(unaudited)..................... $3,278 $(25,506) $(16,895)
====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 80
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,526) $(7,984) $(12,169) $ (2,962) $(2,959)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 300 352 918 161 307
Stock compensation...................................... 81 26 -- -- --
Amortization of financing costs and warrants issued on
bridge loan........................................... -- 413 -- -- --
Warrants issued as inducement for bridge loan........... -- 375 -- -- --
Bad debt expense........................................ 359 167 247 -- --
Changes in assets and liabilities:
Restricted cash....................................... 65 36 -- -- --
Accounts receivable................................... (449) 1 (1,431) (197) 124
Unrealized gain....................................... -- -- -- (44) (42)
Costs in excess of billings........................... -- -- (503) -- (508)
Other current assets.................................. 87 (193) 53 171 (171)
Other assets.......................................... (13) (2) (63) (17) (4)
Accounts payable...................................... (408) 161 166 272 228
Accrued payroll and other accrued expenses............ 164 627 1,332 (309) (427)
Billings in excess of costs........................... -- -- 429 -- 581
Other current liabilities............................. 38 103 (147) 36 --
------- ------- -------- -------- -------
Net cash used in operating activities.............. (1,302) (5,918) (11,168) (2,889) (2,871)
------- ------- -------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of notes payable................... 5,000 1,160 -- -- --
Proceeds from sale of mandatorily redeemable convertible
preferred stock -- Series A, net........................ -- 7,500 -- -- --
Proceeds from sale of mandatorily redeemable convertible
preferred stock -- Series D and D-1, net................ -- -- 14,232 -- --
Proceeds from sale of preferred stock -- Series C, net.... -- 5,092 279 284 --
Proceeds from exercise of stock options and bridge
warrants................................................ -- 619 8 4 --
Deferred financing costs.................................. (332) -- -- (5) --
Redemption of bridge warrants............................. -- -- (4) -- --
Principal payments on notes payable and capital lease
obligations............................................. (2,260) (1,347) (1,618) -- --
------- ------- -------- -------- -------
Net cash provided by financing activities.......... 2,408 13,024 12,897 283 --
------- ------- -------- -------- -------
Cash flows from investing activities:
Purchase of securities available for sale................. -- (1,770) (48,697) (15,818) (7,910)
Sales and maturities of securities available for sale..... -- -- 44,715 14,527 11,665
Investment in joint venture............................... (14) 30 -- -- --
Capital expenditures...................................... (318) (1,113) (2,054) (948) (783)
------- ------- -------- -------- -------
Net cash (used in) provided by investing
activities....................................... (332) (2,853) (6,036) (2,239) 2,972
------- ------- -------- -------- -------
Net increase (decrease) in cash and cash equivalents........ 774 4,253 (4,307) (4,845) 101
Cash and cash equivalents at beginning of period............ 3 777 5,030 5,030 723
------- ------- -------- -------- -------
Cash and cash equivalents at end of period.................. $ 777 $ 5,030 $ 723 $ 185 $ 824
======= ======= ======== ======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................ $ 273 $ 640 $ 142 $ -- $ --
======= ======= ======== ======== =======
NON-CASH INVESTING AND FINANCING ACTIVITIES (IN THOUSANDS):
The Company entered into capital leases for new equipment of
$56 in 1996.
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 81
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Daleen Technologies, Inc. (the "Company") is a provider of next-generation
billing and customer care software that can serve as the core of an enterprise
solution for integrated communication service providers. The Company provides
comprehensive billing, provisioning and customer care systems for wireline and
wireless network operators and service providers. It also provides customer care
and billing systems to companies that offer multiple service packages, commonly
referred to as convergent services, such as local, long distance, international,
data, Internet, Voice Over Internet Protocol, cellular, personal communications
services and paging.
Prior to the development of the Company's products, the Company was a
computer consulting company which provided software and hardware development
services to customers on a contract basis. The Company ceased performing these
contract consulting services in June 1996. The Company also provided temporary
software and hardware computer specialists to companies on a contract basis
until the sale of the Company's placement services division in November 1996
(note 12).
The Company currently has a professional services department to provide
custom integration and configuration services to its customers, as well as
training and support for customers and business partners. The Company maintains
a customer service department to provide technical assistance to customers, in
addition to providing customer care for upgrades and new releases of its
products.
In February 1996, the Company formed a foreign sales corporation, Daleen
International, Inc., which is wholly owned. Daleen International, Inc. had no
operations for each of the years in the three year period ended December 31,
1998.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and operations
of the Company and its wholly owned subsidiary. The Company accounted for the
investment in the Indian joint venture discussed in note 10 on the equity method
of accounting. All intercompany accounts and transactions have been eliminated.
(C) REVENUE RECOGNITION
The Company recognizes revenue from long-term contracts involving
significant production, modification or customization of software under
Statement of Position 81-1 using the percentage of completion method, based on
the ratio of total labor hours incurred to date to total estimated labor hours.
Changes in job performance, job conditions, estimated profitability and final
contract settlement may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Contract costs
include all direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor and supplies. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Amounts billed in excess of revenue recognized to date
are classified as "Billings in
F-7
<PAGE> 82
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
excess of costs", whereas revenue recognized in excess of amounts billed are
classified as "Costs in excess of billings" in the accompanying consolidated
balance sheets.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-2, Software Revenue Recognition (SOP
97-2). Effective January 1, 1998, the Company adopted SOP 97-2 for all software
transactions entered into that did not require significant production,
modification or customization. SOP 97-2 generally requires revenue earned on
software arrangements involving multiple elements to be allocated to each
element based on vendor specific objective evidence (VSOE) of the relative fair
values of the elements. VSOE is determined by the price charged when the element
is sold separately. The revenue allocated generally is recognized when the
software has been delivered and installed, the fee is fixed and determinable and
collectibility is probable.
Revenue related to customer maintenance agreements are deferred and
recognized ratably on a straight-line basis over the maintenance period of the
agreement.
Revenue related to professional services under a time and materials
arrangement is recognized as services are performed.
For license fee revenue sold to end users, the Company recognizes revenue
upon shipment when it has no further obligations under the contract. In these
arrangements a third-party integrator contracts directly with the customer to
perform the installation. Upon shipment, delivery has occurred, persuasive
evidence of an arrangement exists, collectibility is probable and the fee is
fixed and determinable.
The Company recognizes revenue after installation is complete if the
Company sells the license to a third-party integrator. Under these types of
arrangements, the Company's involvement in the integration is on an as-needed
basis throughout the integration process. Therefore, the obligation is not
complete until the software has been installed and accepted by the end user.
In March 1999, the Company adopted SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions. SOP 98-9
amends SOP 97-2 to require recognition of revenue using the "residual method"
when (1) there is VSOE of the fair values of all undelivered elements in a
multiple-element arrangement that is not accounted for using long-term contract
accounting, (2) VSOE of fair value does not exist for one or more of the
delivered elements in the arrangement, and (3) all revenue-recognition criteria
in SOP 97-2 other than the requirement for VSOE of the fair value of each
delivered element of the arrangement are satisfied. Under the residual method,
the arrangement fee is recognized as follows: (1) the total fair value of the
undelivered elements, as indicated by VSOE, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2 and (2) the
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements.
The adoption of SOP 98-9 did not have a material impact on results of
operations.
F-8
<PAGE> 83
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
(D) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(E) SECURITIES AVAILABLE FOR SALE
Securities available for sale are recorded at fair value. Unrealized gains
and losses are recorded as other comprehensive income in stockholders' deficit.
The fair value of securities available for sale approximated the historical cost
for all periods presented and thus, no significant unrealized gains or losses
existed.
(F) PROPERTY AND EQUIPMENT, NET
Property and equipment is stated at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets, ranging from three to seven years. Leasehold improvements
are amortized over their useful lives or the term of the related lease,
whichever is shorter.
(G) SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs under Statement of
Financial Accounting Standards No. 86, Accounting for Costs of Computer Software
to Be Sold, Leased or Otherwise Marketed ("SFAS No. 86"). Under SFAS No. 86, the
costs associated with software development are required to be capitalized after
technological feasibility has been established. Based on our product development
process, technological feasibility is generally established upon completion of
the working model. Costs incurred by the Company between completion of the
working model and the point at which the product is ready for general release
have been insignificant and, as a result, the Company has not capitalized any
software development costs.
(H) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment of assets to be held and used is determined by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
(I) INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
F-9
<PAGE> 84
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(J) STOCK OPTION PLANS
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, ("SFAS
No. 123") permits entities to recognize as expense over the vesting period the
fair value of all stock-based awards on the date of grant. Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosures of SFAS No. 123.
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, requires disclosure of fair value of certain
financial instruments. Cash and cash equivalents, accounts receivable,
securities available for sale and prepaid expenses and other current assets, as
well as accounts payable, accrued expenses and other current liabilities, as
reflected in the consolidated financial statements, approximate fair value
because of the short-term maturity of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
(L) USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare the accompanying financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
(M) BASIC AND DILUTED NET LOSS PER SHARE
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"). SFAS No. 128
establishes new standards designed to improve the earnings per share ("EPS")
information provided in financial statements by simplifying the existing
computational guidelines, revising the disclosure
F-10
<PAGE> 85
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
requirements and increasing the comparability of EPS data on an international
basis. The adoption of SFAS No. 128 did not have a significant impact on the
Company's reported EPS.
In accordance with Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin No. 98, certain common stock and common stock equivalents
issued for nominal consideration prior to the initial filing of a registration
statement relating to an IPO are treated as outstanding for the entire period.
The Company had no nominal issuances during this period.
Basic and diluted net loss applicable to common stockholders per share were
computed by dividing net loss applicable to common stockholders by the
weighted-average number of shares of common stock outstanding for each period
presented. Common stock equivalents were not considered for each of the years in
the three year period ended December 31, 1998 since their effect would be
antidilutive. Net loss applicable to common stockholders differs from net loss
in the year ended December 31, 1998 and the three months ended March 31, 1999
due to accretion on the preferred stock.
(N) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited pro forma basic and diluted net loss applicable to common
stockholders per share for the year ended December 31, 1998, and for the three
months ended March 31, 1999 were computed by dividing pro forma net loss
applicable to common stockholders by the pro forma weighted average number of
shares of common stock outstanding, which reflects the conversion of preferred
stock as described below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
Net loss applicable to common stockholders......... $(12,234) $(2,998)
Accretion of preferred stock upon conversion into
common stock..................................... (703) (664)
-------- -------
Pro forma net loss applicable to common
stockholders..................................... $(12,937) $(3,662)
======== =======
Weighted average shares............................ 3,237 3,240
Common stock issued upon conversion of preferred
stock............................................ 10,619 10,619
-------- -------
Pro forma weighted average shares.................. 13,856 13,859
======== =======
Pro forma basic and diluted net loss applicable to
common stockholders per share.................... $ (0.93) $ (0.26)
======== =======
</TABLE>
The unaudited pro forma consolidated balance sheet at March 31, 1999
reflects the conversions of the Series A, D and D-1 Mandatorily Redeemable
Convertible Preferred Stock and Series C Convertible Preferred Stock to common
stock which conversions will automatically occur upon the closing of an initial
public offering. In addition, it reflects the sale of the outstanding shares of
the Series E Redeemable Preferred Stock which occurred in June 1999 and the
automatic conversion of these shares into common stock (see note 15).
F-11
<PAGE> 86
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
(O) CAPITAL STRUCTURE
The Company has a total of 25,000,000 authorized shares of preferred stock.
In September 1997, the Company designated 3,000,000 shares of preferred stock as
Mandatorily Redeemable Convertible Series A Preferred Stock (see note 9). In
November 1997, the Company designated 1,222,222 shares of preferred stock as
Series C Convertible Preferred Stock (see note 8(b)). In June 1998, the Company
designated 4,221,846 shares and 686,533 shares, respectively, of preferred stock
as Series D and D-1 Preferred Stock (see note 9). The Board has the ability to
set the rights, preferences, and dividends of preferred stock without
shareholder approval.
(P) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130").
SFAS No. 130 establishes standards for reporting and displaying comprehensive
income and its components in a full set of general purpose financial statements.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in financial statements and (b) display the
accumulated balance of other comprehensive income separately from accumulated
deficit and additional paid in capital in the equity section of the balance
sheets. Comprehensive income is defined as a change in equity during the
financial reporting period of a business enterprise resulting from non-owner
sources.There were no differences between net loss and comprehensive loss for
each of the years in the three-year period ended December 31, 1998.
(Q) SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. The Company operates in one segment for management reporting
purposes.
(R) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of March 31, 1999, the
unaudited consolidated statements of operations and cash flows for the three
months ended March 31, 1998 and 1999 and the unaudited consolidated statement of
redeemable preferred stock and stockholders' deficit for the three months ended
March 31, 1999 include, in the opinion of management, adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Company's
consolidated financial position, results of operations and cash flows. Operating
results for the three months ended March 31, 1999 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1999.
F-12
<PAGE> 87
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
2. LIQUIDITY
The Company has incurred substantial losses and utilized substantial
amounts of cash in its operating activities for the years ended December 31,
1997 and 1998, and has an accumulated deficit of $22,508,291 at December 31,
1998. An additional loss was incurred in the amount of $2,958,901 during the
three months ended March 31, 1999. During these loss periods, the Company
incurred significant costs related to the development of its current primary
product. The Company plans to increase sales and profitability by marketing its
current primary product and increasing sales in the United States, United
Kingdom and Latin America. During the year ended December 31, 1998, the
Company's revenue from license fees increased due to certain major contracts
that were entered into in 1998. In addition, as discussed in note 15, the
Company received $13.5 million in June 1999 from the proceeds of a private
placement offering.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) ESTIMATED
1997 1998 USEFUL LIFE
------ ------- -----------
<S> <C> <C> <C>
Computer hardware........................... $ 787 $ 2,093 3 - 5 years
Purchased computer software................. 300 472 3 - 5
Office furniture and equipment.............. 383 755 5 - 7
Transportation equipment.................... 43 43 5
Leasehold improvements...................... 194 757 lease term
Construction in progress.................... 459 8 --
------ -------
2,166 4,128
Less accumulated depreciation and
amortization.............................. (787) (1,612)
------ -------
Property and equipment, net................. $1,379 $ 2,516
====== =======
</TABLE>
4. INCOME TAXES
The Company did not have income tax expense for the years ended December
31, 1996, 1997 and 1998. This differed from an income tax benefit computed by
applying the Federal income tax rate of 34% to pretax losses as a result of the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit............................ $ 519 $ 2,715 $ 4,137
Increase (reduction) in income taxes resulting from:
State income taxes....................................... 55 594 439
Increase in the valuation allowance for deferred tax
assets................................................ (564) (3,016) (4,360)
Other items.............................................. (10) (293) (216)
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</TABLE>
F-13
<PAGE> 88
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1997 and 1998 are presented
below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 3,682 $ 7,791
Depreciation and amortization........................... 28 106
Allowance for doubtful accounts......................... 112 3
Accrued expenses........................................ -- 274
Other................................................... (8) --
------- -------
Gross deferred tax assets............................... 3,814 8,174
Less valuation allowance................................ (3,814) (8,174)
------- -------
Total net deferred tax asset.................... $ -- $ --
======= =======
</TABLE>
Realization of deferred tax assets associated with net operating loss and
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. Management believes that there is a risk that these
net operating loss and credit carryforwards may expire unused and has
established a valuation allowance for the deferred tax assets.
The Company has net operating loss carry forwards of approximately
$20,843,000 that expire through year 2013. The utilization of our net operating
loss carryforward may be limited due to the defined changes in ownership that
have occurred over the past several years.
5. NOTES PAYABLE
During 1996, the Company completed a private placement of 60 units of
subordinated promissory notes (the "1996 Notes"), along with warrants to
purchase shares of the Company's common stock. The gross proceeds of the
placement were $3,000,000 and the expenses related to the placement were
$381,424. Each unit consisted of a $50,000 note payable and a warrant to
purchase 8,400 shares of the Company's common stock at a price equal to the
greater of $3.00 per share or one-half of the initial offering price per share
in the event that the Company completes an initial public offering ("IPO") of
its common stock. The proceeds were allocated between the estimated value of the
warrants and the note payable. The estimated value of the warrants is reflected
as a discount to the note payable. The expenses and discount related to the
private placement were amortized into interest expense over the term of the 1996
Notes.
During June 1997, the Company completed an offering of subordinated notes
payable ("1997 Notes") with aggregate proceeds of $375,000. The notes were due
in June 1998 with interest payable in arrears at 10%. The Company also granted
90,000 warrants for the purchase of common stock at $3.25 per share to the
investors of the subordinated notes payable. These notes were repaid with
proceeds from the September 1997 offering discussed in note 9.
On July 10, 1997, the Company completed a restructuring of the 1996 Notes
and an additional offering of the 1997 Notes described above. The Company
offered each holder of the 1996 units the right to exchange the old units for
new units comprised of a $50,000 convertible
F-14
<PAGE> 89
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
subordinated note payable with a new maturity date which was one year from the
original maturity date, thereby extending the maturity dates on the converted
notes from September through November 1997 to September through November 1998.
One half of the 1997 Notes plus accrued interest converts to the Company's
common stock at the rate of $3.00 per share upon completion of a private or
public equity financing of at least $2,500,000. If the equity financing is for
less than $3.00 per share, the conversion rate is for the lesser amount. The
fair value of the underlying stock was less than the conversion price. Should
any portion of the 1997 Notes remain outstanding after the maturity date, the
Company was obligated to issue common shares to the holder at a rate of 700
common shares per month for each $50,000 outstanding. The 8,400 warrants
associated with each 1996 Note converted to the 1997 Note were required to be
immediately exercised on July 10, 1997 at a purchase price of $1.00 per share.
The Company recorded inducement expense of $375,000 related to the reduction of
the exercise price of these warrants from the original exercise price of $3.00
per share to the reduced exercise price of $1.00 per share. This inducement
expense is included in interest expense in the accompanying consolidated
statement of operations for the year ended December 31, 1997 and as a credit to
additional paid-in capital. Of the 60 original units of 1996 Notes, 49 were
converted to the new units of 1997 Notes and the related warrants were
exercised. At the same time, the Company also offered the new units of 1997
Notes to certain additional investors. A total of 15.7 new units was sold to
investors. Total proceeds from the offering of the new units of 1997 Notes and
from the warrants exercised was $1,328,480 and a total of 543,480 new shares of
common stock was issued to the investors.
Because of the completion of the financing on September 12, 1997, described
in note 9, one half of the 1997 Notes amounting to $1,617,500 plus associated
interest of approximately $100,000 were converted on that date to common stock
at $2.50 per share, amounting to approximately 690,000 new shares of common
stock. In addition to the conversion of one half of the new units of 1997 Notes
to common stock, the new unit holders received a total of 215,000 warrants to
purchase common stock at $4.00 per share, similar to the Series B Preferred
Stock warrants described in note 8.
Notes payable at December 31, 1997 consisted of the 1997 Notes of
$1,617,500, due at the earlier of the closing of an IPO or at dates ranging from
September 1998 to November 1998, and bore interest at 9%, due at maturity.
Upon completion of the financing in June 1998, described in note 9, the
outstanding balance of the 1997 Notes amounting to $1,617,500, plus associated
interest of approximately $180,000 was repaid.
F-15
<PAGE> 90
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
6. ACCRUED PAYROLL AND OTHER ACCRUED EXPENSES
Accrued payroll and other accrued expenses consist of the following at
December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1997 1998
----- -------
<S> <C> <C>
Accrued payroll and related expenses........................ $266 $ 249
Due to subcontractors....................................... 138 760
Accrued bonuses............................................. 457 953
Other accrued expenses...................................... 44 275
---- ------
$905 $2,237
==== ======
</TABLE>
7. COMMITMENTS
(A) LEASES
The Company leases office space and certain equipment under operating
leases that expire through January, 2001. Future minimum lease payments under
noncancelable operating leases (with initial or remaining lease terms in excess
of one year) for the years ending December 31, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999........................................................ $220
2000........................................................ 203
2001........................................................ 15
----
Total minimum lease payments...................... $438
====
</TABLE>
Total rent expense for operating leases was $185,498, $279,708, and
$370,919, for the years ended December 31, 1996, 1997 and 1998, respectively.
(B) 401(K) PROFIT SHARING & TRUST
The Daleen Technologies, Inc. 401(k) Profit Sharing & Trust plan covers
substantially all of its employees. The Company matches 25% of the employees'
contribution, up to a maximum of 8% deferral made by the employees. In addition,
the Plan allows discretionary contributions from us. The total expense
associated with this plan for 1996, 1997 and 1998 was $0, $36,277, and $71,923,
respectively.
(C) EMPLOYMENT AGREEMENTS
The Company has employment agreements with four executives that provide for
annual base salaries, annual salary increases, an annual bonus and periodic
stock option grants subject to the approval by the compensation committee of the
Company's board of directors. These agreements vary in length up to five years
and provide for aggregate annual base salaries of $795,000. Such agreements
provide for severance payments of up to two years base salary.
F-16
<PAGE> 91
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
(8) STOCKHOLDERS' DEFICIT
(A) STOCK OPTIONS
The Company has six fixed stock option plans: the 1994 Employee
Non-Qualified Stock Option Plan ("the 1994 Plan"), the 1995 Qualified Employee
Incentive Stock Option Plan ("the 1995 Plan"), the 1996 Employee Non-Qualified
Stock Option Plan ("the 1996 Plan"), the 1997 Employee Incentive Stock Option
Plan ("the 1997 Plan"), the 1998 Non-Qualified Employee Stock Option Plan ("the
1998 Plan") and the 1998 Qualified Employee Incentive Stock Option Plan ("the
1998 ISO Plan"). Each Plan provides that the exercise price of the options
granted will be issued at no less than the fair market value of the underlying
common stock at the date of grant. A summary of the Company's stock option plans
is presented below:
<TABLE>
<CAPTION>
SHARES
AUTHORIZED
FOR ISSUANCE CONTRACTUAL LIFE
UNDER PLAN VESTING PERIOD OF OPTIONS
------------ ------------------------- -------------------
<S> <C> <C> <C>
1994 Plan...................... 125,000 100% upon grant 10 years from grant
1995 Plan...................... 200,000 100% upon grant 10 years from grant
1996 Plan...................... 400,000 100% upon grant 10 years from grant
1997 Plan...................... 200,000 33.3% each year for first 10 years from grant
three years from grant
1998 Plan...................... 500,000 25% each year for first 10 years from grant
four years from grant
1998 ISO Plan.................. 1,600,000 25% each year for first 10 years from grant
four years from grant
</TABLE>
On February 25, 1999 the Company established a new stock incentive plan.
The number of shares reserved for grants under this plan was 598,881. The
contractual life of the options under this plan is ten years from the date of
grant.
F-17
<PAGE> 92
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
A summary of the status of the Company's stock option plans, as of December
31, 1996, 1997 and 1998, and changes during the years then ended, is presented
below:
<TABLE>
<CAPTION>
1996 1997 1998
-------------------- ---------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year.... 113,425 $0.87 520,303 $1.73 1,476,498 $2.67
Granted................ 422,293 1.94 988,732 3.18 1,012,600 3.25
Exercised.............. -- -- -- -- -- --
Forfeited.............. (15,415) 0.92 (32,537) 3.00 (125,401) 3.13
-------- ---------- ----------
Outstanding at end of
year................. 520,303 $1.73 1,476,498 $2.67 2,363,697 $2.89
======== ========== ==========
Options exercisable at
end of year.......... 459,478 503,885 957,814
Weighted average fair
value of options
granted during the
year................. $0.50 $0.38 $0.61
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.10 to $1.00......... 319,305 2.28 $0.97 319,305 $0.97
$2.00 to $3.00......... 403,733 3.01 2.98 349,624 2.97
$3.25 to $4.00......... 1,640,659 4.45 3.25 288,885 3.25
--------- -------
2,363,697 3.91 2.89 957,814 2.39
========= =======
</TABLE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. The fair value of each option granted to
employees is estimated on the date of grant using the Black-Scholes model with
the following assumptions: expected dividends of zero; a risk-free interest rate
ranging from 4.4% to 6.6%; and an expected life of five years.
F-18
<PAGE> 93
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
Had compensation expense for the Company's plans been determined consistent
with FASB Statement No. 123, the Company's net loss and net loss per share would
have been increased to pro forma amounts indicated below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
PRO FORMA DISCLOSURES 1996 1997 1998
- --------------------- ------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported.................................... $(1,526) $(7,984) $(12,169)
Pro forma...................................... (1,761) (8,342) (12,444)
Net loss applicable to common stockholders per
share:
As reported.................................... (0.81) (3.48) (3.78)
Pro forma...................................... (0.94) (3.64) (3.84)
</TABLE>
The pro forma amounts disclosed above do not include the pro forma effects
of stock options granted prior to 1995.
The Company accounts for stock options granted to nonemployees based on the
fair value of the stock options granted. During 1996 and 1997, the Company
recorded $81,000 and $25,782, respectively, of stock compensation expense
related to stock options for the purchase of 23,490 and 113,756 shares of common
stock, respectively, granted to nonemployees. The fair value of such stock
options was estimated on the dates of grant using the Black-Scholes model.
(B) COMMON AND PREFERRED STOCK
In November 1997, the Company began an offering of Series C convertible
preferred stock ("Series C Preferred Stock"). The Series C Preferred Stock was
offered for $4.50 per share and is convertible at the option of the holder to
common stock on a one-for-one basis. The Series C Preferred Stock automatically
converts to common stock upon the completion of an IPO. The Company raised a
total of approximately $5,301,000 for 1,213,584 shares of Series C Preferred
Stock, of which approximately $5,092,000 and $279,000 was received in 1997 and
1998, respectively. Dividends on the Series C Preferred Stock are payable if and
when declared by the Company's board of directors, at an amount to be determined
by the Company's board of directors. In connection with this offering the
Company issued warrants to purchase an additional 285,000 shares of the
Company's common stock at $4.50 per share.
In January 1998, the Company issued 21,600 shares of common stock to
certain individuals as a finder's fee for services performed in conjunction with
the issuance of the Series C Preferred Stock. The fair value of $70,200 of the
shares of common stock issued was reclassified from the carrying value of the
Series C Preferred Stock to common stock and additional paid-in capital.
9. REDEEMABLE PREFERRED STOCK
On September 12, 1997, the Company completed a sale of mandatorily
redeemable convertible Series A preferred stock ("Series A Preferred Stock") to
a venture capital fund. The Company issued 3,000,000 shares of Series A
Preferred Stock to the fund at $2.50 per share for
F-19
<PAGE> 94
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
total proceeds of $7,500,000. The Series A Preferred Stock is convertible on a
one to one basis into the Company's common stock at the option of the holder,
until an IPO occurs, at which time the Series A Preferred Stock is automatically
converted. The Series A Preferred Stock is redeemable at the option of the
holder if an IPO is not completed within five years from the date of issuance at
$2.50 per share which is the fair market value of the common stock on the date
of issuance. In addition, the Company issued to the venture capital fund
1,250,000 warrants to purchase Series B Preferred Stock at $4.00 per share. The
Series B Preferred Stock is also convertible to common stock on a one to one
basis and has the same automatic conversion and redemption features as the
Series A Preferred Stock.
In June 1998, the Company completed a private placement with a group of
venture capital funds for an investment of $15,000,006 in the Company. Under the
terms of the private placement, the Company issued 4,221,846 shares and 686,533
shares, respectively, of newly authorized Series D and D-1 redeemable
convertible preferred stock ("Series D and D-1 Preferred Stock"). The Series D
and D-1 Preferred Stock is convertible on a one to one basis into the Company's
common stock at the option of the holder and will be automatically convertible
to common stock in the event of an IPO of at least $20,000,000 at a price per
share of at least three times the Series D and D-1 Preferred Stock conversion
price ($9.17). The fair market value was equal to the conversion price per share
at the date of issuance. The Company is required to redeem one-third of the
Series D and D-1 Preferred Stock on each of June 18, 2002, 2003 and 2004. Costs
of the offering were $768,275 and were recorded as a discount to the fair value
of the Series D and D-1 Preferred Stock at its date of issuance. This discount
is being accreted into the carrying value of the Series D and D-1 Preferred
Stock, using the effective interest method, so that one-third of the carrying
value of the Series D and D-1 Preferred Stock will equal its redemption value on
each of June 18, 2002, 2003 and 2004. The net proceeds of the private placement
after payment of expenses, were used for working capital and to repay notes
payable and accrued interest of approximately $1,800,000, as discussed in note
5.
Dividends on the Series A Preferred Stock, Series B Preferred Stock, and
the Series D and D-1 Preferred Stock are payable if and when declared by the
Company's board of directors, at an amount to be determined by the Company's
board of directors.
10. JOINT VENTURE
On September 21, 1995, the Company entered into a joint venture agreement
with Macmet India Ltd., an Indian company, to form a new joint venture company
in India to market telecommunications products and services. The Indian joint
venture was named Macmet Daleen Teleware Ltd. In July 1997, the Company was
reimbursed for our investment in the Indian joint venture and as of that date,
the joint venture was terminated. The Company incurred an immaterial loss
related to this sale of the joint venture.
11. BUSINESS AND CREDIT CONCENTRATIONS
Historically, when the Company was a consulting company, a substantial
amount of the Company's business activity was with customers located within the
state of Florida and with customers in various industries. Over the past year, a
greater percentage of business was done
F-20
<PAGE> 95
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
with customers located in different areas of the United States and in Latin
America and Europe, and the Company has focused on customers in the
communications industry. Foreign revenue is less than 10% of total revenue in
each period presented.
Normal credit terms are granted to customers. Project retainers are
received on most contracts. The Company has the right to cancel software
licenses in the event that the customer is in default of its license agreement
with the Company.
During the years ended December 31, 1996, 1997 and 1998, 60%, 100% and 99%,
respectively, of the Company's total revenue were attributed to two, one and
five customers, respectively. Sales to the two customers in 1996 represented 40%
and 14% of total revenue. Sales to five customers in 1998 accounted for 19%,
22%, 27%, 15% and 15%. In addition, there were accounts receivable from four
customers and one customer at December 31, 1997 and 1998, respectively, each of
which exceeded 10% of total accounts receivable and aggregated approximately
$19,000 and $1,130,000, respectively. These amounts were collected subsequent to
December 31, 1998 and 1997, respectively.
The Company estimates an allowance for doubtful accounts generally based on
an analysis of collections in prior years, the credit worthiness of its
customers as well as general economic conditions. Consequently, an adverse
change in those factors could effect the Company's estimate of its bad debts.
12. SALE OF PLACEMENT DIVISION
Effective November 30, 1996, the Company sold all of the net assets
relating to its placement services division at a sale price of $1.3 million in
cash. The net assets related to the division were primarily customer contracts
relating to ongoing temporary placements of personnel, along with the employment
contracts for the personnel in the placement services division. Therefore, there
were no recorded assets or liabilities on our balance sheet related to the sale
and the resulting gain of $1,300,000 was recorded as other nonoperating income.
Costs of the sale were insignificant and the Company has no further
responsibilities for the operations of the placement services division.
13. SALE OF UNRELATED SOFTWARE PRODUCT
In May 1996, the Company sold the marketing rights to an unrelated software
product for an initial cash payment of $500,000, guaranteed minimum sales levels
by the buyer of this product for a three-year period and common stock in a
publicly-traded company affiliated with the buyer. The fair value of the common
stock at the date of the license agreement was $289,464. At December 31, 1996,
the Company wrote down the common stock to its fair value of $165,408 and
recorded the resulting loss of $124,056. Subsequently, during 1997, such stock
became worthless and the Company wrote off the asset, recording a loss of
$165,408. The Company entered into a related settlement and release agreement
with the buyer. Under the terms of this agreement, the sale of the marketing
rights and all related obligations were canceled. However, the Company retained
the initial $500,000 payment and the common stock received in the transaction.
F-21
<PAGE> 96
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE-
MONTH PERIODS ENDED MARCH 31, 1998 AND 1999 IS UNAUDITED)
In July 1998, the Company sold the source code and all rights to this
unrelated software product to another buyer for $400,000.
These amounts are included in other income in the accompanying consolidated
statements of operations.
14. NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued Statement of Position 98-5 Reporting on the
Costs of Start-Up Activities (SOP 98-5). Pursuant to the provisions of SOP 98-5,
all costs associated with start-up activities, including organization costs,
should be expensed as incurred. Companies that previously capitalized such costs
are required to write off the unamortized portion of such costs as a cumulative
effect of a change of accounting principle. The Company has no start-up costs
capitalized at December 31, 1998.
In March 1998, the AICPA issued Statement of Position 98-1 (SOP 98-1),
accounting for the costs of software developed or obtained for internal use.
This standard requires companies to capitalize qualifying computer software
costs, which are incurred during the application development stage, and amortize
them over the software's estimated useful life. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. The Company expects no impact on its
financial statements related to SOP 98-1.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires the
recognition of all derivatives as either assets or liabilities in the balance
sheet and the measurement of those instruments at fair value. Gains and losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. SFAS No. 133 is expected to be effective for the Company's year
ending December 31, 2000. The Company expects this SFAS to have no material
impact on its financial statements.
15. SUBSEQUENT EVENT
On June 30, 1999 the Company completed a sale of mandatorily redeemable
convertible Series E Preferred Stock ("Series E Preferred Stock") to a private
company. The Company issued 1,496,615 shares of Series E Preferred Stock at
$9.00 per share for total proceeds of $13.5 million. The Series E Preferred
Stock is convertible on a one to one basis into the Company's common stock at
the option of the holder, until an IPO occurs, at which time the Series E
Preferred Stock is automatically converted. The Series E Preferred Stock is
redeemable at the option of the holder if an IPO is not completed within five
years from the date of issuance at $9.00 per share. Dividends on the Series E
preferred stock are payable, if and when declared by the board of directors at
an amount to be determined by the board of directors.
F-22
<PAGE> 97
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,846
National Association of Securities Dealers, Inc. fee........ 6,200
Nasdaq National Market listing fee.......................... *
Accountants' fees and expenses.............................. *
Legal fees and expenses..................................... *
Blue Sky fees and expenses.................................. *
Transfer Agent's fees and expenses.......................... *
Printing and engraving expenses............................. *
Miscellaneous............................................... *
--------
Total expenses.................................... $ *
========
</TABLE>
- -------------------------
* To be completed by amendment
All fees other than the SEC registration fee, the NASD fee and the Nasdaq
National Market listing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Daleen's certificate of incorporation provides that the liability of the
directors for monetary damages shall be eliminated to the fullest extent
permissible under the Delaware General Corporation Law (the "DGCL") and that we
may indemnify our officers, employees and agents to the fullest extent permitted
under the DGCL.
Daleen's bylaws provide that Daleen must indemnify its directors against
all liabilities to the fullest extent permitted under the DGCL and that Daleen
must advance all reasonable expenses incurred in a proceeding in which the
director was either a party or a witness because he or she was a director.
The DGCL provides that, in general, a corporation may indemnify an
individual who is or was a party to any proceeding (other than action by, or in
the right of, such corporation) by reason of the fact that he or she is or was a
director of the corporation, against liability incurred in connection with such
proceeding, including any appeal thereof, provided certain standards are met,
including that such officer or director acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the DGCL provides that, in general, a corporation may indemnify an
individual who was or is a party to any such proceeding by reason of the fact
that he or she is or was a director of the corporation against reasonable
expenses incurred in connection with such proceeding, if it is determined that
the director has met the relevant standard of conduct. To the extent that any
directors are successful on the merits or otherwise in the defense of any of the
proceedings described above, the DGCL provides that a corporation is required to
indemnify such officers or directors against reasonable expenses incurred in
connection therewith. The DGCL further provides, in general, for the advancement
of reasonable expenses incurred by a director who is a party to a proceeding if
the director furnishes the corporation (1) a written affirmation of his good
faith belief that he or she has met the
II-1
<PAGE> 98
standard of conduct under the DGCL or that the proceeding involves conduct for
which liability has been eliminated under the corporation's certificate of
incorporation; and (2) a written undertaking to repay any advances if it is
ultimately determined that he or she is not entitled to indemnification. In
addition, the DGCL provides for the indemnification of officers, employees and
agents in certain circumstances.
Daleen maintains directors' and officers' liability insurance covering
liabilities that may be incurred by our directors and officers, including
liabilities under the Securities Act.
Section of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of Daleen may be entitled to be indemnified by the
underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, Daleen has issued the securities set forth
below which were not registered under Section 5 of the Securities Act of 1933:
1. Between September and November 1996, we completed a private placement
of notes and warrants to purchase shares of our common stock to approximately 30
private investors. The gross proceeds of the placement were $3 million. Each
warrant entitles the holder to purchase 8,400 shares of our common stock at a
price equal to one-half of our offering price.
In June 1997, we completed an offering of subordinated notes for $375,000.
We also granted 90,000 warrants for the purchase of common stock at $3.25 per
share to these investors. In September 1997, we received approximately $1.7
million from the conversion of approximately one-half of these notes to
approximately 690,000 shares of common stock. These investors also received a
total of 215,000 warrants to purchase our common stock at $4.00 per share.
In July 1997, we offered these investors the right to convert their notes
to our common stock should any portion of the notes remain outstanding after
their maturity date. As of June 30, 1999 all of these notes had been paid in
full. Total proceeds from our sale of notes and warrants to these and additional
investors were $1.3 million and a total of 543,480 new shares of common stock
was issued.
2. In September 1997, we issued and sold 3,000,000 shares of Series A
Convertible Preferred Stock and warrants to purchase up to 1,250,000 shares of
Series B Convertible Preferred Stock to HarbourVest Partner V-Direct Fund L.P.
The aggregate purchase price was $7,500,000, of which $7,400,000 was allocated
to the Series A Convertible Preferred Stock and $100,000 was allocated to the
warrants.
3. In November 1997, we issued and sold 1,213,584 shares of Series C
Convertible Preferred Stock at an aggregate purchase price of $5,461,128, or
$4.50 per share, to accredited investors in a private offering.
4. In August 1998, we issued and sold to private investors 4,221,846
shares of Series D Convertible Preferred Stock and 686,533 shares of Series D-1
Preferred Stock for aggregate net proceeds to us of $15,000,006, or
approximately $3.06 per share.
5. In January 1999, we issued and sold 22,223 shares of Series C
Convertible Preferred Stock to Mr. Stephen J. Getsy a Director of the Company,
for $100,000 or approximately $4.50 per share.
II-2
<PAGE> 99
6. In June 1999, we issued and sold 1,496,615 shares of Series E
Convertible Preferred Stock at $9.00 per share for aggregate net proceeds to us
of $13,500,000 to a private investment company.
The issuance of the securities in the transactions described above were
exempt from registration under Section 5 of the Securities Act in reliance on
Section 4(2) of the Securities Act and Regulation D promulgated thereunder as
transactions by an issuer not involving any public offering.
Daleen has issued stock options to purchase an aggregate of 2,335,238
shares of Common Stock at a weighted average exercise price of $3.54 per share
to employees, officers and directors. Of these, options have been exercised to
purchase an aggregate of shares.
The issuance of securities in the transaction described above was deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
and Rule 701 of the Securities Act.
ITEM 16. (A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Certificate of incorporation of Daleen Technologies, Inc.
3.2* Bylaws of Daleen Technologies, Inc.
4.1 See Exhibits 3.1 and 3.2 for provisions of the certificate
of incorporation and bylaws of Daleen Technologies, Inc.
defining rights of the holders of common stock of Daleen
Technologies, Inc.
4.2* Specimen stock certificate.
5.1* Opinion of Morris, Manning & Martin, LLP, counsel to Daleen
Technologies, Inc., as to the legality of the shares being
registered.
10.1 Employment Agreement, dated December 1, 1994, between James
Daleen and Daleen Technologies, Inc.
10.2 Amendment to Employment Agreement, dated September 5, 1997,
between James Daleen and Daleen Technologies, Inc.
10.3 Third Amendment to the Employment Agreement, effective March
1, 1999, between James Daleen and Daleen Technologies,
Inc.
10.4 Employment Agreement, dated, January 31, 1998, between David
B. Corey and Daleen Technologies, Inc.
10.5 Employment Agreement, dated November 15, 1994, between
Richard A. Schell and Daleen Technologies, Inc.
10.6 Amendment to Employment Agreement, dated January 31, 1997,
between Richard A. Schell and Daleen Technologies, Inc.
10.7 Second Amendment to Employment Agreement, dated September 5,
1997, between Richard A. Schell and Daleen Technologies,
Inc.
10.8 Third Amendment to Employment Agreement, effective March 1,
1999, between Richard A. Schell and Daleen Technologies,
Inc.
10.9 Employment Agreement, dated April 28, 1999, between Stephen
M. Wagman and Daleen Technologies, Inc.
10.10 Form of Indemnification Agreement.
10.11 Daleen Technologies, Inc. 1999 Stock Incentive Plan.
</TABLE>
II-3
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.12 Daleen Technologies, Inc. 1998 Incentive Stock Option Plan.
10.13 Daleen Technologies, Inc. 1997 Incentive Stock Option Plan.
10.14 Daleen Technologies, Inc. 1995 Incentive Stock Option Plan.
10.15 Daleen Technologies, Inc. 1998 Employee Non-Qualified Stock
Option Plan.
10.16 Daleen Technologies, Inc. 1996 Employee Non-Qualified Stock
Option Plan.
10.17 Daleen Technologies, Inc. 1994 Employee Non-Qualified Stock
Option Plan.
10.18 Lease Agreement, dated August 4, 1992, by Innovative
Selective Software, Inc., and Crow-Childress-Donner,
Limited.
10.19 First Amendment to Lease Agreement, dated December 29, 1994,
by Daleen Technologies Inc, successor to Innovative
Selective Software, Inc., and Regent Holding Corporation,
successor to Crow-Childress-Donner.
10.20 Lease Agreement, dated August 27, 1998, by Daleen
Technologies, Inc. and Regent Holding Corporation.
10.21 First Amendment to Lease, dated December 2, 1998, between
Daleen Technologies, Inc. and Regent Holding Corporation.
10.22* Second Amendment to Lease, dated January 16, 1996, between
Daleen Technologies, Inc. and Regent Holding Corporation.
10.23* Warrant to Purchase Series B Preferred Stock.
22.1 Subsidiaries.
23.1 Consent and Report on Financial Statement Schedule of KPMG
LLP.
23.2* Consent of Morris, Manning & Martin, LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether
II-4
<PAGE> 101
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 102
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boca Raton, State of
Florida on the 8th day of July 1999.
Daleen Technologies, Inc.
By: /s/ James Daleen
-----------------------------------
James Daleen, Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James Daleen and Richard A. Schell, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any subsequent registration
statements pursuant to Rule 462 of the Securities Act and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorney-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James Daleen Chairman of the Board and July 8, 1999
- --------------------------------------------- Chief Executive Officer
James Daleen (Principal Executive Officer)
/s/ David B. Corey President, Chief Operating July 8, 1999
- --------------------------------------------- Officer and Director
David B. Corey
/s/ Richard A. Schell Chief Financial Officer July 8, 1999
- --------------------------------------------- (Principal Financial and
Richard A. Schell Accounting Officer)
/s/ Paul G. Cataford Director July 8, 1999
- ---------------------------------------------
Paul G. Cataford
</TABLE>
II-6
<PAGE> 103
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Daniel Foreman Director July 8, 1999
- ---------------------------------------------
Daniel Foreman
/s/ Stephen J. Getsy Director July 8, 1999
- ---------------------------------------------
Stephen J. Getsy
/s/ Elliot Levine Director July 8, 1999
- ---------------------------------------------
Elliot Levine
/s/ Ofer Nemirovsky Director July 8, 1999
- ---------------------------------------------
Ofer Nemirovsky
/s/ William A. Roper, Jr. Director July 8, 1999
- ---------------------------------------------
William A. Roper, Jr.
</TABLE>
II-7
<PAGE> 104
DALEEN TECHNOLOGIES, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT BAD DEBT BALANCE AT END
BEGINNING OF PERIOD EXPENSE DEDUCTIONS OF PERIOD
------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996........ 3,015 359,563 347,392 15,186
Year ended December 31, 1997........ 15,186 166,803 (165,408) 16,581
Year ended December 31, 1998........ 16,581 247,052 (254,588) 9,045
</TABLE>
S-1
<PAGE> 1
EXHIBIT 10.1
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective as
of this 1st day of December, 1994, by and between DALEEN TECHNOLOGIES, INC., an
Illinois corporation located at 902 Clint Moore Road, Suite 230, Boca Raton,
33487 ("Company" or "Employee"), and JAMES DALEEN, residing at 4404 Woodfield
Blvd., Boca Raton, Florida 33434 ("Employee").
WITNESSETH:
WHEREAS, Employee is the Company founder and has since inception been a
loyal and devoted employee;
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
Company;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Employment. Company hereby employs Employee in its business as
President, Chairman of the Board of Directors of the Company ("Board") and Chief
Executive Officer, and Employee hereby accepts such employment, all upon the
terms and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of
this Agreement, the term of employment under this Agreement shall be for five
(5) years ("Employment Period"). The Employment Period shall be automatically
extended for additional three year periods unless either party notifies the
other in writing that the Employment Period will not be renewed at least six (6)
months prior to the end of the initial term or six (6) months prior to the end
of any such three year renewal.
3. Salary and Base Compensation. Employee shall be entitled to
receive salary during the Employment Period at the rate of:
One Hundred Twenty-Five Thousand and 00/100 Dollars ($125,000.00) per annum
initially,
One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) per annum
effective April 15, 1995,
One Hundred Seventy-Five Thousand and 00/100 Dollars ($175,000.00) per annum
effective January 1, 1996, Two
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 2
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
Hundred Thousand and 00/100 Dollars ($200,000.00) per annum effective July 1,
1996,
Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per annum effective
January 1, 1997,
The Employee's salary shall increase Fifty Thousand Dollars ($50,000.00) per
annum every six months thereafter starting July 1, 1997 and continuing through
the term of this agreement (the "Base Salary").
In addition to the Base Salary paid to Employee during the Employment Period,
Employee shall be entitled to receive the Benefits, Profits Bonus, Revenue Bonus
and Stock Options (as those terms are hereinafter defined) during the Employment
Period. The Base Salary shall be payable Bi-Weekly in accordance with the
current normal payroll policies of Company, which policies may be changed by
Company from time to time in its sole discretion, and shall be subject to all
appropriate withholding taxes.
4. Business Expenses and Reimbursements. Employee shall be
entitled to reimbursement by the Company for ordinary and necessary business
expenses incurred by Employee in the performance of his duties for Company,
which types of expenditures shall be determined and approved by the Company, and
further provided that:
(a) Each such expenditure is of a nature qualifying it as
a proper deduction on the Federal and State income tax returns of Company as a
business expense (determined without regard to statutory limitations) and not as
deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and
other documentary evidence required by federal and State statutes and
regulations for the substantiation of such expenditures as deductible business
expenses of Company and not as deductible compensation to Employee, as well as
any other documentation reasonably requested by Company.
(c) Employee agrees that, if at any time, any payment
made to Employee by Company, whether for salary or as a business expense
reimbursement, shall be disallowed in whole or in part as a deductible expense
by the appropriate taxing authorities, Employee shall reimburse Company to the
full extent of such disallowance.
5. Car Allowance. During the Employment Period, Employee shall be
entitled to the exclusive, full-time use of a four-door luxury automobile or a
car allowance of up to $700.00 per month (increased by the Consumer Price Index
increase on each anniversary of this Agreement) in accordance with Company's
normal automobile allowance payment practices, as in existence from time to
time.
6. Benefits. Employee shall be entitled to receive during the
entire Employment Period the following benefits herein below described
("Benefits"). Employee agrees that the Base Salary, the Profits Bonus, the
Revenue Bonus, the Stock Option, and the Benefits and the other compensation
provided in accordance with this Agreement, are the sole and exclusive
compensation of Employee for his duties hereunder.
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 3
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
(a) Continuing throughout the Employment Period
Employee shall receive all of the employee benefits including, without
limitation, health insurance, pension, disability, profit sharing and retirement
benefits, provided at any time by Company to any of its senior executive
employees.
7. Vacation. Employee shall be entitled to paid vacation in
accordance with the vacation policy of the Company in effect for senior
executives from time to time, in no event to be less than three (3) weeks per
calendar year.
8. Revenue and Profits Bonuses.
(a) During the Employment Period, Employee shall be paid, within
thirty (30) days after delivery of the Company's annual audited financial
statements for its fiscal year end, a bonus in cash equal to two percent (2%) of
the increase in total gross revenues of the Company including all subsidiaries
on a consolidated basis for the most recently ended fiscal year over the total
gross revenues for the Company as of the end of the immediately prior fiscal
year. For example, if total gross revenue for fiscal year "A" equals $2,100,000
and if total gross revenue for fiscal year "B" equals $3,100,000, the bonus
amount payable hereunder would be two percent (2%) of said $1,000,000
difference, in that case equal to $20,000 ("Revenue Bonus").
(b) Employee shall be paid, within thirty (30) days of the end of each
full calendar quarter during the Employment Period, a quarterly bonus equal to
five percent (5%) of the net pre-tax earnings of the Company including all
subsidiaries on a consolidated basis (the "Profits Bonus"). The term "net
pre-tax earnings" as used herein shall be determined by the Company's internal
financial statements and shall be subject at the Company's fiscal year end to
adjustment based upon the annual audit of the Company financial statements by
the Company's independent CPA firm in accordance with generally accepted
accounting principles.
(c) Notwithstanding anything to the contrary in this Agreement, the
Profits Bonus shall be payable only provided Employee is in the employ of
Company on the last day of the respective quarter for which such Profits Bonus
is being calculated. Employee shall be entitled to the Revenue Bonus on a
prorata basis for partial year calculations, based on full year results and
further payable in accordance with and subject to the normal payroll policies of
the Company with respect to similar forms of compensation, including without
limitation, being subject to all appropriate withholding taxes.
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 4
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
(d) If the fiscal year of the Company is changed, the annual Revenue
Bonus shall be adjusted for the year in which the election is made and the next
fiscal year so that the calculation will have been made on an equitable basis
for comparable periods.
9. Stock Option. Employee shall be eligible to receive stock
options in accordance with the stock option plans adopted by the Company from
time to time or determined by the Board of Directors of the Company, in all
events annually within thirty (30) days of the end of the Company's fiscal year
in an amount not less than twenty five percent (25%) of the aggregate of all
stock options granted to all other employees of the Company during the most
recently ended fiscal year.
10. Registration Rights. In the event Company registers common
stock held by other employees of Company, then the Company shall also register a
prorata portion of the stock held by Employee.
11. Compensation Review. The Board shall from time to time, no
less frequently than annually, review Employee's compensation and may (in his
sole discretion) increase, but not decrease, the compensation provided for in
Section 3 hereof. Any such increase in compensation shall be valid only if in
writing, executed by a duly authorized officer of the Company, and such writing
shall constitute an amendment solely to the payments to be made to Employee
under this Agreement, without waiver or modification of any other provision
hereof.
12. Invention Assignment and Confidentiality Agreement. Against
the execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "A" hereto (the "Invention Assignment and
Confidentiality Agreement").
13. Non-Competition Agreement. Against the execution and delivery
of this Agreement, Employee shall enter into a non-competition and
non-solicitation agreement (in the form of Exhibit "B" hereto) (the
"Non-Competition Agreement")
14. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature except for payments for
service as a director equal to those payments, if any paid by the Company to its
other members of its Board of Directors, which the Company shall be obligated to
pay to employee also, if any.
15. Duties. During the Employment Period:
(a) Employee shall furnish all manner of services in
connection with his position as Chairman of the Board, President and Chief
Executive Officer or as otherwise designated by the President including, without
limitation, primary responsibility for management of the Company to
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 5
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
carry out the policies and programs of the Board and as from time to time may be
delegated or assigned to him by the Board;
(b) Employee shall report directly to the Board in the
performance of all his duties herein.
(c) Employee shall comply with all Company policies for the
employees as such policies may exist from time to time.
(d) Employee shall devote himself, and apply his best energy
and skill to the service of Company and the promotion of Company's interests,
and shall use his best efforts in the performance of his services hereunder. The
parties agree that Employee may not, during the Employment Period, be engaged in
any other business activity whether or not such activity is pursued for gain,
profit, or other pecuniary advantage including, without limitation, management
or management consulting activities; provided, however, Employee may contunie to
participate in the management and activities of any company which the Employee
is currently a Fifty percent (50%) or greater stockholder and the Employee may
invest his personal assets in businesses where the form or manner of such
investment will not require services on the part of Employee conflicting with
the duties of Employee under this Agreement and in which his participation is
solely that of a passive investor. Employee agrees to abide by all rules and
regulations established from time to time by the Board; and all commissions,
fees or other income earned and received by Employee, if any, in furtherance of
the business of Company, or its affiliates or from any other business or
financial opportunity or endeavor in which Employee is an active participant and
not a passive investor, other than a business which the Employee is currently a
Fifty percent (50%) or greater stockholder, shall be accepted by Employee for
the account of Company, and shall be remitted to Company within three (3) days
of Employee's receipt thereof.
16. Authority to Contract. Employee shall have authority to enter
into contracts binding upon Employer and believed in good faith by Employee to
be in the best interest of the Company.
17. Termination.
(a) Employer shall have the right to terminate the Employment Period
only for substantial cause or if Employee becomes permanently disabled.
(b) As used in this Section 17, the term "substantial cause" shall
mean:
(i) the commission by Employee of any act of fraud,
theft, or embezzlement against Employer; or
(ii) Any material breach by Employee of this Agreement,
provided that
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 6
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
Employer first shall have delivered to Employee
written notice of the alleged breach, specifying the
exact nature of the breach in detail, and provided,
further, that Employee shall have failed to cure or
substantially mitigate such breach within thirty days
after receiving notice thereof.
(c) For purposes of this Section 17, the term "permanently disabled"
or "permanent disability" shall mean a physical or mental incapacity of Employee
which renders Employee unable to perform his duties hereunder and which shall
continue for nine consecutive months or for twelve months during any period of
eighteen consecutive months.
(d) If Employer terminates the Employment Period for death or
substantial cause, the termination shall be effective immediately upon
Employee's receipt of written notice of termination from Employer. If Employer
terminates the Employment Period by reason of the permanent disability of
Employee, the termination shall be effective ninety days after the delivery by
Employer of written notice of termination from Employer.
18. Severance Pay. If Employer terminates the Employment Period
for any reason other than substantial cause, Employee shall be entitled to
severance pay from Employer in an amount equal to the lesser of (a) three years'
base salary, at the rate in effect at the time of termination; or (b) the base
salary due to Employee for the remaining term of this Agreement (but not less
than two full years' salary), determined at the rate of Employee's base salary
at the date of termination.
19. Change in Control.
(a) For the purposes of this Agreement, a "change in control of
Employer" shall mean the occurrence of any of the following events:
(i) any "person" (as that term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended ("Exchange Act")),who holds less than 20% of
the combined voting power of the securities of the
Employer, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Employer representing
twenty-five percent or more of the combined voting
power of the securities of Employer then outstanding;
or
(ii) during any period of twenty-four (24) consecutive
months, individuals who at the beginning of such
period constitute all members of the Board of
Directors of Employer shall cease, for any reason, to
constitute at least a majority of the Directors,
unless the election of each Director who was not a
Director at the beginning of the period was approved
by a vote of at least two-thirds of the Directors
then still in office who were Directors at the
beginning of the period; or
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 7
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
(iii) Employer shall consolidate or merge with another
company and Employer is not the continuing or
surviving corporation, or shares of Employer's common
stock are converted into cash, securities, or other
property, other than a merger of Employer in which
the holders of the Employer's common stock
immediately prior to the merger have the same
proportionate ownership of common stock of the
surviving corporation immediately after the merger as
they had in Employer immediately prior to the merger;
or
(iv) Employer shall sell, lease, exchange, or otherwise
transfer all or substantially all of its assets (in
one transaction or in a series of related
transactions); or
(v) the stockholders of Employer shall approve a plan or
proposal for the liquidation or dissolution of
Employer.
(b) Employee shall have the right to resign from the employ of
Employer at any time after a change in control of Employer. If Employee resigns
within two years of such a change in control, he shall be entitled to the
payment provided in subsection (c) of this Section 19.
(c) If Employee resigns from the employ of Employer within two
years of a change in control of Employer, of if Employer terminates this
Agreement after a change in control of Employer for any reason other than
substantial cause, then the following provisions of this Section 19 shall apply:
(i) in lieu of any further salary payments to Employee
for periods subsequent to the date of the termination
of his employment, Employer shall pay to Employee, in
a lump sum and in cash, as liquidated damages, an
amount equal to the sum of:
(A) the greater of (I) three years' base salary,
or (II) the base salary due to Employee for
the remaining term of this Agreement, in
either case at the greater of the rate in
effect at the date of the change in control
of Employer or at the date of termination;
plus
(B) an amount equal to a multiple of two (2)
times the largest total of Revenue and
Profits Bonuses previously paid in any one
year by Employer to Employee pursuant to the
provisions of Section IV(c) hereof.
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 8
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
(ii) Employer shall maintain in full force and effect
until the expiration of the term of this Agreement,
at its expense, all group insurance and other
employee benefit plans (including, without
limitation, qualified profit-sharing and retirement
type plans) in which Employee was entitled to
participate prior to the date of his termination,
provided that Employee's continued participation is
possible under the terms of such plans. If Employee's
continued participation under such plans is not
possible, Employer shall arrange to provide Employee
with alternative benefits substantially similar to
those provided under the group insurance and employee
benefit plans of Employer in which Employee was
participating prior to the date of his termination.
Any payment due to Employee pursuant to the provisions of subsection
(c) of this Section 19 shall be paid to him by Employer on the fifth day
following the date of Employee's termination.
(d) For purposes of the remaining provisions of this Section 19,
the following terms shall have the following meanings:
(i) The term "Code" shall mean the Internal Revenue Code
of 1986, as amended; and any references to sections
thereof shall include any successor provisions of the
Code or of any future income tax laws enacted as
successors to the Code;
(ii) The term "Excise Tax" shall mean the tax imposed by
Section 4999 of the Code;
(iii) The term "Gross-Up Payment" shall mean the payment
referred to in subsection (e) of this Section 19.
(iv) The term "Section 19 Payments" shall mean all
payments to which Employee shall become entitled
under the provisions of this Section 19.
(v) The term "Other Payments" shall mean any payments or
benefits, other than the Section 19 Payments,
received or to be received by Employee in connection
with a change in control of Employer, or in
connection with Employee's termination of employment,
and which are payable pursuant to the terms of any
plan, arrangement, or agreement (other than this
Agreement) with Employer, with Employer's successors,
with any person whose actions result in a change in
control of Employer, or with any person affiliated
either with Employer or with any person whose actions
result in a change in control of Employer.
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 9
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
(e) If Employee becomes entitled to any payments under this
Section 19, and if the Section 19 Payments or any Other Payments will be subject
to the Excise Tax, then Employer shall pay to Employee an additional sum (the
"Gross-Up Payment") sufficient to provide Employee with a net amount equal to
the sum of the Section 19 and the Other Payments, after deduction of any Excise
Tax on such Payments and after deduction of any federal, state, or local income
taxes, and of any Excise Tax, upon the Gross-Up Payment. The amount due from
Employer under this Section 19(e) shall be paid to Employee within five days of
the date of Employee's termination.
(f) The following rules shall apply for the purpose of determining
whether any of the Section 19 Payments or any of the Other Payments will be
subject to the Excise Tax and for the purpose of computing the amount of any
such Excise Tax:
(i) All of the Other Payments shall be treated as
"parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as being subject to the
Excise Tax; and
(ii) The value of any benefits payable to Employee in any
form other than cash, and the value of any deferred
payments or benefits due to Employee from Employer,
shall be determined by Employer's independent
auditors in accordance with the provisions of Section
280G(d)(3) of the Code.
(g) For purpose of determining the amount of the Gross-Up Payment:
(i) Employee shall be deemed to be subject to state and
local income taxes at the highest marginal rate of
taxation in the state and locality of Employee's
principal residence on the date of his termination;
and
(ii) Employee shall be deemed to be subject to federal
income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the
Gross-Up Payment is due (net of the maximum reduction
in federal income taxes which Employee can obtain
from deduction of the state and local taxes described
in the preceding clause).
(h) If the Excise Tax is determined to exceed the amount taken
into account under the provisions of this Section 19 at the time of the
termination of Employee (including by reason of any payment, the existence or
the amount of which could not be determined at the time of the Gross-Up
Payment), Employer shall make an additional Gross-Up Payment in respect of such
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 10
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
excess and in respect of any interest payable with respect to such excess, at
the time that the amount of such excess is finally determined.
(i) Employee shall not be required to mitigate the amount
of any payment provided for in this Section 19 by
seeking other employment or otherwise; and the amount
of any payment provided for in this Section 19 shall
not be reduced by any compensation earned by
Employee, either as the result of employment by any
other employer after the date of his termination of
employment with Employer or otherwise.
20. Surrender of Records. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably required by Employer, the Employee agrees to
surrender to the Employer, in good condition, any record or records kept by him
containing the names, addresses, and other information with regard to patients
or potential patients of the Employer which have been served or treated by the
Employee.
21. Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
22. Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
23. Assignments. Employee shall not assign his rights and/or
obligations hereunder.
24. Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns.
25. Severability. If any part of this Agreement or any other
Agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
26. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 11 through 29 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 11
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
27. Waivers. The failure or delay of Company at any time to
require performance by Employee of any provision of this Agreement, even if
known, shall not affect the right of Company to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
Company of any breach of any provision of this Agreement should not be construed
as a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on Employee in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
28. Specific Performance. Employee acknowledges that the services
to be rendered by Employee hereunder are extraordinary and unique and are vital
to the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by Employee.
Therefore, in the event of a breach or threatened breach by Employee of any
provision of this Agreement, then Company shall be entitled, in addition to all
other rights or remedies, to injunctions restraining such breach, without being
required to show any actual damage or to post any bond or other security.
29. Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including telex and telegraphic communication) and shall be (as elected by the
person giving such notice) hand delivered by messenger or courier service,
telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, to the addresses
listed above or to such other address as any party may designate by notice
complying with the terms of this Section. Each such notice shall be deemed
delivered (a) on the date delivered if by personal delivery, (b) on the date
telecommunicated if by telegraph, (c) on the date of transmission with confirmed
answer back if by telex or telefax, and (d) on the date upon which the return
receipt is signed or delivery is refused or the notice is designated by the
postal authorities as not deliverable, as the case may be, if mailed.
30. Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations, anticipated performance and execution of
this Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal or
state courts, each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record of the State of Florida in Palm
Beach County or the court of the United States, Southern District of Florida;
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding; (c) waives any objection which it may have to the laying of venue of
any such suit, action or proceeding in any of such courts; and (d) agrees that
service of any court paper may be effected on such party by mail, as provided in
this Agreement, or in such other manner as may be provided under applicable laws
or court rules in said state.
- --------------------------------------------------------------------------------
Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 12
December 1, 1994 James Daleen Employment Agreement
- --------------------------------------------------------------------------------
31. Remedies Cumulative. No remedy herein conferred upon any party
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
32. Employee Representations, Warranties, and Acknowledgments.
Employee represents and warrants to Company that he is fully empowered to enter
and perform his obligations under this Agreement and, without limitation, that
he is under no restrictive covenants to any person or entity that will be
violated by his entering into and performing this Agreement, and that this
Agreement constitutes the valid and legally binding obligation of Employee
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Employee has been duly authorized by all necessary action. Employee
shall indemnify Company upon demand for and against any and all judgments,
losses, claims, damages, costs (including without limitation all legal fees and
costs, even if incident to appeals) incurred or suffered by any of them as a
result of the breach of the representations and warranties made in this section,
or as a result of the failure of the acknowledgment made in this section to be
true and correct at all times.
33. Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Florida without regard to
principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ James Daleen
- ------------------------ -----------------------------
James Daleen James Daleen
President/CEO/Chairman of the Board
12/1/94
- ------------------------ -----------------------------
Dated Dated
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 13
December 1, 1994 James Daleen Employment Agreement
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EXHIBIT LIST
Exhibit A - Invention Assignment and Confidentiality Agreement
Exhibit B - Non-Solicitation and Non-Compete Agreement
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 14
December 1, 1994 James Daleen Employment Agreement
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EXHIBIT A OF EMPLOYMENT AGREEMENT
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 1st day of December, 1994, by and
between Daleen Technologies, Inc. (DTI) and James Daleen (hereinafter referred
to as "Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any
Confidential Information. "Confidential Information" is
defined as information which has not been made publicly
available by DTI or the third party owner of such information,
and
1. Which was developed by DTI, and relates to DTI's
past, present, and future business, including but not
limited to developments (defined below, technical
data, specifications, designs, concepts, discoveries,
copyrights, improvements, product plans, research and
development, personal information, personnel
information, financial information, customer lists,
leads, and/or marketing programs;
2. All documents marked as confidential and/or
continuing such information; and/or
3. All information DTI has acquired or received from a
third party in confidence.
b. Employee shall use Confidential Information only for DTI's
business purposes; and
c. Employee shall use any information received in confidence by
DTI from any third party only as permitted by written
agreement between DTI and the third party; and
d. Employee shall not be permitted to justify any disregard of
the obligations of Employee hereunder by using any of the
Confidential Information to guide a search by it of
publications and other publicly available information,
selecting a series of items of knowledge from unconnected
sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard
of the obligations of confidence.
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 15
December 1, 1994 James Daleen Employment Agreement
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2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI
to use any information or material which is confidential to any third
party unless DTI has a written agreement with the third party allowing
DTI to receive and use the confidential information or materials.
Employee will not incorporate into Employee's work any material which
is subject to the copyrights of any third party unless DTI has the
right to copy and incorporate such copyrighted material.
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any
other materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his rights,
title and interest, if any, in any and all Developments, including
rights to translation and reproductions in all forms or formats and the
copyrights and patent rights thereto, if any, and he agrees that DTI
may copyright said materials in DTI's name and secure renewal, reissues
and extensions of such copyrights for such periods of time as the law
may permit. "Developments" is defined as any idea, invention, process,
design, concept, or useful article (whether the design is ornamental or
otherwise), computer program, documentation, literary work, audiovisual
work and any other work of authorship, hereafter expressed, made or
conceived solely or jointly by consultant during Employee's employment
or engagement, whether or not subject to patent, copyright or other
forms of protection that:
a. Are related to the actual or anticipated business,
research or Development of DTI; and/or
b. Are suggested by or result from any task assigned to
Employee or work performed by Employee for or on
behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to
DTI by operation of law, or may belong to a party engaged by DTI by
operation of law pursuant to a works for hire contract between DTI and
such contracted part. To the extent the copyrights in such works may
not be owned by DTI or such contracted party by operation of law,
Employee hereby assigns to DTI or such contracted party, as the case
may be, all copyrights (if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include
any part of such items in the materials Employee prepares for DTI
unless and until such items are licensed or assigned to DTI under
separate written agreement.
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 16
December 1, 1994 James Daleen Employment Agreement
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At all times hereafter, Employee agrees to assist DTI in obtaining
patents or copyrights on any Developments assigned to DTI that DTI, in
its sole discretion, seeks to patent or copyright. Employee also agrees
to sign all documents, and do all things necessary to obtain such
patents or copyrights, to further assign them to DTI, and to reasonably
protect them and DTI against infringement by other parties at DTI
expense with DTI prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all
time hereafter, as his agent and attorney-in-fact to perform all acts
necessary to obtain patents and/or copyrights as required by this
Agreement if Employee (i) refuses to perform those acts or (ii) is
unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the foregoing
power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested
by DTI. Such information and records, and all copies thereof, shall be
the property of DTI as to any Developments assigned DTI. Employee
agrees to promptly surrender such information and records at the
request of DTI as to any Developments.
5. In connection with any of the Developments assigned by Section 4,
Employee agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to
DTI and do all things reasonable necessary to enable DTI to
secure patents, register copyrights or obtain any other form
of protection for Developments in the United States and in
other countries. If Employee fails or is unable to do so,
Employee hereby authorizes DTI to act under power of attorney
for Employee to do all things to secure such rights.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either directly or through the agency
of a third party during the term of, or within six (6) months after,
the termination of Employee's employment or engagement with DTI.
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 17
December 1, 1994 James Daleen Employment Agreement
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7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a
writing signed by the party as to whom enforcement of any such
amendment, supplement, waiver or modification is sought and
making specific reference to this Agreement.
b) Further Assurances. The parties hereby agree from time to time
to execute and deliver such further and other transfers,
assignments and documents and do all matters and things which
may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
c) Brokers. Each of the parties represents and warrants that such
party has dealt with no broker or finder in connection with
any of the transactions contemplated by this Agreement, and,
insofar as such party knows, no broker or other person is
entitled to any commission or finder's fee in connection with
any of these transactions. The parties each agree to indemnify
and hold harmless one another against any loss, liability,
damage, cost, claim or expense incurred by reason of any
brokerage commission or finder's fee alleged to be payable
because of any act, omission or statement of the indemnifying
party.
d) Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon,
inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
e) Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part
hereof and shall not limit or otherwise affect in any way the
meaning or interpretation of this Agreement.
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 18
December 1, 1994 James Daleen Employment Agreement
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f) Severability. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If
any provision of this Agreement may be construed in two or
more ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision
shall have the meaning which renders it valid and enforceable.
g) Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any
party pursuant hereto shall survive the execution and delivery
of this Agreement and the termination of employment or
engagement of Employee.
h) Waivers. The failure or delay of any party at any time to
require performance by another party of any provision of this
Agreement, even if known, shall not affect the right of such
party to require performance of that provision or to exercise
any right, power or remedy hereunder. Any waiver by any party
of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach
of such provision, a waiver of the provision itself, or a
waiver of any right, power or remedy under this Agreement. No
notice to or demand on any party in any case shall, of itself,
entitle such party to any other or further notice or demand in
similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that
the parties will be irreparably damage (and damages at law
would be an inadequate remedy) if this Agreement is not
specifically enforced. Therefore, in the event of a breach or
threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in
addition to all other rights or remedies, to injunctions
restraining such breach, without being required to show any
actual damage or to post any bond or other security, and/or to
a decree for specific performance of the provisions of this
Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations and anticipated
performance and execution of this Agreement occurred or shall
occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other
federal or state courts, each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in
Palm Beach County or the court of the
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Daleen Technologies, Inc. Proprietary and Confidential
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December 1, 1994 James Daleen Employment Agreement
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United States, Southern District of Florida; (b) consents to
the jurisdiction of each such court in any suit, action or
proceeding; (c) waives any objection which it may have to the
laying of venue of any such suit, action or proceeding in any
of such courts; and (d) agrees that service of any court paper
may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under
applicable laws or court rules in said state.
k) Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is intended
to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy
hereunder shall preclude any other or further exercise
thereof.
l) Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws
of the State of Florida without regard to principles of
conflicts of laws.
m) Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is
responsible for its preparation. The parties acknowledge each
contributed and is equally responsible for its preparation.
n) Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect to
the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made
by and among such parties.
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ James Daleen
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James Daleen James Daleen
President/CEO/Chairman of the Board
12/1/94
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Date Date
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 20
December 1, 1994 James Daleen Employment Agreement
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EXHIBIT B TO EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as
of this 1st day of December, 1994 by and between Daleen Technologies, Inc., an
Illinois corporation with its principal office at 902 Clint Moore Road, Suite
230, Boca Raton, Florida 33487 (hereinafter called "Daleen") and James Daleen, a
resident of 4414 Woodfield Blvd., Boca Raton, Florida 33434 (hereinafter
"Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while
employed by Daleen and for one (1) year after the termination of Employee's
employment with Daleen for any reason whatsoever, directly or indirectly (by
assisting or suggesting to another, or otherwise) solicit otherwise attempt to
induce or accept the initiative of another in such regard, alone or by combining
or conspiring with anyone, any employees, officers, directors, agents,
consultants, representatives, contractors, suppliers, distributors, customers or
other business contacts (collectively, "Business Affiliates") of Daleen to
terminate or modify its position as an employee, officer, director, agent,
consultant, representative, contractor, supplier, distributor, customer or
business contact with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by
Daleen, and after the termination of said employment for any reason whatsoever
for the one (1) year after such termination (the "No-Compete Period"), directly
or indirectly, as owner, officer, director, employee, agent, lender, broker,
investor, consultant or representative of any corporation or as owner of any
interest in, or as an employee, agent, consultant, partner, affiliate or in any
other capacity whatsoever or representative of any other form of business
association, sole proprietorship or partnership, conduct or be related to any
business in competition with any business of Daleen now or in the future,
including without limitation, the licensing, development
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 21
December 1, 1994 James Daleen Employment Agreement
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or sale of computer software or computer consulting services (herein referred to
as the "Competitive Business") anywhere within the United States, including
without limitation, the solicitation of any customers, who were at any time
customers of Daleen and in connection with a business which is competitive with
the Competitive Business.
(b) In addition to, and not in limitation of the other provisions
hereof or of any other Agreement between Employee and Daleen, Employee shall not
at any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
3. Legal Effect. The foregoing covenants of Employee shall be
deemed severable, and the invalidity of any covenant shall not affect the
validity or enforceability of any other covenant. The existence of any claim or
cause of action by Employee against Daleen predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Daleen of these
covenants. Daleen's failure to object to any conduct in violation of this
Agreement shall not be deemed a waiver by Daleen, but Daleen may, if it wishes,
specifically waive any part or all of those covenants to the extent that such
waiver is set forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Agreement will not cause him any undue
hardship, financial or otherwise, and that enforcement of each of the covenants
contained in this Agreement will not impair his ability to obtain employment
commensurate with his abilities and on terms fully acceptable to him or
otherwise to obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. Employee acknowledges
and confirms that his special knowledge of the business of Daleen is such as
would cause Daleen serious injury and loss if he were to use such ability and
knowledge to the benefit of a competitor or were to compete with Daleen.
In the event that any court shall finally hold that the time or
territory or any other provision stated in this Agreement constitutes an
unreasonable restriction upon Employee, Employee hereby expressly agrees that
the provisions of this Agreement shall not be rendered void, but shall apply as
to time and territory or to such other extent as such court may judicially
determine or indicate constitutes a reasonable restriction under the
circumstances involved. Employee hereby agrees that in the event of the
violation by him of any of the provisions of this
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 22
December 1, 1994 James Daleen Employment Agreement
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Agreement, Daleen will be entitled if it so elects, to institute and prosecute
proceedings at law or in equity to obtain damages with respect to such violation
or to enforce the specific performance of this Agreement by Employee or to
enjoin Employee from engaging in any activity in violation hereof without any
requirement on the part of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding
for the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. Miscellaneous Provisions.
The provisions of this Agreement may not be amended, supplemented,
waived or changed orally, but only by a writing signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement. All of the terms and provisions
of this Agreement, whether so expressed or not, shall be binding upon, inure to
the benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns. The headings contained in this Agreement are for convenience
of reference only, are not to be considered a part hereof and shall not limit or
otherwise affect in any way the meaning or interpretation of this Agreement. The
failure or delay of any party at any time to require performance by another
party of any provision of this Agreement, even if known, shall not affect the
right of such party to require performance of that provision or to exercise any
right, power or remedy hereunder. Any waiver by any party of any breach of any
provision of this Agreement should not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement, No
notice to or demand on any party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as otherwise
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 23
December 1, 1994 James Daleen Employment Agreement
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expressly provided herein, no remedy herein conferred upon any party is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. No single
or partial exercise by any party of any right, power or remedy hereunder shall
preclude any other or further exercise thereof. This Agreement and all
transactions contemplated by this Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Florida
without regard to principles of conflicts of laws. This Agreement shall not be
construed more strongly against any party regardless of who is responsible for
its preparation. The parties acknowledge each contributed and is equally
responsible for its preparation. Any time period provided for herein which shall
end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the next
full business day. This Agreement represents the entire understanding and
agreement amount the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and among such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above.
EMPLOYEE DALEEN TECHNOLOGIES, INC.
/s/ James Daleen
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James Daleen James Daleen
President/CEO/Chairman of the Board
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Daleen Technologies, Inc. Proprietary and Confidential
<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, effective September 5, 1997, to the EMPLOYMENT
AGREEMENT ("Agreement") dated December 1, 1994, by and between DALEEN
TECHNOLOGIES, INC., and JAMES DALEEN, changes the following sections:
(1) Section 3. Salary and Base Compensation. Replace this section in its
entirety, as follows:
Employee shall be entitled to receive salary during the Employment Period at the
rate of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000.00), per
annum, and as such may be increased pursuant to Section 11 hereof ("the Base
Salary").
In addition to the Base Salary paid to Employee during the Employment Period,
Employee shall be entitled to receive the Benefits, Annual Performance Bonus,
and Stock Options (as those terms are hereinafter defined) during the Employment
Period. The Base Salary shall be payable Bi-Weekly in accordance with the
current normal payroll policies of Company, which policies may be changed by
Company from time to time in its sole discretion, and shall be subject to all
appropriate withholding taxes.
(2) Section 8. Profits Bonus. Replace this section in its entirety, as follows:
Annual Performance Bonus
Employee will be able to earn an Annual Performance Bonus equal to a certain
percentage of his Base Salary, depending on his performance against goals and
objectives set and agreed upon in advance for each calendar year by the
Compensation Committee of the Board of Directors. Such Annual Performance Bonus
will be paid to Employee by January 31 following the end of the calendar year
and is subject to review and approval of the Compensation Committee of the Board
of Directors. For 1997, the Annual Performance Bonus is targeted at $100,000 and
is targeted at 50% of the Base Salary in future years.
(3) Section 9. Stock Option. Delete the remainder of the section following
"Board of Directors of the Company," in the third line.
(4) Section 11. Compensation Review. Replace this section in its entirety, as
follows:
Annual Compensation.
The Company's Compensation Committee of the Board of Directors, shall, by
January 31 of each calendar year, review Employee's Base Salary and may
increase, but not decrease, the Base Salary provided for in Section 3 hereof.
Any such increase in Base Salary shall be valid only if in writing, executed by
the Compensation Committee, and such writing
<PAGE> 2
shall constitute an amendment solely to the payments to be made to Employee
under this Agreement, without waiver or modification of any other provision
hereof.
(5) Section 18. Severance Pay. Replace this section in its entirety, as
follows:
Severance Pay. If Employer terminates the Employment Period for any reason other
than substantial cause, Employee shall be entitled to severance pay from
Employer in an amount equal to two year's Base Salary. In addition, the
Performance Bonus for that year will also be paid to Employee on a prorata basis
for the number months that Employee was employed by the Company in the year of
termination.
(6) Section 19. Change in Control. Replace section 19(c)(i)(A) and (B), as
follows:
(A) Two year's Base Salary; plus
(B) the Performance Bonus for that year prorated for the number of months that
Employee was employed by the Company prior to the termination.
All other provisions and sections of the Agreement except for the above changes
will remain the same and unchanged.
Agreed to this as of the date above:
DALEEN TECHNOLOGIES, INC.: EMPLOYEE:
/s/ James Daleen
- ---------------------------- -------------------------------------
James R. Daleen, President and CEO James Daleen
<PAGE> 1
EXHIBIT 10.3
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, effective March 1, 1999, amends that certain
EMPLOYMENT AGREEMENT ("Agreement") dated November 15, 1994, by and between
DALEEN TECHNOLOGIES, INC., and JAMES R. DALEEN, as amended effective January 31,
1997 and as further amended effective September 5, 1997 (the employment
agreement, as amended, the "Agreement"), as set forth below. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Exhibit B, Section 2, entitled "Non-Competition", is hereby deleted in
its entirety and replaced as follows:
(a) Employee shall not while employed by Daleen, and after the
termination of said employment for any reason whatsoever for the time period
after such termination described in paragraph (c) below (the "No-Compete
Period"), directly or indirectly, as owner, officer, director, employee, agent,
lender, broker, investor, consultant or representative of any corporation or as
owner of any interest in, or as an employee, agent, consultant, partner,
affiliate or in any other capacity whatsoever or representative of any other
form of business association, sole proprietorship or partnership, conduct or be
related to any business in competition with any business of Daleen now or in the
future, including without limitation, in the Billing and Customer Care industry
(herein referred to as the "Competitive Business") anywhere within the
territories, nor as to certain customers anywhere in the United States, both
listed on the "Territories and Customers" Exhibit to the Agreement, made a part
hereof, including without limitation, the solicitation of any customers, who
were at any time customers of Daleen and in connection with a business which is
competitive with the Competitive Business except that such competitive activity
will be permitted as to business solicitation of and competition with Daleen as
to any entity listed on an Exhibit to this Agreement made a part hereof
identified as a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions
hereof or of any other Agreement between Employee and Daleen, Employee shall not
at any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
<PAGE> 2
(c) The No-Compete Period shall increase depending upon the
duration of Employee's employment with Daleen as follows:
i) If Employee has completed one hundred eighty (180) days or
less of employment there will be a six (6) month No-Compete
Period;
ii) If Employee has completed more than one hundred eighty (180)
days of employment the No-Compete Period will be one (1) year;
(2) All capitalized terms used herein and not otherwise defined shall have
the respective meanings attributed to such terms in the Agreement. All other
provisions and sections of the Agreement except for the above changes will
remain unchanged and in full force and effect. In the event of a conflict
between the terms of this Amendment and the Agreement, the terms of this
Amendment shall control.
Agreed to this as of the date above:
DALEEN TECHNOLOGIES, INC.: EMPLOYEE:
/s/ James R. Daleen
- ---------------------------- -------------------------------
David Corey, James R. Daleen,
President Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
31st day of January 1998, by and between DALEEN TECHNOLOGIES, INC., a Florida
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, 33487
("Company"), and David B. Corey, residing at 2332 Fawn Lake Circle, Naperville,
IL 60564 ("Employee").
WITNESSETH:
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
Company;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Employment. Company hereby employs Employee in its business as
President and Chief Operating Officer, and Employee hereby accepts such
employment, all upon the terms and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of
this Agreement, the term of employment under this Agreement shall be for as long
as Employee remains employed hereunder, with Employee acknowledging that he is
an at will employee ("Employment Period").
3. Salary and Base Compensation. Employee shall be entitled to
receive salary during the Employment Period at the rate of Two Hundred Thousand
and 100/00 Dollars ($200,000.00) per annum, as such may be increased pursuant to
Section 9 hereof (the "Base Salary"). In addition to the Base Salary paid to
Employee during the Employment Period, Employee shall be entitled to receive the
Benefits, Bonus Compensation, and Stock Option (as those terms are hereinafter
defined) during the Employment Period. The Base Salary shall be payable biweekly
in accordance with the current normal payroll policies of Company, which
policies may be changed by Company from time to time in its sole discretion, and
shall be subject to all appropriate withholding taxes.
4. Business Expenses and Reimbursements. Employee shall be
entitled to reimbursement by the Company for ordinary and necessary business
expenses incurred by Employee in the performance of his duties for the Company,
which types of expenditures shall be determined and approved by the Company, and
further provided that:
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<PAGE> 2
(a) Each such expenditure is of a nature qualifying it as a
proper deduction on the Federal and State income tax returns of Company as a
business expense and not as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and other
documentary evidence required by federal and State statutes and regulations for
the substantiation of such expenditures as deductible business expenses of
Company and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
5. Benefits. Employee shall be entitled to receive the following
Benefits during the entire Employment Period:
(a) Employee agrees that the Base Salary, Bonus Compensation,
the Stock Option, and the Benefits and the other compensation provided in
accordance with this Agreement and the offer letter dated January 31, 1998, are
the sole and exclusive compensation of Employee for his duties hereunder.
(b) Continuing throughout the Employment Period:
(i) Employee shall receive all of the employee
benefits including, without limitation, pension, disability, profit sharing and
retirement benefits, provided at any time by Company to any of its employees in
the sole and absolute discretion of the Board of Directors of the Company (the
"Board");
(ii) The Company shall provide health insurance
providing full hospital, medical and dental coverage pursuant to Company plans
in effect from time to time for Employee and each of Employee's dependents at
similar expense to Employee or such dependents as charged to other employees of
the Company.
6. Vacation. Employee shall be entitled to vacation in accordance
with the vacation policy of the Company in effect from time to time.
7. Stock Options. In addition to Employee's Base Salary, Benefits
and Bonus Compensation, Employee shall be granted a qualified incentive stock
option to purchase a number of shares equal to One Hundred Twenty-Three Thousand
Seventy-Seven (123,077) at an exercise price no greater than $3.25 per share,
which options will vest over a four-year period. In addition, Employee shall be
granted a nonqualified stock option to purchase a number of shares equal to
Eighty-Six Thousand Nine Hundred Twenty-Three (86,923) at an exercise price no
greater than $2.50 per share, which option will vest over a two-year period. The
options shall be granted to Employee pursuant to an Option Agreement
satisfactory as to its other terms to the Company, and all of these grants and
terms are subject to the approval of the Board of Directors.
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<PAGE> 3
8. Registration Rights. In the event Company registers common
stock held by other employees of Company, then the Company shall also register a
prorata portion of the stock held by Employee.
9. Compensation Review. The Chief Executive Officer ("CEO")
and/or Board shall from time to time, no less frequently than annually, review
Employee's compensation and may (in his sole discretion) increase, but not
decrease, the compensation provided for in Section 3 hereof. Any such increase
in compensation shall be valid only if in writing, executed by the CEO, and such
writing shall constitute an amendment solely to the payments to be made to
Employee under this Agreement, without waiver or modification of any other
provision hereof.
10. Invention Assignment and Confidentiality Agreement. Against
the execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "A" hereto (the "Invention Assignment and
Confidentiality Agreement").
11. Non-Competition Agreement. Against the execution and delivery
of this Agreement, Employee shall enter into a non-competition and
non-solicitation agreement (in the form of Exhibit "B" hereto) (the
"Non-Competition Agreement") which also, notwithstanding the at will nature of
the employment, provides for a severance benefit under certain circumstances.
12. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature.
13. Duties. During the Employment Period:
(a) Employee shall furnish all manner of services in
connection with his position as President and Chief Operating Officer or as
otherwise designated by the CEO including, without limitation, primary
responsibility for such duties as shall be deemed by the CEO appropriate to
carry out the policies and programs of the Board and as from time to time may be
delegated or assigned to him/her by the Board;
(b) Employee shall report directly to the CEO in the
performance of all his duties herein.
(c) Employee shall comply with all Company policies for the
employees as such policies may exist from time to time.
(d) Employee shall devote his entire time, energy and skill
to the service of Company and the promotion of Company's interests, and shall
use his best efforts in the performance of his/her services hereunder. The
parties agree that Employee may not, during the Employment Period, be engaged in
any other business activity whether or not such activity is pursued for gain,
profit, or other pecuniary advantage including, without limitation, management
or management consulting activities; provided, however, Employee may invest his
personal assets
3
<PAGE> 4
in businesses where the form or manner of such investment will not require
services on the part of Employee conflicting with the duties of Employee under
this Agreement and in which his participation is solely that of a passive
investor. Employee agrees to abide by all rules and regulations established from
time to time by the CEO and/or the Board; and all commissions, fees or other
income earned and received by Employee, if any, in furtherance of the business
of Company, or its affiliates or from any other business or financial
opportunity or endeavor in which Employee is an active participant and not a
passive investor, shall be accepted by Employee for the account of Company, and
shall be remitted to Company within three (3) days of Employee's receipt
thereof.
14. Termination. The Employer may, in its sole discretion,
terminate this Agreement for any reason, subject to the severance obligation
outlined in the Non-Competition Agreement. In the event of termination of
employment by either party, subject to compliance with the Non-Competition
Agreement, Employee shall be entitled to distributions pursuant to the severance
provisions more fully set forth in the Non-Competition Agreement and to all Base
Salary which is fully accrued.
15. Surrender of Records. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably required by Employer, the Employee agrees to
surrender to the Employer, in good condition, any record or records kept by
him/her containing the names, addresses, and other information with regard to
customers or potential customers of the Employer which have been served by the
Employee.
16. Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
17. Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
18. Assignments. Employee shall not assign his rights and/or
obligations hereunder.
19. Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns.
20. Severability. If any part of this Agreement or any other
Agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
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<PAGE> 5
21. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 10 through 28 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
22. Waivers. The failure or delay of Company at any time to
require performance by Employee of any provision of this Agreement, even if
known, shall not affect the right of Company to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
Company of any breach of any provision of this Agreement should not be construed
as a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on Employee in any case shall, of itself,
entitle such party to any other or further notice or demand in similar or other
circumstances.
23. Specific Performance. Employee acknowledges that the services
to be rendered by Employee hereunder are extraordinary and unique and are vital
to the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by Employee.
Therefore, in the event of a breach or threatened breach by Employee of any
provision of this Agreement, then Company shall be entitled, in addition to all
other rights or remedies, to injunctions restraining such breach, without being
required to show any actual damage or to post any bond or other security.
24. Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including telex and telegraphic communication) and shall be (as elected by the
person giving such notice) hand delivered by messenger or courier service,
telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, to the addresses
listed above or to such other address as any party may designate by notice
complying with the terms of this Section. Each such notice shall be deemed
delivered (a) on the date delivered if by personal delivery, (b) on the date
telecommunicated if by telegraph, (c) on the date of transmission with confirmed
answer back if by telex or telefax, and (d) on the date upon which the return
receipt is signed or delivery is refused or the notice is designated by the
postal authorities as not deliverable, as the case may be, if mailed.
25. Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations, anticipated performance and execution of
this Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal or
state courts, each of the parties irrevocably and unconditionally (a) agrees
that any suit, action or legal proceeding arising out of or relating to this
Agreement may be brought in the courts of record of the State of Florida in Palm
Beach County or the court of the United States, Southern District of Florida;
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding; (c) waives any objection which it may have to the laying of venue of
any such suit, action or proceeding in any of such courts; and (d) agrees that
service of any court paper may be effected on such party by mail, as provided in
this Agreement, or in such other manner as may be provided under applicable laws
or court rules in said state.
5
<PAGE> 6
26. Remedies Cumulative. No remedy herein conferred upon any party
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
27. Employee Representations, Warranties, and Acknowledgments.
Employee represents and warrants to Company that she is fully empowered to enter
and perform his/her obligations under this Agreement and, without limitation,
that she is under no restrictive covenants to any person or entity that will be
violated by his entering into and performing this Agreement, and that this
Agreement constitutes the valid and legally binding obligation of Employee
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Employee has been duly authorized by all necessary action. Employee
shall indemnify Company upon demand for and against any and all judgments,
losses, claims, damages, costs (including without limitation all legal fees and
costs, even if incident to appeals) incurred or suffered by any of them as a
result of the breach of the representations and warranties made in this section,
or as a result of the failure of the acknowledgment made in this section to be
true and correct at all times.
28. Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Florida without regard to
principles of conflicts of laws.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DALEEN TECHNOLOGIES, INC.
Its: CEO: /s/ James Daleen
----------------------------
EMPLOYEE: /s/ David B. Corey
----------------------------
7
<PAGE> 8
EXHIBIT LIST
Exhibit A -Invention Assignment and Confidentiality Agreement
Exhibit B -Non-Solicitation and Non-Compete Agreement
8
<PAGE> 9
EXHIBIT A TO EMPLOYMENT AGREEMENT
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 31st day of January, 1998, by and between
Daleen Technologies, Inc. (DTI), and David B. Corey (hereinafter referred to as
"Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any
Confidential Information. "Confidential Information" is
defined as information which has not been made publicly
available by DTI or the third party owner of such information,
and
1. Which was developed by DTI, and relates to DTI's past,
present, and future business, including but
not limited to developments (defined below,
technical data, specifications, designs,
concepts, discoveries, copyrights,
improvements, product plans, research and
development, personal information, personnel
information, financial information, customer
lists, leads, and/or marketing programs;
2. All documents marked as confidential and/or continuing such
information; and/or
3. All information DTI has acquired or received from a third
party in confidence.
b. Employee shall use Confidential Information only for DTI's
business purposes; and
c. Employee shall use any information received in confidence by
DTI from any third party only as permitted by written
agreement between DTI and the third party; and
d. Employee shall not be permitted to justify any disregard of
the obligations of Employee hereunder by using any of the
Confidential Information to guide a search by it of
publications and other publicly available information,
selecting a series of items of knowledge from unconnected
sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard
of the obligations of confidence.
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<PAGE> 10
2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI
to use any information or material which is confidential to any third
party unless DTI has a written agreement with the third party allowing
DTI to receive and use the confidential information or materials.
Employee will not incorporate into Employee's work any material which
is subject to the copyrights of any third party unless DTI has the
right to copy and incorporate such copyrighted material.
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any
other materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Developments,
including rights to translation and reproductions in all forms or
formats and the copyrights and patent rights thereto, if any, and he or
she agrees that DTI may copyright said materials in DTI's name and
secure renewal, reissues and extensions of such copyrights for such
periods of time as the law may permit. "Developments" is defined as any
idea, invention, process, design, concept, or useful article (whether
the design is ornamental or otherwise), computer program,
documentation, literary work, audiovisual work and any other work of
authorship, hereafter expressed, made or conceived solely or jointly by
employee during Employee's employment or engagement, whether or not
subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business, research
or Development of DTI; and/or
b. Are suggested by or result from any task assigned to
Employee or work performed by Employee for or on
behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to
DTI by operation of law, or may belong to a party engaged by DTI by
operation of law pursuant to a works for hire contract between DTI and
such contracted part. To the extent the copyrights in such works may
not be owned by DTI or such contracted party by operation of law,
Employee hereby assigns to DTI or such contracted party, as the case
may be , all copyrights (if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works".
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<PAGE> 11
Employee agrees not to include any part of such items in the materials
Employee prepares for DTI unless and until such items are licensed or
assigned to DTI under separate written agreement.
At all times hereafter, Employee agrees to assist DTI in obtaining
patents or copyrights on any Developments assigned to DTI that DTI, in
its sole discretion, seeks to patent or copyright. Employee also agrees
to sign all documents, and do all things necessary to obtain such
patents or copyrights, to further assign them to DTI, and to reasonably
protect them and DTI against infringement by other parties at DTI
expense with DTI prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all
time hereafter, as his or her agent and attorney-in-fact to perform all
acts necessary to obtain patents and/or copyrights as required by this
Agreement if Employee (i) refuses to perform those acts or (ii) is
unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the foregoing
power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested
by DTI. Such information and records, and all copies thereof, shall be
the property of DTI as to any Developments assigned DTI. Employee
agrees to promptly surrender such information and records at the
request of DTI as to any Developments.
5. In connection with any of the Developments assigned by Section 4,
Employee agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to
DTI and do all things reasonable necessary to enable DTI to
secure patents, register copyrights or obtain any other form
of protection for Developments in the United States and in
other countries. If Employee fails or is unable to do so,
Employee hereby authorizes DTI to act under power of attorney
for Employee to do all things to secure such rights.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either
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<PAGE> 12
directly or through the agency of a third party during the term of, or
within six (6) months after, the termination of Employee's employment
or engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a
writing signed by the party as to whom enforcement of any such
amendment, supplement, waiver or modification is sought and
making specific reference to this Agreement.
b) Further Assurances. The parties hereby agree from time to time
to execute and deliver such further and other transfers,
assignments and documents and do all matters and things which
may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
c) Brokers. Each of the parties represents and warrants that such
party has dealt with no broker or finder in connection with
any of the transactions contemplated by this Agreement, and,
insofar as such party knows, no broker or other person is
entitled to any commission or finder's fee in connection with
any of these transactions. The parties each agree to indemnify
and hold harmless one another against any loss, liability,
damage, cost, claim or expense incurred by reason of any
brokerage commission or finder's fee alleged to be payable
because of any act, omission or statement of the indemnifying
party.
d) Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon,
inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
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<PAGE> 13
e) Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part
hereof and shall not limit or otherwise affect in any way the
meaning or interpretation of this Agreement.
f) Severability. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If
any provision of this Agreement may be construed in two or
more ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision
shall have the meaning which renders it valid and enforceable.
g) Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any
party pursuant hereto shall survive the execution and delivery
of this Agreement and the termination of employment or
engagement of Employee.
h) Waivers. The failure or delay of any party at any time to
require performance by another party of any provision of this
Agreement, even if known, shall not affect the right of such
party to require performance of that provision or to exercise
any right, power or remedy hereunder. Any waiver by any party
of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach
of such provision, a waiver of the provision itself, or a
waiver of any right, power or remedy under this Agreement. No
notice to or demand on any party in any case shall, of itself,
entitle such party to any other or further notice or demand in
similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that
the parties will be irreparably damage (and damages at law
would be an inadequate remedy) if this Agreement is not
specifically enforced. Therefore, in the event of a breach or
threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in
addition to all other rights or remedies, to injunctions
restraining such breach, without being required to show any
actual damage or to post any bond or other security, and/or to
a decree for specific performance of the provisions of this
Agreement.
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<PAGE> 14
j) Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations and anticipated
performance and execution of this Agreement occurred or shall
occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other
federal or state courts, each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in
Palm Beach County or the court of the United States, Southern
District of Florida; (b) consents to the jurisdiction of each
such court in any suit, action or proceeding; (c) waives any
objection which it may have to the laying of venue of any such
suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such
party by mail, as provided in this Agreement, or in such other
manner as may be provided under applicable laws or court rules
in said state.
k) Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is intended
to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy
hereunder shall preclude any other or further exercise
thereof.
l) Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws
of the State of Florida without regard to principles of
conflicts of laws.
m) Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is
responsible for its preparation. The parties acknowledge each
contributed and is equally responsible for its preparation.
n) Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect to
the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made
by and among such parties.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ David B. Corey
- ------------------------------ ----------------------------
DTI Authorized Signature Employee's Signature
/s/ David B. Corey
- ------------------------------ ----------------------------
Date Employee's Printed Name
----------------------------
Date
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<PAGE> 16
SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by Section 4 of the Invention
Assignment and Confidentiality Agreement, in which Employee has any right, title
or interest, and which were conceived or written either wholly or in part by
Employee, prior to or outside the scope of Employee's employment by DTI.
DESCRIPTION: (If none, enter the word "None")
NONE
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
NONE
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------
Indicate the name of such organization or third party who also has rights in any
of the listed items (such as former employers, partners, etc.):
NONE
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------
The foregoing is complete and accurate to the best of Employee's knowledge.
- ------------------------------------- --------------------------------
Employee's Signature Date
- -------------------------------------
Employee's Printed Name
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<PAGE> 17
EXHIBIT B TO EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of this
31st day of January, 1997 by and between Daleen Technologies, Inc., a Florida
corporation with its principal office at 902 Clint Moore Road, Suite 230, Boca
Raton, Florida 33487 (hereinafter called "Daleen") and David B. Corey
(hereinafter "Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while
employed by Daleen and for one (1) year after the termination of Employee's
employment with Daleen for any reason whatsoever, directly or indirectly (by
assisting or suggesting to another, or otherwise) solicit otherwise attempt to
induce or accept the initiative of another in such regard, alone or by combining
or conspiring with anyone, any employees, officers, directors, agents,
consultants, representatives, contractors, suppliers, distributors, customers or
other business contacts (collectively, "Business Affiliates") of Daleen to
terminate or modify its position as an employee, officer, director, agent,
consultant, representative, contractor, supplier, distributor, customer or
business contact with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by
Daleen, and after the termination of said employment for any reason whatsoever
for the time period after such termination described in paragraph (c) below (the
"No-Compete Period"), directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, investor, consultant or representative of any
corporation or as owner of any interest in, or as an employee, agent,
consultant, partner, affiliate or in any other capacity whatsoever or
representative of any other form of business association, sole proprietorship or
partnership, conduct or be related to any business in competition with any
business of Daleen now or in the future, including without limitation, in the
Billing and Customer Care industry (herein referred to as the "Competitive
Business") anywhere within the territories, nor as to certain customers anywhere
in the United States, both listed
17
<PAGE> 18
on the "Territories and Customers" Exhibit to the Agreement, made a part hereof,
including without limitation, the solicitation of any customers, who were at any
time customers of Daleen and in connection with a business which is competitive
with the Competitive Business except that such competitive activity will be
permitted as to business solicitation of and competition with Daleen as to any
entity listed on an Exhibit to this Agreement made a part hereof identified as a
"No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions
hereof or of any other Agreement between Employee and Daleen, Employee shall not
at any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
(c) The No-Compete Period shall increase depending upon the
duration of Employee's employment with Daleen as follows:
i) If Employee has completed one hundred eighty (180) days or
less of employment there will be a six (6) month No-Compete
Period;
ii) If Employee has completed more than one hundred eighty (180)
days of employment the the No-Compete Period will be one (1)
year;
DTI reserves the right to waive the Non-Compete Period at its option in
return for the payment of the severance benefit described in Section 4.
3. Legal Effect. The foregoing covenants of Employee shall be
deemed severable, and the invalidity of any covenant shall not affect the
validity or enforceability of any other covenant. The existence of any claim or
cause of action by Employee against Daleen predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Daleen of these
covenants. Daleen's failure to object to any conduct in violation of this
Agreement shall not be deemed a waiver by Daleen, but Daleen may, if it wishes,
specifically waive any part or all of those covenants to the extent that such
waiver is set forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full, uninhibited and faithful
observance of each of the
18
<PAGE> 19
covenants contained in this Agreement will not cause him or her any undue
hardship, financial or otherwise, and that enforcement of each of the covenants
contained in this Agreement will not impair his or her ability to obtain
employment commensurate with his or her abilities and on terms fully acceptable
to him or her or otherwise to obtain income required for the comfortable support
of him or her and his or her family and the satisfaction of the needs of his or
her creditors. Employee acknowledges and confirms that his or her special
knowledge of the business of Daleen is such as would cause Daleen serious injury
and loss if he or she were to use such ability and knowledge to the benefit of a
competitor or were to compete with Daleen.
In the event that any court shall finally hold that the time or
territory or any other provision stated in this Agreement constitutes an
unreasonable restriction upon Employee, Employee hereby expressly agrees that
the provisions of this Agreement shall not be rendered void, but shall apply as
to time and territory or to such other extent as such court may judicially
determine or indicate constitutes a reasonable restriction under the
circumstances involved. Employee hereby agrees that in the event of the
violation by him or her of any of the provisions of this Agreement, Daleen will
be entitled if it so elects, to institute and prosecute proceedings at law or in
equity to obtain damages with respect to such violation or to enforce the
specific performance of this Agreement by Employee or to enjoin Employee from
engaging in any activity in violation hereof without any requirement on the part
of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding
for the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. Severance. In further consideration of the entering into of
this Agreement by Employee, Daleen agrees to entitle Employee to a severance pay
benefit based upon base salary dependent upon the duration of Employee's
employment with Daleen, determined as follows:
a) One hundred eighty (180) days or less of employment will
result in a severance benefit equal to six (6) months salary;
b) Beyond one hundred eighty (180) days of employment will result
in a severance benefit equal to one (1) year salary.
c) If DTI waives the Non-Compete Period there shall be no
severance benefit paid for that period, subject to a minimum
severance of six (6) months salary.
19
<PAGE> 20
The foregoing severance benefit shall be paid by Daleen in accordance
with DTI's current payroll policies. Employee shall not be entitled to any
severance benefit if terminated by Daleen for "cause" or if Employee voluntarily
resigns from his or her employment with Daleen subject to the provisions of the
Non-Compete period in Section 2(c). As used in this Agreement determination for
"cause" shall be defined as termination of Employee by Daleen in the event
Employee has been convicted of any felony or, in the case of other crimes,
involving moral turpitude or dishonesty, or for any breach by Employee of any
agreement with Daleen or of its employment or business policies (including
without limitation theft or misuse of company property), or for any other act or
omission by Employee which does not fit into the previous categories but which
Daleen in good faith believes has occurred to its detriment and about which
Employee has received at least one (1) written warning by Daleen and despite
such prior written warning, Employee has a second occasion committed such act or
omission.
5. Miscellaneous Provisions.
The provisions of this Agreement may not be amended, supplemented,
waived or changed orally, but only by a writing signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement. All of the terms and provisions
of this Agreement, whether so expressed or not, shall be binding upon, inure to
the benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns. The headings contained in this Agreement are for convenience
of reference only, are not to be considered a part hereof and shall not limit or
otherwise affect in any way the meaning or interpretation of this Agreement. The
failure or delay of any party at any time to require performance by another
party of any provision of this Agreement, even if known, shall not affect the
right of such party to require performance of that provision or to exercise any
right, power or remedy hereunder. Any waiver by any party of any breach of any
provision of this Agreement should not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement, No
notice to or demand on any party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in
20
<PAGE> 21
Palm Beach County or the District Court of the United States, Southern District
of Florida; (b) consents to the jurisdiction of each such court in any suit,
action or proceeding; (c) waives any objection which it may have to the laying
of venue of any such suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such party by mail, as
provided in this Agreement, or in such other manner as may be provided under
applicable laws or court rules in said state. Except as otherwise expressly
provided herein, no remedy herein conferred upon any party is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. No single
or partial exercise by any party of any right, power or remedy hereunder shall
preclude any other or further exercise thereof. This Agreement and all
transactions contemplated by this Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Florida
without regard to principles of conflicts of laws. This Agreement shall not be
construed more strongly against any party regardless of who is responsible for
its preparation. The parties acknowledge each contributed and is equally
responsible for its preparation. Any time period provided for herein which shall
end on a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the next
full business day. This Agreement represents the entire understanding and
agreement amount the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and among such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above.
Daleen Technologies, Inc.
- ----------------------------- -------------------------------
Employee's Signature Its: CEO
- ----------------------------- -------------------------------
Printed Name Printed Name
NO-COMPETE EXCEPTIONS
Exhibit to Non-Solicitation and Non-Compete Agreement of David B. Corey.
NONE.
21
<PAGE> 22
TERRITORIES AND CUSTOMERS
Exhibit to Non-Solicitation and Non-Compete Agreement of David B. Corey.
THE WORLD.
22
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
15th day of November 1994, by and between DALEEN TECHNOLOGIES, INC., an Illinois
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, 33487
("Company or Employer"), and RICHARD A. SCHELL Residing at 4271 N.E. 24th
AVENUE, LIGHTHOUSE POINT, FL 33064 ("Employee").
WITNESSETH
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
Company;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. EMPLOYMENT. Company hereby employs Employee in its business as Vice
President of Finance and Chief Financial Officer, and Employee hereby accepts
such employment, all upon the terms and conditions hereinafter set forth.
2. TERM. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for 3 years.
("Employment Period"). This contract may be extended for additional three year
periods unless either party notifies the other in writing that the Employment
Period will not be renewed, at least 6 months prior to the end of the initial
term or prior to the end of any such three year renewal. Notwithstanding the
foregoing,and in consideration of the severance benefit referred to in Section
14 hereof, Company may terminate Employee at any time for any reason with no
other obligation whatsoever.
3. SALARY AND BASE COMPENSATION. Employee shall be entitled to receive
salary during the Employment Period at the rate of One Hundred Thousand and
100/00 Dollars ($100,000.00) per annum, increased to One Hundred Twenty Five
Thousand and 100/00 Dollars ($125,000.00) upon the earlier of when the first six
months has elapsed, or when the Company receives equity funding from the closing
of its anticipated private placement, and as such may be increased pursuant to
Section 12 hereof (the "Base Salary"). In addition to the Base Salary paid to
Employee during the Employment Period, Employee shall be entitled to receive the
Benefits, Profits Bonus, and Stock Option (as those terms are
<PAGE> 2
hereinafter defined) during the Employment Period. The Base Salary shall be
payable Semi-monthly in accordance with the current normal payroll policies of
Company, which policies may be changed by Company from time to time in its sole
discretion, and shall be subject to all appropriate withholding taxes.
4. BUSINESS EXPENSES AND REIMBURSEMENTS. Employee shall be entitled to
reimbursement by the Company for ordinary and necessary business expenses
incurred by Employee in the performance of his duties for Company, which types
of expenditures shall be determined and approved by the Company, and further
provided that:
(a) Each such expenditure is of a nature qualifying it as a proper
deduction on the Federal and State income tax returns of Company as a business
expense and not as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and other
documentary evidence required by federal and State statutes and regulations for
the substantiation of such expenditures as deductible business expenses of
Company and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
(c) Employee agrees that, if at any time, any payment made to
Employee by Company, whether for salary or as a business expense reimbursement,
shall be disallowed in whole or in part as a deductible expense by the
appropriate taxing authorities, Employee shall reimburse Company to the full
extent of such disallowance unless otherwise approved by the company.
5. BENEFITS. Employee shall be entitled to receive during the entire
Employment Period the following additional benefits ("Benefits")
(a) CAR ALLOWANCE. During the Employment Period Employee shall be
entitled to a Five Hundred Seventy and 100/00 ($570.00) per month car allowance
in accordance with Company's normal automobile allowance payment practices, as
in existence front time to time.
6. OTHER BENEFITS.
(a) Employee agrees that the Base Salary, the Profits Bonus,
the Stock Option, and the Benefits and the other compensation provided in
accordance with this Agreement, are the sole and exclusive compensation of
Employee for his duties hereunder.
(b) Continuing throughout the Employment Period Employee shall
receive all of the employee benefits including, without limitation, pension,
disability, profit sharing and retirement benefits, provided at any time by
Company to any of
<PAGE> 3
its employees in the sole and absolute discretion of the Board of Directors of
the Company (the "Board") a description of the companies CURRENT benefits
package is described in Exhibit "A" Description of Current Benefits;
7. VACATION. Employee shall be entitled to vacation in accordance with
the vacation policy of the Company in effect, from time to time.
8. PROFITS BONUS.
(a) Employee shall be entitled to receive within thirty (30) days of
the end of each full calendar quarter during the Employment Period, a quarterly
bonus based upon five percent (5%) of the net earnings of the entire company
(the "Profits Bonus").
(b) For purposes of this Agreement, the term "net earnings" shall be
determined by the Company's external accounting firm and agreed to by the
President and in accordance with generally accepted accounting principles. The
determination of the net earnings for this purpose by Company's accounting firm
shall be conclusive and binding upon Employee.
(c) Notwithstanding anything to the contrary in this Agreement, the
Profits Bonus shall be payable only provided Employee is in the employ of
Company on the last day of the respective quarter for which such Profits Bonus
is being calculated and further payable in accordance with and subject to the
normal payroll policies of Company with respect to similar forms of
compensation, including without limitation, being subject to all appropriate
withholding taxes.
9. GRANT OF STOCK. Against the execution and delivery of this
Agreement, Employee shall enter into a stockholder agreement (in the form of
Exhibit "B" hereto) (the "Stockholder Agreement"). Subject to the terms of the
Stockholder Agreement, Employee shall receive two (2) shares of Company's common
stock (the "Stock"), said amount representing two percent (2%) of the Company's
outstanding common stock on the date hereof.
10. STOCK OPTION. In addition to Employee's Base Salary, Benefits,
Profits Bonus, and Stock, Employee shall be granted a non-transferable stock
option exercisable after and if ever the company's stock has become publicly
traded. The exercise price for such stock shall be the book value of such stock
as determined by Company's independent accountants based upon the balance sheet
of the Company, using generally accepted accounting principles and shall be
final and binding. All stock purchased under such option shall be subject to the
Stockholder's Agreement, and the option shall be granted to Employee pursuant to
an Option Agreement satisfactory as to its other terms to the Company.
3
<PAGE> 4
11. REGISTRATION RIGHTS. In the event Company registers common stock
held by other employees of Company, then the Company shall also register a
prorata portion of the stock held by Employee.
12. COMPENSATION REVIEW. The President or Board shall from time to
time, no less frequently than annually, review Employee's compensation and may
(in his sole discretion) increase, but not decrease, the compensation provided
for in Section 3 hereof. Any such increase in compensation shall be valid only
if in writing, executed by the President, and, such writing shall constitute an
amendment solely to the payments to be made to Employee under this Agreement,
without waiver or modification of any other provision hereof.
13. INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT. Against the
execution and delivery of this Agreement, Employee shall enter into an
agreement in the form of Exhibit "C" hereto (the "Invention Assignment and
Confidentiality Agreement").
14. NON-COMPETITION AGREEMENT. Against the execution and delivery of
this Agreement, Employee shall enter into a non-competition and non-solicitation
agreement (in the form of Exhibit "D" hereto) (the "Non-Competition
Agreement") which also, notwithstanding the at will nature of the employment,
provides for a severance benefit under certain circumstances.
15. NO OTHER COMPENSATION OR BENEFITS. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder and that he shall have no rights to
receive any other compensation or benefits of any nature.
16. DUTIES. During the Employment Period:
(a) Employee shall furnish all manner of services in connection with
his position as Vice President of Finance and Chief Financial Officer "CFO" or
as otherwise designated by the President including, without limitation, primary
responsibility for such duties as shall be deemed by the President appropriate
to carry out the policies and programs of the Board and as from time to time may
be delegated or assigned to his by the Board;
(b) Employee shall report directly to the President (or someone
appointed by the President) in the performance of all his duties herein.
(c) Employee shall comply with all Company policies for the
employees as such policies may exist from time to time.
(d) Employee shall devote his entire time, energy
4
<PAGE> 5
and skill to the service of Company and the promotion of Company's interests,
and shall use his best efforts in the performance of his services hereunder,
unless otherwise approved in advance by the President. The parties agree that
Employee may not, during the Employment Period, be engaged in any other business
activity whether or not such activity is pursued for gain, profit, or other
pecuniary advantage including, without limitation, management or management
consulting activities; provided, however, Employee may invest his personal
assets in businesses where the form or manner of such investment will not
require services on the part of Employee conflicting with the duties of Employee
under this Agreement and in which his participation is solely that of a passive
investor. Employee agrees to abide by all rules and regulations established from
time to time by the President and/or the Board; and all commissions, fees or
other income earned and received by Employee, if any, in furtherance of the
business of Company, or it's affiliates or from any other business or financial
opportunity or endeavor in which Employee is an active participant and not a
passive investor, shall be accepted by Employee for the account of Company, and
shall be remitted to Company within three (3) days of Employee's receipt
thereof.
17. AUTHORITY TO CONTRACT. Employee shall have authority to enter into
contracts binding upon Employer and in the best interest of the Company subject
to a limit or $5,000.00, and any contract or disbursement greater than $5,000.00
will require approval in writing from the President.
18. TERMINATION. The Employer may, in its sole discretion, terminate
this Agreement for any reason, subject only to the severance obligation
outlined in the Non-Competition Agreement with no additional payment for
termination prior to the end of the Employment Period. In the event of
termination of employment by either party, subject to compliance with the
Non-Competition Agreement, Employee shall be entitled to all Base Salary and
fully accrued Profits Bonus for completed quarters.
19. SURRENDER OF RECORDS. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably required by Employer, the Employee agrees to
surrender to the Employer, in good condition, any record or records kept by him
containing the names, addresses, and other information with regard to clients Or
potential clients of the Employer which have been served or treated by the
Employee.
20. ENTIRE AGREEMENT. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between
5
<PAGE> 6
such parties.
21. AMENDMENTS. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
22. ASSIGNMENTS. Employee shall not assign his rights and/or
obligations hereunder.
23. BINDING EFFECT. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
24. SEVERABILITY. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
25. SURVIVAL. Notwithstanding anything to the contrary herein, the
provisions of Sections 11 through 29 (inclusive) shall survive and remain in
effect in accordance with their respective terms in the event the employment is
terminated.
26. WAIVERS. The failure or delay of Company at any time to require
performance by Employee of any provision of this Agreement, even if known, shall
not affect the right of Company to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by Company of any
breach of any provision of this Agreement should not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement. No
notice to or demand on Employee in any case shall, of itself, entitle such party
to any other or further notice or demand in similar or other circumstances.
27. SPECIFIC PERFORMANCE. Employee acknowledges that the services to
be rendered by Employee hereunder are extraordinary and unique and are vital to
the success of the Company, and that damages at law would be an inadequate
remedy for any breach or threatened breach of this Agreement by Employee.
Therefore, in the event of a breach or threatened breach by Employee of any
provision of this Agreement, then Company shall be entitled, in addition to all
other rights or remedies, to injunctions
6
<PAGE> 7
restraining such breach, without being required to show any actual damage or to
post any bond or other security.
28. NOTICES. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, to the addresses listed above or to such
other address as any party may designate by notice complying with the terms of
this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex or telefax, and (d) on the date upon which the return receipt is signed or
delivery is refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
29. JURISDICTION AND VENUE. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of or relating to this Agreement may be
bought in the courts of record of the State of Florida in Palm Beach County or
the court of the United States, Southern District to Florida; (b) consents to
the jurisdiction of each such court in any such suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
30. REMEDIES CUMULATIVE. No remedy herein conferred upon any parry is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
31. EMPLOYEE REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS. Employee
represents and warrants to Company that he is fully empowered to enter and
perform his obligations under this Agreement and without limitation, that he is
under no
7
<PAGE> 8
restrictive covenants to any person or entity that will be violated by his
entering into and performing this Agreement, and that this Agreement constitutes
the valid and legally binding obligation of Employee enforceable in accordance
with its terms. The execution and delivery of this Agreement by Employee has
been duly authorized by all necessary action. Employee shall indemnify company
upon demand for and against any and all judgments, losses, claims, damages,
costs (including without limitation all legal fees and costs, even if incident
to appeals) incurred or suffered by any of them as a result of the breach of the
representations and warranties made in this section, or as a result of the
failure of the acknowledgment made in this section to be true and correct at all
times.
32. GOVERNING LAW. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Witnesses: DALEEN TECHNOLOGIES, INC.
/s/ John Lofquist By: /s/ James Daleen
- ------------------------------ ------------------------------
/s/ Patricia A. Harrell Its: President
- ------------------------------
EMPLOYEE:
/s/ John Lofquist
- ------------------------------ /s/ Richard A. Schell
/s/ Patricia A. Harrell ---------------------------------
- ------------------------------ RICHARD A. SCHELL
8
<PAGE> 9
EXHIBIT LIST
------------
Exhibit A - Description of Current Benefits
Exhibit B - Shareholders Agreement
Exhibit C - Invention Assignment and Confidentiality Agreement
Exhibit D - Non-Solicitation and Non-Compete Agreement
9
<PAGE> 10
EXHIBIT A TO EMPLOYMENT AGREEMENT
---------------------------------
DESCRIPTION OF CURRENT BENEFITS
-------------------------------
1. Employee Name: RICHARD A. SCHELL
2. Title: VICE PRESIDENT OF FINANCE/CHIEF FINANCIAL OFFICER.
Reporting to: President ("James Daleen")
2. Current Benefits to Which Employee is Entitled are as follows:
- - RETIREMENT PLANNING
- - HEALTH BENEFITS PROGRAM
- - DISABILITY PROTECTION PROGRAM
The RETIREMENT PLANNING program consists of a 401 (k) Profit Sharing Plan which
allows employees to contribute on a tax deductible basis, up to a maximum of 15%
of their income.
In addition, the employer will match 12.5% of the Employee 401(k) percentage
election, up to a maximum of 8% deferral made by the Employee. Also, to inspire
excellence and profitability, the Plan Document provides for a Discretionary
Matching contribution which is relative to the performance of the company.
The HEALTH BENEFITS PROGRAM AND DISABILITY PROTECTION PROGRAM are structured
under Code Section 125 of the Internal Revenue Code Providing a reduction in
cost due to the pre-tax structure of these benefit plans, offering a reduction
in both Social Security Tax and Income Tax.
The HEALTH BENEFITS PROGRAM is provided by The Prudential Insurance Company.
Employees have the opportunity to choose from two options which are the PRU CARE
PLUS or the PRU CARE H.M.O. Daleen Technologies, Inc. contributes 75% of the
premium for the employee and 50% for dependents.
The DISABILITY PROTECTION PLAN is individually designed and the employer
provides a 7% contribution to the Plan. This Plan also provides a guaranteed
cost and portability to the employee.
10
<PAGE> 11
Exhibit B of Employment Agreement
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is entered into effective as
of the 15th day of November, 1994, by and among RICHARD A. SCHELL Residing at
4271 N.E. 24TH AVENUE, LIGHTHOUSE POINT, FL 33064 (the "Shareholder"), and
DALEEN TECHNOLOGIES, INC., an Illinois corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Employment Agreement dated the same date
as above (the "Employment Agreement"), the Shareholder has received two (2)
shares of the common stock of the Corporation, as well as the option of
receiving certain additional shares of common stock pursuant to said agreement
(collectively the "Shares"); and
WHEREAS, the Shareholder and the Corporation desire, as permitted by Florida
Statutes, to govern the activities of the parties hereto with respect to the
Shares in accordance with the terms hereinafter set forth; and
WHEREAS, the Shareholder and the Corporation agree that it is in the best
interest of the Corporation to provide for the transfer, ownership, pledge and
disposition of the Shares in the manner and to the extent set forth hereinafter.
NOW, THEREFORE, in consideration of the mutual promises herein exchanged,
together with other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Shareholder and the Corporation, intending
to be legally bound, hereby agree as follows:
1. EFFECTIVENESS AND TERM OF AGREEMENT. This Agreement shall become effective
upon the issuance of the Shares to the Shareholder and shall remain in effect
until the either the Corporation buys back the Shares as provided herein or
fails to purchase the Shares within the time periods provided herein, or as
otherwise terminated by the provisions herein.
2. CORPORATION'S RIGHT TO CALL SHARES: CANCELLATION OF SHARES.
(a) Upon termination of the Shareholder for any reason from his employment with
the Corporation, and as long as the Corporation has not filed any registration
statements with the Securities and Exchange Commission, the Corporation shall
have for thirty (30) days from the date of any such termination, the right to
call (purchase) any or all of the Shares and pay the Shareholder the book value
of the Shares by providing the Shareholder written notice with such thirty (30)
day period.
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(i) If the termination was by the Corporation and it has made its election to
purchase the Shares within thirty (30) days of such termination date, the
Corporation shall pay the Shareholder the book value of the Shares as of said
termination date within 10 days of such election notice.
(ii) Upon voluntary termination of the Shareholder, and after notice by the
Corporation within thirty (30) days of the date of termination, the Corporation
shall deliver to the Shareholder a promissory note for the book value of the
Shares as of the date of termination within thirty (30) days of such notice.
Said note shall charge the minimum IRS interest rate, and will be payable over
two (2) years in eight (8) quarterly payments with accrued interest at the time
of each payment.
(b) In the event the Shareholder fails to return the certificates representing
the Shares to the Corporation on or before the delivery by the Corporation of
the cash or the note provided for above, then the Shareholder herein appoints
the Secretary of the Corporation power of attorney to effect the transfer of the
Shares on the Corporation's records, and to do all things necessary to implement
the call as provided herein. The foregoing power of attorney is coupled with an
interest.
(c) The book value of all of the Shares of the Corporation shall be determined
in writing by an independent certified public accountant regularly used by the
Corporation based upon the balance sheet of the Corporation, which determination
shall be binding upon the parties hereto.
(d) Notwithstanding the foregoing, shareholder acknowledge and agrees that the
Corporation may unilaterally cancel (with no consideration paid to Shareholder)
all issued Shares in the event Shareholder's employment with the Corporation is
terminated for any reason or no reason by the Corporation or Shareholder on or
before the first anniversary date of this Agreement. As such, until the passage
of such date the Company shall hold any and all certificates representing such
Shares, along with stock powers executed by Shareholder. Shareholder
acknowledges that this provision is reasonable under the circumstances and does
not constitute a penalty, as it is the intention of the parties that
Shareholder's ultimate full interest in an entitlement to the Shares be
contingent upon his completing his first year of employment.
3. RESTRICTIONS ON TRANSFERS OF SHARES
(a) As long as the Corporation does not file a registration statement with the
Securities and Exchange Commission, due to the personal nature of receiving the
Shares as an employee of the
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Corporation pursuant to the terms of the Employment Agreement, except as
otherwise provided in this Agreement, the Shareholder hereby agrees that she
will not sell, transfer, pledge, grant a security interest in, assign,
hypothecate, or otherwise encumber or dispose of (collectively and through this
Agreement, "transfer") any of the Shares or any interest therein or suffer or
permit the same to be subject, directly or indirectly, to transfer by operation
of law or agreement, without the prior written consent of the Corporation. The
restriction set forth in this section on stock transfers applies to all stock
transfers including transfers to other shareholders of the Corporation.
(b) Any attempted or purported transfer by the Shareholder of any Shares or any
interest therein in violation of the terms of this Agreement shall be void and
the Corporation shall reject and refuse to transfer on its books any stock which
may have been so transferred, and it shall not recognize any person holding such
stock as a shareholder, nor shall any such person have any rights as a
shareholder of the Corporation.
4. RIGHT OF FIRST REFUSAL
(a) In the event any of the restrictions on the Shares as contained herein are
determined to be illegal, as an illegal restraint on alienation or otherwise,
and if in that event the Shareholder desires to sell all of the Shares ("Offered
Shares") to any person or entity other than the Corporation ("Transferee"), such
Shareholder ("Offeror Shareholder") shall first give written notice thereof to
the Corporation by certified or registered mail, return receipt requested
("Notice of Offer"). The Notice of Offer shall include: (i) a true copy of a
bona fide, signed, written offer by the Transferee to purchase the Offered
Shares, the per share price ("Purchase Price") and the terms ("Purchase Terms")
upon which such offer is made, and the name and the residence address of the
Transferee; and (ii) an offer to sell all the Offered Shares at the Purchase
Price and on the Purchase Terms to the Corporation and, in the event the
Corporation is unable or does not desire to purchase the Offered Shares, to
James Daleen, a shareholder (hereinafter referred to as "Offeree Shareholder").
The Corporation first shall have the option to purchase all of the Offered
Shares, exercisable within thirty (30) days of the date on which the Notice of
Offer was given, and, if the Corporation is unable or does not desire to
purchase all of the Offered Shares, then the Offeree Shareholder shall have the
option, exercisable after the Corporation's rejection (or deemed rejection which
shall, occur if the Corporation fails to respond to the Notice of Offer within
the Corporation Election Period, as hereinafter defined) of the offer contained
in the Notice of Offer, but within sixty (60) days of the date on which the
Notice of Offer was given, to
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purchase all, but not less than all, the Offered Shares at the Purchase Price
and on the Purchase Terms. The Corporation shall give notice of its election to
accept or reject the offer contained in the Notice of Offer in writing to the
Offeror Shareholder ("Election Notice") within thirty (30) days after the date
on which the Notice of Offer was given ("Corporation Election Period"), and the
Offeree Shareholder shall give notice of its or his/her election to accept or
reject the offer contained in the Notice of Offer in writing to the Offeror
Shareholder after the Corporation's rejection (or deemed rejection of the offer
contained in the Notice of Offer), but within sixty (60) days after the date on
which the Notice of Offer was given ("Shareholder Election Period").
In the event the Corporation elects not to purchase the Offered Shares, the
Offeree Shareholder who has indicated an election to accept the offer contained
in the Notice of Offer (hereinafter referred to as ("Purchasing Shareholder")
shall purchase all the Offered Shares at the Purchase Price and on the Purchase
Terms.
In the event that neither the Corporation nor the Offeree Shareholder elects to
accept the offer contained in the Notice of Offer within the Corporation
Election Period and the Shareholder Election Period, the Offeror Shareholder
may sell the Offered Shares to the Transferee for the Purchase Price and subject
to the Purchase Terms; provided, however, that said sale to the Transferee must
be unconditionally concluded within sixty (60) days after the expiration of the
Shareholder Election Period or the Offeror Shareholder must again of fer the
Offered Shares to the Corporation and the Offeree Shareholders in accordance
with the provisions of this Section.
(b) The closing ("Closing") under this Section shall be held on the date
set forth for Closing in the Purchase Terms, which date shall be no earlier than
the sixtieth (60th) day, nor later than the one hundred twentieth (120th) day,
following the date on which the Notice of Offer is given. At Closing, Offeror
Shareholder shall (i) represent and warrant that she or it is the sole owner of
the Shares being sold, that such Shares are held free and clear of any and all
pledges, claims, liens and rights of others (other than the effect of this
Agreement) and that the Offeror Shareholder has the full power, right and
authority to consummate the transaction; (ii) resign from all corporate offices
and directorships held by such Offeror Shareholder, or his/her designee; and
(iii) deliver to the Corporation or the Purchasing Shareholder, as the case may
be, the Shares so sold, duly endorsed for transfer with all necessary stock
transfer tax stamps affixed, together with all other documents necessary to
transfer such Shares.
(c) In the event that the Corporation or the Offeree Shareholder
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indicates in the Corporation Election Notice or the Shareholder Election Notice
an election to accept the offer contained in the Notice of Offer, and, through
no fault of the Offeror Shareholder, the Corporation or the Offeree
Shareholder fails to close on the Offered Shares within the time period provided
in Section 4(b) hereof ("Default"), the Offeror Shareholder, in addition to any
other rights and remedies she may have at law or in equity, may sell, transfer,
or otherwise dispose of or pledge the Offered Shares or any portion thereof at
any consideration therefor to a third party.
5. PROTECTION OF VALUE. In the event the Corporation or its shareholders sell
in a single transaction fifty percent (50%) or more of its outstanding common
stock or substantially all of the assets of the Corporation (the "Sale"), then
within ninety (90) days of the Sale, Employee shall have the right to sell to
the Corporation its Shares at the same value per share received by the
Corporation or its selling shareholders in the Sale at the value per share based
upon a valuation of the Corporation's stock at fair market value determined by
virtue of the Sale price by an independent certified public account regularly
used by the Corporation, which determination shall be final and binding upon the
parties. In the event the Sale occurs within ninety (90) days of purchase by the
Corporation of the Shares under Section 2 hereunder, the purchase price under
Section 2 shall be revalued to be a price calculated pursuant to this Section 5,
and the Corporation shall pay any difference to Shareholder within 10 days of
such revaluation.
6. APPOINTMENT AS DIRECTOR. James Daleen, as majority shareholder and Director
of the Corporation may, in his sole discretion, vote to elect the Shareholder to
the Board of Directors to serve as a Director for as long as he deems
appropriate.
7. SUBCHAPTER S STATUS AND ELECTIONS
(a) Shareholder agrees that it is currently in the Corporation's best interest
to elect to be treated as an S corporation within the meaning of Code Section
1361. Shareholder covenants and agrees not to do any act, or fail to do any act,
directly or indirectly, the commission or omission of which would voluntarily or
involuntarily cause the termination of any Subchapter B election of the
Corporation, unless requested to take such action by the Corporation. In order
to maintain such Subchapter S status, notwithstanding anything provided in this
Agreement herein to the contrary, Shareholder and any permissible transferee of
Shareholder may not transfer the beneficial ownership of any share of their
Shares in the Corporation if such transfer or acquisition would cause the
Corporation's Subchapter S status to terminate, including, but not limited to
transfers to, or acquisitions by: (a) any person who would cause the Corporation
to have more than
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35 shareholders; (b) any nonresident alien; or (c) any person other than an
individual, an estate or a qualified Subchapter S trust (within the meaning of
Code Section 1361(d) . The Corporation's Board of Directors may, in their sole
and absolute discretion, impose such other restrictions upon the sale or
transfer of Shareholder's Shares as they shall deem appropriate to maintain the
corporation's Subchapter S status. Shareholder shall take whatever action is
required, either individually or jointly with other shareholders, to continue
the Subchapter S election, and prevent its termination.
(b) In accordance with Code Section 1377(a) (2), for any taxable year that
Shareholder's interest in the Corporation terminates, Shareholder agrees to
determine his pro rata share of the Corporation's items of income, lose,
deductions, and credits by closing the books of the Corporation on the date of
such termination. Shareholder agrees to execute any election or consent forms
necessary to effectuate the foregoing.
(c) In accordance with Code Section 1362(e) (3), in taxable years in which the S
corporation status of the Corporation terminates, Shareholder agrees to allocate
the income, loss, deductions, and credits attributable to its S corporation
short taxable year, (as defined in Code Section 1362(e)) and its C corporation
short taxable year (as defined in Code Section 1362 (e), by closing the books of
the Corporation on the date that its S corporation status terminates.
Shareholder agrees to execute any election or consent forms necessary to
effectuate the foregoing.
(d) If any provision or any portion of any provision of this Agreement, or the
application of any such provision or any portion thereof to any person or
circumstance operates directly or indirectly to cause the termination of any
Subchapter S election of the Corporation, then such provision or portion of any
provision shall be severed from this Agreement and shall be unenforceable. All
remaining portions of this Agreement shall continue in full force.
(e) Nothing herein shall prevent the Corporation from terminating its "S"
election as its deems appropriate.
8. LEGENDS. So long as the Corporation deems it necessary or appropriate, all
certificates representing the Shares shall bear legends on the face thereof
substantially as follows:
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, AND ALL RIGHTS
REPRESENTED BY SUCH SHARES, ARE SUBJECT TO THE TERMS OF A SHAREHOLDERS
AGREEMENT BETWEEN THE CORPORATION, RICHARD A. SCHELL DATED NOVEMBER 15,
1994, AS THE SAME MAY BE AMENDED, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION. ANY PERSON WHO WISHES
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TO BECOME THE OWNER OF THIS CERTIFICATE OR OF THE SHARES WHICH IT
REPRESENTS, OR TO OBTAIN ANY INTEREST IN SUCH CERTIFICATE OR SHARES, SHALL
AGREE TO BECOME BOUND BY THE PROVISIONS OF SUCH AGREEMENT. THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
THESE SHARES HAVE BEEN ACQUIRED FOR AN INVESTMENT, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
ACCEPTABLE TO COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH LAWS.
9. FUTURE SHARES. The Shareholder agrees that any Shares it obtains during the
term of its employment with the Corporation shall be subject to the terms and
conditions of this Agreement.
10. INDEMNIFICATION. The Shareholder shall hold harmless and on demand indemnify
the other shareholders of the Corporation, pro rata, based as a percentage of
stock ownership, from and against any and all liabilities, costs, damages,
expense, and attorney's fees resulting from or attributable to any losses,
claims, payments, judgments, or other monetary loss sustained by any shareholder
in connection with any obligation of the Corporation which has been personally
guaranteed or co-signed by any shareholder of the Corporation.
11. TERMINATION; STATUS OF SHAREHOLDER. This Agreement shall terminate upon the
dissolution of the Corporation or upon an agreement in writing of all the
parties. The is Agreement shall otherwise remain in effect until the either the
Corporation buys back or cancels the Shares as provided herein or fails to
purchase the Shares within the time periods provided herein, or unless otherwise
terminated by the provisions herein.
12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of, and be
binding upon, the successors, administrators, heirs, legal representatives and
permitted assigns of the Shareholder and of the Corporation, subject to the
provisions of this Agreement. Shareholder, in furtherance thereof, shall execute
a Last Will and Testament, directing his/her personal representatives to perform
this Agreement and to execute all documentation necessary to effectuate the
purposes of this Agreement, but the failure to execute such Last Will and
Testament shall not affect the rights of any Shareholder or the obligations of
any estate, as provided in this Agreement.
13. NOTICES. All notices, requests, consents and other communications required
or permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and
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shall be (as elected by the person giving such notice) hand delivered by
messenger or courier service, telecommunicated, or mailed (airmail if
international) by registered or certified mail (postage prepaid), return receipt
requested, to the addresses listed above or to such other address as any party
may designate by notice complying with the terms of this Section. Each such
notice shall be deemed delivered (a) on the date delivered if by personal
delivery, (b) on the date telecommunicated if by telegraph, (c) on the date of
transmission with confirmed answer back if by telex or telefax, and (d) on the
date upon which the return receipt is signed or delivery is refused or the
notice is designated by the postal authorities as not deliverable, as the case
may be, if mailed.
14. JURISDICTION AND VENUE. The parties acknowledge that a substantial portion
of negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in Palm Beach County or
the court of the United States, Southern District of Florida; (b) consents to
the jurisdiction of each such court in any such suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
15. AMENDMENTS. The Shareholder hereby irrevocably agrees that no attempted
amendment, modification, termination, waiver, discharge or change (collectively,
"Amendment") of this Agreement shall be valid and effective, unless the
Shareholder and the Corporation agree in writing to such Amendment.
16. GOVERNING LAW. This Agreement shall be construed under the laws of the State
of Florida and venue of any proceedings in connection herewith shall be in Palm
Beach County, Florida.
17. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
and the same instrument, and shall be effective as to each party upon his/her
signing of such counterpart notwithstanding the fact that the other parties have
not signed it.
18. SPECIFIC PERFORMANCE. Because the Shares of the Corporation cannot be
readily purchased or sold in the open market, and for
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other reasons, the parties will be irreparably damaged if this Agreement is not
specifically enforced. In the event of a breach or threatened or attempted
breach of any provision of this Agreement by any party hereto, the other parties
shall, in addition to all other remedies, be entitled to temporary and permanent
injunctions restraining such breach, without being required to show any actual
damage or to post any bond or other security, and/or to a decree for specific
performance of the provisions hereof.
19. ENTIRE AGREEMENT. This Agreement represents the entire understanding and
agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the day and year first above written.
WITNESSES: THE CORPORATION:
Daleen Technologies, Inc.
John Lofquist /s/ James Daleen
- ------------------------------ ---------------------------
JAMES DALEEN, President
Patricia A. Harrell THE SHAREHOLDER:
- ------------------------------
/s/ Richard A. Schell
John Lofquist ---------------------------
- ------------------------------ RICHARD A. SCHELL
Patricia A. Harrell
- ------------------------------
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Exhibit C of Employment Agreement
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 14th day of November, 1994, by and between
Daleen Technologies, Inc. (DTI) and RICHARD A. SCHELL Residing at 4271 N.E.
24TH AVENUE, LIGHTHOUSE POINT, FL 33064, (hereinafter referred to as
"Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any Confidential
Information. "Confidential Information" is defined as information which
has not been made publicly available by DTI or the third party owner of
such information, and
1. Which was developed by DTI, and relates to DTI's past, present, and
future business, including but not limited to developments (defined
below, technical data, specifications, designs, concepts,
discoveries, copyrights, improvements, product plans, research and
development, personal information, personnel information, financial
information, customer lists, leads, and/or marketing programs;
2. All documents marked as confidential and/or continuing such
information; and/or
3. All information DTI has acquired or received from a third party in
confidence.
b. Employee shall use Confidential Information only for DTI's business
purposes; and
c. Employee shall use any information received in confidence by DTI from
any third party only as permitted by written agreement between DTI and
the third party; and
d. Employee shall not be permitted to justify any disregard of the
obligations of Employee hereunder by using any of the Confidential
Information to guide a search by it of publications and other publicly
available information, selecting a series of items of knowledge from
unconnected sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard of the
obligations of confidence.
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2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI to
use any information or material which is confidential to any third party
unless DTI has a written agreement with the third party allowing DTI to
receive and use the confidential information or materials. Employee will
not incorporate into Employee's work any material which is subject to the
copyrights of any third party unless DTI has the right to copy and
incorporate such copyrighted material.
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any other
materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Developments, including
rights to translation and reproductions in all forms or formats and the
copyrights and patent rights thereto, if any, and he or she agrees that DTI
may copyright said materials in DTI's name and secure renewal, reissues and
extensions of such copyrights for such periods of time as the law may
permit. "Developments" is defined as any idea, invention, process, design,
concept, or useful article (whether the design is ornamental or otherwise),
computer program, documentation, literary work, audiovisual work and any
other work of authorship, hereafter expressed, made or conceived solely or
jointly by Employee during Employee's employment or engagement, whether or
not subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business, research or
Development of DTI; and/or
b. Are suggested by or result from any task assigned to Employee or work
performed by Employee for or on behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to DTI
by operation of law, or may belong to a party engaged by DTI by operation
of law pursuant to a works for hire contract between DTI and such
contracted part. To the extent the copyrights in such works may not be
owned by DTI or such contracted party by operation of law, Employee hereby
assigns to DTI or such contracted party, as the case may be, all copyrights
(if any) Employee may have in Developments.
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Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include any
part of such items in the materials Employee prepares for DTI unless and
until such items are licensed or assigned to DTI under separate written
agreement.
At all times hereafter, Employee agrees to assist DTI in obtaining patents
or copyrights on any Developments assigned to DTI that DTI, in its sole
discretion, seeks to patent or copyright. Employee also agrees to sign all
documents, and do all things necessary to obtain such patents or
copyrights, to further assign them to DTI, and to reasonably protect them
and DTI against infringement by other parties at DTI expense with DTI prior
approval. Employee irrevocably appoints any DTI-selected designee to act,
at all time hereafter, as his or her agent and attorney-in-fact to perform
all acts necessary to obtain patents and/or copyrights as required by this
Agreement if Employee (i) refuses to perform those acts or (ii) is
unavailable, within the meaning of the United States patent and Copyright
laws. It is expressly intended by Employee that the foregoing power of
attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested by
DTI. Such information and records, and all copies thereof, shall be the
property of DTI as to any Developments assigned DTI. Employee agrees to
promptly surrender such information and records at the request of DTI as to
any Developments.
5. In connection with any of the Developments assigned by Section 4, Employee
agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to DTI and do
all things reasonable necessary to enable DTI to secure patents,
register copyrights or obtain any other form of protection for
Developments in the United States and in other countries. If Employee
fails or is unable to do so, Employee hereby authorizes DTI to act
under power of attorney for Employee to do all things to secure such
rights.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either
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directly or through the agency of a third party during the term of, or
within six (6) months after, the termination of Employee's employment or
engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement,
waiver or modification is sought and making specific reference to this
Agreement.
b) Further Assurances. The parties hereby agree from time to time to
execute and deliver such further and other transfers, assignments and
documents and do all matters and things which may be convenient or
necessary to more effectively and completely carry out the intentions
of this Agreement.
c) Brokers. Each of the parties represents and warrants that such party
has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement, and, insofar as such party
knows, no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions. The parties
each agree to indemnify and hold harmless one another against any loss,
liability, damage, cost, claim or expense incurred by reason of any
brokerage commission or finder's fee alleged to be payable because of
any act, omission or statement of the indemnifying party.
d) Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns.
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e) Headings. The headings contained in this Agreement are for convenience of
reference only, are not to be considered a part hereof and shall not limit
or otherwise affect in any way the meaning or interpretation of this
Agreement.
f) Severability. If any provision of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If any provision
of this Agreement may be construed in two or more ways, one of which would
render the provision invalid or otherwise voidable or unenforceable and
another of which would render the provision valid and enforceable, such
provision shall have the meaning which renders it valid and enforceable.
g) Survival. All covenants, agreements, representations and warranties made
herein or otherwise made in writing by any party pursuant hereto shall
survive the execution and delivery of this Agreement and the termination
of employment or engagement of Employee.
h) Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if
known, shall not affect the right of such party to require performance of
that provision or to exercise any right, power or remedy hereunder. Any
waiver by any party of any breach of any provision of this Agreement should
not be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself, or a waiver of any right,
power or remedy under this Agreement. No notice to or demand on any party
in any case shall, of itself, entitle such party to any other or further
notice or demand in similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that the parties
will be irreparably damage (and damages at law would be an inadequate
remedy) if this Agreement is not specifically enforced. Therefore, in the
event of a breach or threatened breach by any party of any provision of
this Agreement, then the other parties shall be entitled, in addition to
all other rights or remedies, to injunctions restraining such breach,
without being required to show any actual damage or to post any bond or
other security, and/or to a decree for specific performance of the
provisions of this
25
<PAGE> 26
Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a substantial portion
of negotiations and anticipated performance and execution of this
Agreement occurred or shall occur in Palm Beach County, Florida, and that,
therefore, without limiting the jurisdiction or venue of any other federal
or state courts, each of the parties irrevocably and unconditionally (a)
agrees that any suit, action or legal proceeding arising out of or
relating to this Agreement may be brought in the courts of record of the
State of Florida in Palm Beach County or the court of the United States,
Southern District of Florida; (b) consents to the jurisdiction of each
such court in any suit, action or proceeding; (c) waives any objection
which it may have to the laying of venue of any such suit, action or
proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable
laws or court rules in said state.
k) Remedies Cumulative. Except as otherwise expressly provided herein, no
remedy herein conferred upon any party is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy hereunder
shall preclude any other or further exercise thereof.
l) Government Law. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to
principles of conflicts of laws.
m) Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its
preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
n) Entire Agreement. This Agreement represents the entire understanding and
agreement among the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if
any) made by and among such parties.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
Daleen Technologies, Inc. Employee
/s/ James Daleen /s/ Richard A. Schell
- ---------------------------- ---------------------------
James Daleen, President RICHARD A. SCHELL
11/15/94 11/15/94
- ---------------------------- ---------------------------
Date Date
27
<PAGE> 28
EXHIBIT D to EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of
this 15th day of November, 1994 by and between Daleen Technologies, Inc., an
Illinois corporation with its principal office at 902 Clint Moore Road, Suite
230, Boca Raton, Florida 33487 (hereinafter called "Daleen") and RICHARD A.
SCHELL Residing at 4271 N.E. 24TH AVENUE, LIGHTHOUSE POINT, FL 33064
(hereinafter "Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. NON-SOLICITATION. Employee will not, at any time while employed by
Daleen and for one (1) year after the termination of Employee's employment
with Daleen for any reason whatsoever, directly or indirectly (by assisting or
suggesting to another, or otherwise) solicit or otherwise attempt to induce or
accept the initiative of another in such regard, alone or by combining or
conspiring with anyone, any employees, officers, directors, agents,
consultants, representatives, contractors, suppliers, distributors, customers
or other business contacts (collectively, "Business Affiliates") of Daleen to
terminate or modify its position as an employee, officer, director, agent,
consultant, representative, contractor, supplier, distributor, customer or
business contact with Daleen or to compete against Daleen.
2. NON-COMPETITION. (a) Employee shall not while employed by Daleen, and
after the termination of said employment for any reason whatsoever for the time
period after such termination described in paragraph (c) below (the "No-Compete
Period"), directly or indirectly, as owner, officer, director, employee, agent,
lender, broker, investor, consultant or representative of any corporation or as
owner of any interest in, or as an employee, agent, consultant, partner,
affiliate or in any other capacity whatsoever or representative of any other
form of business association, sole proprietorship or partnership, conduct or be
related to any business in competition with any business of Daleen
28
<PAGE> 29
now or in the future, including without limitation, the licensing, development
or sale of computer software or computer consulting services (herein referred
to as the "Competitive Business") anywhere within the territories, nor as to
certain customers anywhere in the United States, both listed on the
"Territories and Customers" Exhibit to the Agreement, made a part hereof,
including without limitation, the solicitation of any customers, who were at
any time customers of Daleen and in connection with a business which is
competitive with the Competitive Business except that such competitive activity
will be permitted as to business solicitation of and competition with Daleen as
to any entity listed on an Exhibit to this Agreement made a part hereof
identified as a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions hereof
or of any other Agreement between Employee and Daleen, Employee shall not at
any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
(c) The No-Compete Period shall increase depending upon the duration of
Employee's employment with Daleen as follows:
i) If Employee has completed an Employment Period (as defined in the
Employment Agreement to which this Agreement is an Exhibit) of
between one (1) and four hundred and forty nine (449) days, subject
to the No-Compete Exception, then the No-Compete Period will be one
hundred and eighty (180) days;
ii) If Employee has completed an Employment Period of four hundred and
fifty (450) days or more, then the No-Compete Period will be one (1)
year.
3. LEGAL EFFECT. The foregoing covenants of Employee shall be deemed
severable, and the invalidity of any covenant shall not affect the validity or
enforceability of any other covenant. The existence of any claim or cause of
action by Employee against Daleen predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Daleen of these covenants.
Daleen's failure to object to any conduct in violation of this Agreement shall
not be deemed a waiver by Daleen, but Daleen may, if it wishes, specifically
waive any part or all of those covenants to the extent that such waiver is set
forth in writing duly authorized by Daleen's Board of Directors.
29
<PAGE> 30
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full, uninhibited and faithful
observance of each of the covenants contained in this Agreement will not cause
him or her any undue hardship, financial or otherwise, and that enforcement of
each of the covenants contained in this Agreement will not impair his or her
ability to obtain employment commensurate with his or her abilities and on
terms fully acceptable to him or her or otherwise to obtain income required for
the comfortable support of him or her and his or her family and the
satisfaction of the needs of his or her creditors. Employee acknowledges and
confirms that his or her special knowledge of the business of Daleen is such as
would cause Daleen serious injury and loss if he or she were to use such
ability and knowledge to the benefit of a competitor or were to compete with
Daleen.
In the event that any court shall finally hold that the time or territory
or any other provision stated in this Agreement constitutes an unreasonable
restriction upon Employee, Employee hereby expressly agrees that the provisions
of this Agreement shall not be rendered void, but shall apply as to time and
territory or to such other extent as such court may judicially determine or
indicate constitutes a reasonable restriction under the circumstances involved.
Employee hereby agrees that in the event of the violation by him or her of any
of the provisions of this Agreement, Daleen will be entitled if it so elects,
to institute and prosecute proceedings at law or in equity to obtain damages
with respect to such violation or to enforce the specific performance of this
Agreement by Employee or to enjoin Employee from engaging in any activity in
violation hereof without any requirement on the part of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding for
the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. SEVERANCE. In further consideration of the entering into of this
Agreement by Employee, Daleen agrees to entitle Employee to a severance pay
benefit equivalent to six (6) months base salary. The foregoing severance
benefit shall be paid by Daleen one month at a time until such time when the
entire severance benefit has been paid. No credit toward entitlement of
additional months of severance pay shall be earned for any partial month
worked, and Employee shall not be entitled to any severance benefit if
terminated by Daleen for "cause" or if Employee
30
<PAGE> 31
voluntarily resigns from his or her employment with Daleen. As used in this
Agreement determination for "cause" shall be defined as termination of Employee
by Daleen in the event Employee has been convicted of any felony or, in the case
of other crimes, involving moral turpitude or dishonesty, or for any breach by
Employee of any agreement with Daleen or of its employment or business policies
(including without limitation theft or misuse of company property), or for any
other act or omission by Employee which does not fit into the previous
categories but which Daleen in good faith believes has occurred to its detriment
and about which Employee has received at least one (1) written warning by
Daleen and despite such prior written warning, Employee has on a second
occasion committed such act or omission. Any termination of this Agreement for
"cause" shall be done in writing, with a written statement of the reasons for
the termination. Conflicts under this Agreement only as to validity of a
termination for "cause" shall be settled by binding arbitration in accordance
with the commercial arbitration rules of the American Arbitration Association,
in Palm Beach County, Florida.
5. MISCELLANEOUS PROVISIONS.
The provisions of this Agreement may not be amended, supplemented, waived or
changed orally, but only by a writing signed by the party as to whom enforcement
of any such amendment, supplement, waiver or modification is sought and making
specific reference to this Agreement. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective
administrators, executors, legal representatives, heirs, successors and
permitted assigns. The headings contained in this Agreement are for convenience
of reference only, are not to be considered a part hereof and shall not limit or
otherwise affect in any way the meaning or interpretation of this Agreement. The
failure or delay of any party at any time to require performance by another
party of any provision of this Agreement, even if known, shall not affect the
right of such party to require performance of that provision or to exercise any
right, power or remedy hereunder. Any waiver by any party of any breach of any
provision of this Agreement should not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement, No
notice to or demand on any party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably
31
<PAGE> 32
and unconditionally (a) agrees that any suit, action or legal proceeding
arising out of or relating to this Agreement may be brought in the courts of
record of the State of Florida in Palm Beach County or the District Court of the
United States, Southern District of Florida; (b) consents to the jurisdiction of
each such court in any suit, action or proceeding; (c) waives any objection
which it may have to the laying of venue of any such suit, action or proceeding
in any of such courts; and (d) agrees that service of any court paper may be
effected on such party by mail, as provided in this Agreement, or in such other
manner as my be provided under applicable laws or court rules in said state.
Except as otherwise expressly provided herein, no remedy herein conferred upon
any party is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof. This
Agreement and all transactions contemplated by this Agreement shall be governed
by, and construed and enforced in accordance with, the internal laws of the
State of Florida without regard to principles of conflicts of laws. This
Agreement shall not be construed more strongly against any party regardless of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation. Any time period provided for
herein which shall end on a Saturday, Sunday or legal holiday shall extend to
5:00 p.m. of the next full business day. This Agreement represents the entire
understanding and agreement amount the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
written above.
Daleen Technologies, Inc.
/s/ Richard A. Schell /s/ James Daleen
- -------------------------- ---------------------------------
RICHARD A. SCHELL James Daleen
President
32
<PAGE> 33
NO-COMPETE EXCEPTIONS
---------------------
Exhibit to Non-Solicitation and Non-Compete Agreement of RICHARD A. SCHELL.
None
33
<PAGE> 34
TERRITORIES AND CUSTOMERS
-------------------------
Exhibit to Non-Solicitation and Non-Compete Agreement of RICHARD A. SCHELL.
The United States of America
34
<PAGE> 1
Exhibit 10.6
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, effective January 31, 1997, to the EMPLOYMENT AGREEMENT
("Agreement") dated November 15, 1994, by and between DALEEN TECHNOLOGIES, INC.,
and RICHARD A. SCHELL, changes the following sections:
(1) Section 2. TERM. In the second sentence, replace "may be extended" with
"shall be automatically extended".
(2) Section 3. SALARY AND BASE COMPENSATION. Replace the entire first sentence
with the following "Employee shall be entitled to receive salary during the
Employment Period at the rate of One Hundred and Fifty Thousands and 00/100
Dollars ($150,000.00), per annum, and as such may be increased pursuant to
Section 12 hereof (the "Base Salary")".
(3) Section 8. PROFITS BONUS. In section (a), change "net earnings" to "net
pre-tax earnings". In section (b), change "net earnings" to "net pre-tax
earnings" in the second sentence. Also in section (b), replace the entire
first sentence with the following "For purposes of this Agreement, "net
pre-tax earnings" as used herein shall be determined by the Company's
internal financial statements".
(4) Section 7. VACATION. Replace in its entirety with the following "Employee
shall be entitled to paid vacation in accordance with the vacation policy of
the Company in effect for senior executives from time to time, in no event
to be less than three (3) weeks per calendar year."
(5) Exhibit D, NON-SOLICITATION AND NON-COMPETE AGREEMENT. Section 4. SEVERANCE.
In the first sentence, change "six (6) months" to "one (1) year".
All other provisions and sections of the Agreement except for the above changes
will remain the same and unchanged.
Agreed to this as of the date above:
DALEEN TECHNOLOGIES, INC.: EMPLOYEE:
/s/ James R. Daleen /s/ Richard A. Schell
- ------------------------------------- --------------------------------------
James R. Daleen, President and CEO Richard A. Schell, Vice President of
Finance and CFO
<PAGE> 1
EXHIBIT 10.7
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, effective September 5, 1997, to the EMPLOYMENT
AGREEMENT dated November 15, 1994, by and between DALEEN TECHNOLOGIES, INC., and
RICHARD A. SCHELL, as amended January 31, 1997, ("Agreement") changes the
following sections:
(1) Section 8. Profits Bonus. Replace this section in its entirety, as
follows:
Annual Performance Bonus
Employee will be able to earn an Annual Performance Bonus equal to a certain
percentage of his Base Salary, depending on his performance against goals and
objectives set and agreed upon in advance for each calendar year by the
Company's President and Chief Executive Officer, and as approved by the
Compensation Committee of the Board of Directors. Such Annual Performance Bonus
will be paid to Employee by January 31 following the end of the calendar year
and is subject to review and approval of the Compensation Committee of the Board
of Directors. For 1997, the Annual Performance Bonus is targeted at $75,000 and
is targeted at 50% of the Base Salary in future years.
(2) Section 12. Compensation Review. Replace this section in its entirety, as
follows:
Annual Compensation.
The Company's President and Chief Executive Officer, along with the Compensation
Committee of the Board of Directors, shall, by January 31 of each calendar year,
review Employee's Base Salary and may increase, but not decrease, the Base
Salary provided for in Section 3 hereof. Any such increase in Base Salary shall
be valid only if in writing, executed by the President and Chief Executive
Officer, and such writing shall constitute an amendment solely to the payments
to be made to Employee under this Agreement, without waiver or modification of
any other provision hereof.
All other provisions and sections of the Agreement, except for the above changes
will remain the same and unchanged.
Agreed to this as of the date above:
DALEEN TECHNOLOGIES, INC.: EMPLOYEE:
/s/ Jams R. Daleen /s/ Richard A. Schell
- ---------------------------------- --------------------------------------
James R. Daleen, President and CEO Richard A. Schell, Vice President of
Finance and CFO
<PAGE> 1
EXHIBIT 10.8
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, effective March 1, 1999, amends that certain
EMPLOYMENT AGREEMENT ("Agreement") dated November 15, 1994, by and between
DALEEN TECHNOLOGIES, INC., and RICHARD A. SCHELL, as amended effective January
31, 1997 and as further amended effective September 5, 1997 (the employment
agreement, as amended, the "Agreement"), as set forth below. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Exhibit B, Section 2, entitled "Non-Competition", is hereby deleted in
its entirety and replaced as follows:
(a) Employee shall not while employed by Daleen, and after the
termination of said employment for any reason whatsoever for the time period
after such termination described in paragraph (c) below (the "No-Compete
Period"), directly or indirectly, as owner, officer, director, employee, agent,
lender, broker, investor, consultant or representative of any corporation or as
owner of any interest in, or as an employee, agent, consultant, partner,
affiliate or in any other capacity whatsoever or representative of any other
form of business association, sole proprietorship or partnership, conduct or be
related to any business in competition with any business of Daleen now or in the
future, including without limitation, in the Billing and Customer Care industry
(herein referred to as the "Competitive Business") anywhere within the
territories, nor as to certain customers anywhere in the United States, both
listed on the "Territories and Customers" Exhibit to the Agreement, made a part
hereof, including without limitation, the solicitation of any customers, who
were at any time customers of Daleen and in connection with a business which is
competitive with the Competitive Business except that such competitive activity
will be permitted as to business solicitation of and competition with Daleen as
to any entity listed on an Exhibit to this Agreement made a part hereof
identified as a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions
hereof or of any other Agreement between Employee and Daleen, Employee shall not
at any time in any manner other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
<PAGE> 2
(c) The No-Compete Period shall increase depending upon the
duration of Employee's employment with Daleen as follows:
i) If Employee has completed one hundred eighty (180) days or
less of employment there will be a six (6) month No-Compete
Period;
ii) If Employee has completed more than one hundred eighty (180)
days of employment the No-Compete Period will be one (1) year;
(2) All capitalized terms used herein and not otherwise defined shall have
the respective meanings attributed to such terms in the Agreement. All other
provisions and sections of the Agreement except for the above changes will
remain unchanged and in full force and effect. In the event of a conflict
between the terms of this Amendment and the Agreement, the terms of this
Amendment shall control.
Agreed to this as of the date above:
DALEEN TECHNOLOGIES, INC.: EMPLOYEE:
/s/ James R. Daleen /s/ Richard A. Schell
- -------------------------------------- --------------------------------------
James R. Daleen, Richard A. Schell,
Chief Executive Officer Vice President of Finance and CFO
<PAGE> 1
Exhibit 10.09
April 28, 1999
Mr. Stephen Wagman
813 South Rome Avenue
Tampa, FL 33606
Dear Mr. Wagman:
On behalf of Daleen Technologies, Inc., I am pleased to confirm our offer to you
for the position of Executive Vice President of Corporate Development, reporting
to Jim Daleen, Chief Executive Officer and Chairman of the Board. Your
responsibilities will be discussed in detail with you following your start. This
position is key to the success of the organization. I believe you will find it
to be both challenging and rewarding.
This is a salaried, exempt position. Your starting salary for this position will
be at a rate of $6,538.46 paid biweekly. You will also be eligible for an
annual bonus award that will be dependent on both yours and the company's
performance. That bonus is targeted at 40% of your base salary earnings for
optimum performance. Your performance and salary will be reviewed on an annual
basis. In addition, you will also be eligible to participate in Daleen's
Incentive Stock Option Program. An initial grant of 100,000 stock options will
be issued upon employment, and you will be eligible for annual grants
thereafter.
Daleen's extensive benefit package, including comprehensive health and dental
insurance, life insurance, disability, flexible spending accounts, 401k
retirement savings plan and Credit Union Membership are explained in a separate
benefits summary document that is enclosed. You are eligible to receive
additional benefits as detailed in your Employment Agreement.
As agreed, Daleen will make available to you, subject to the execution of a
promissory document, a loan, up to, but not to exceed $72,000.00. The full
details of this loan such repayment dates, collateral requirements, recovery
contingencies and actual loan amount will be discussed in more depth before your
start date.
This offer of employment should not be construed as an employment contract and
will be considered void 30 days after the date of this letter if not accepted
sooner as acknowledged by your signature below. All offers of employment are
contingent upon your signature of Daleen's employment agreement as well as
satisfactory results on references and/or background checks. This offer is also
contingent upon your ability to prove your identity and eligibility to be
employed in compliance with the Immigration Reform and Control Act of 1986. A
comprehensive list of acceptable documents will be provided to you at the time
of hire that may be utilized to comply with the requirements of this Federal Law
as well as a Federal I-9 form, which must be completed.
By accepting this offer, you will be joining a progressive, fast growing
company. Daleen's goal is to be the global leader for billing and customer care
solutions, and we believe that your talents and abilities will contribute
significantly in the attainment of this goal.
<PAGE> 2
I look forward to your acceptance of this offer and having you join our team!
Sincerely,
DALEEN TECHNOLOGIES, INC.
/s/ Rick Klotz
- ------------------------
Rick Klotz,
Director of Human Resources Accept: /s/ Stephen M. Wagman
--------------------------------------
Employee Signature Date
<PAGE> 3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("this Agreement") is made and effective this
28th day of April, 1999, by and between DALEEN TECHNOLOGIES, INC., a Florida
corporation located at 902 Clint Moore Road, Suite 230, Boca Raton, 33487
("Company"), and Stephen M. Wagman, residing at 813 South Rome Avenue, Tampa, FL
33606 ("Employee").
WITNESSETH:
WHEREAS, Company believes it is in Company's best interest to employ
Employee, and Employee desires to be employed by Company; and
WHEREAS, Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
Company;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
1. Employment. Company hereby employs Employee in its business as
Executive Vice President of Corporate Development, and Employee hereby accepts
such employment, all upon the terms and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for as long as
Employee remains employed hereunder, with Employee acknowledging that he is an
at will employee ("Employment Period").
3. Salary and Base Compensation. Employee shall be entitled to receive
salary during the Employment Period at the rate of One Hundred Seventy Thousand
and 100/00 Dollars ($170,000.00) per annum, as such may be increased pursuant to
Section 9 hereof (the "Base Salary"). In addition to the Base Salary paid to
Employee during the Employment Period, Employee shall be entitled to receive the
Benefits, Bonus Compensation, and Stock Option (as those terms are hereinafter
defined) during the Employment Period. The Base Salary shall be payable biweekly
in accordance with the current normal payroll policies of Company, which
policies may be changed by Company from time to time in its sole discretion, and
shall be subject to all appropriate withholding taxes. The annual discretionary
Bonus Compensation will be targeted at 40% of Base Salary which shall be earned
for optimal performance to Company and personal objectives as designated and
determined solely by the CEO and/or Board of Directors.
4. Business Expenses and Reimbursements. Employee shall be entitled to
reimbursement by the Company for ordinary and necessary business expenses
incurred by
1
<PAGE> 4
Employee in the performance of his duties for the Company, which types of
expenditures shall be determined and approved by the Company, and further
provided that:
(a) Each such expenditure is of a nature qualifying it as a
proper deduction on the Federal and State income tax returns of Company as a
business expense and not as deductible compensation to Employee; and
(b) Employee furnishes Company with adequate records and other
documentary evidence required by Federal and State statutes and regulations for
the substantiation of such expenditures as deductible business expenses of
Company and not as deductible compensation to Employee, as well as any other
documentation reasonably requested by Company.
5. Benefits. Employee shall be entitled to receive the following
Benefits during the entire Employment Period:
(a) Employee agrees that the Base Salary, Bonus Compensation,
the Stock Option, and the Benefits and the other compensation provided in
accordance with this Agreement and, if applicable, the Relocation Agreement, are
the sole and exclusive compensation and benefits provided to the Employee for
his duties hereunder.
(b) Continuing throughout the Employment Period:
(i) Employee shall be eligible for participation in
all of the employee benefits including, without limitation, life insurance/AD &
D, supplemental life insurance disability, profit sharing and retirement
benefits in accordance with established procedures and provided at any time by
the Company to any of its employees in the sole and absolute discretion of the
Board of Directors of the Company (the "Board").
(ii) The Company shall make available health and
dental insurance providing full hospital, medical and dental coverage pursuant
to Company plans in effect from time to time for Employee and each of Employee's
dependents at similar expense to Employee or such dependents as charged to other
employees of the Company.
(iii) The Company shall provide a monthly car
allowance equal to $350.00 per month. No additional expenses for maintaining or
insuring a vehicle will be covered beyond this allowance except as allowed under
Section 4, "Business Expenses and Reimbursements."
(iv) The Company will provide an executive level
membership at the Boca Raton Athletic Club. All initiation fees and monthly dues
will be paid by the Company.
(v) The Company will provide membership at the Boca
Raton Country Club and Resort following successful completion of the Preliminary
Evaluation Period.
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6. Personal Time. Employee shall be entitled to Personal Time (e.g.
vacation) in accordance with the Personal Time policy of the Company in effect
from time to time. Employee is eligible for an additional week following one
year of service.
7. Stock Options. In addition to Employee's Base Salary, Benefits and
Bonus Compensation, Employee shall be granted a stock option to purchase a
number of shares of common stock equal to One Hundred Thousand (100,000) at an
exercise price equal to fair market value at time of grant, which options will
vest over a four-year period in accordance with the standard vesting schedule
approved by the Board of Directors. The options shall be granted to Employee
pursuant to an Option Agreement satisfactory as to its other terms to the
Company, shall be incentive option stock options to the extent permitted by law,
and all of these grants and terms are subject to the approval of the Board of
Directors.
8. Registration Rights. After the declaration of effectiveness by the
SEC of the initial public offering of securities of the Company, in the event
the Company registers common stock held by other then-current employees of
Company, then the Company shall also register a prorata portion of the common
stock then held by Employee, excluding registration on Form S-8 or any other
registration of an employee benefit plan available to a class of employees, and
subject to standard underwriter cutback rights based on market conditions. The
Company shall not be required to register any share of Employee to the extent
such shares are eligible for sale (subject to volume limitations) under Rule 144
or any successor provision.
9. Compensation Review. The Chief Executive Officer ("CEO") and/or Board
shall from time to time, no less frequently than annually, review Employee's
compensation and may (in the CEO or Board's sole discretion) increase, but not
decrease, the compensation provided for in Section 3 hereof. Any such increase
in compensation shall be valid only if in writing, executed by the CEO, and such
writing shall constitute an amendment solely to the payments to be made to
Employee under this Agreement, without waiver or modification of any other
provision hereof.
10. Invention Assignment and Confidentiality Agreement. Against the
execution and delivery of this Agreement, Employee shall enter into an agreement
in the form of Exhibit "A" hereto (the "Invention Assignment and Confidentiality
Agreement").
11. Non-Competition Agreement. Against the execution and delivery of
this Agreement, Employee shall enter into a non-competition and non-solicitation
agreement (in the form of Exhibit "B" hereto) (the "Non-Competition Agreement")
which also, notwithstanding the at will nature of the employment, provides for a
severance benefit under certain circumstances. Notwithstanding the foregoing,
the parties agree and acknowledge that this Section 11 and the Non-Competition
Agreement shall be enforceable in all respects, except with regard to any
restriction on Employee's ability to practice the profession of law in the State
of Florida to the extent that such a restriction violates any law or regulation
that is applicable to the Company.
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<PAGE> 6
12. No Other Compensation or Benefits. Employee agrees that the
compensation set forth in this Agreement is the sole and exclusive compensation
of Employee for his duties hereunder, and that he shall have no rights to
receive any other compensation or benefits of any nature.
13. Duties. During the Employment Period:
(a) Employee shall furnish all manner of services in connection
with his position as Executive Vice President of Corporate Development or as
otherwise designated by the CEO including, without limitation, primary
responsibility for such duties as shall be deemed by the CEO appropriate to
carry out the policies and programs of the Board and as from time to time may be
delegated or assigned to him/her by the Board;
(b) Employee shall report directly to the CEO in the performance of
all his duties herein.
(c) Employee shall comply with all Company policies for the
employees as such policies may exist from time to time.
(d) Employee shall devote his entire professional working time,
energy and skill to the service of Company and the promotion of Company's
interests, and shall use his best efforts in the performance of his/her services
hereunder. The parties agree that Employee may not, during the Employment
Period, be engaged in any other business activity whether or not such activity
is pursued for gain, profit, or other pecuniary advantage including, without
limitation, management or management consulting activities; provided, however,
Employee may invest his personal assets in businesses where the form or manner
of such investment will not require services on the part of Employee conflicting
with the duties of Employee under this Agreement and in which his participation
is solely that of a passive investor. Employee agrees to abide by all rules and
regulations established from time to time by the CEO and/or the Board; and all
commissions, fees or other income earned and received by Employee, if any, in
furtherance of the business of Company, or its affiliates or from any other
business or financial opportunity or endeavor in which Employee is an active
participant and not a passive investor, shall be accepted by Employee for the
account of Company, and shall be remitted to Company within three (3) days of
Employee's receipt thereof.
14. Termination. The Company may, in its sole discretion, terminate
this Agreement for any reason or for no reason, with or without cause, subject
to the severance obligation outlined in the Non-Competition Agreement. In the
event of termination of employment by either party, subject to compliance with
the Non-Competition Agreement, Employee shall be entitled to distributions
pursuant to the severance provisions more fully set forth in the Non-
Competition Agreement and to all Base Salary which is fully accrued.
15. Surrender of Records. Upon the termination of the Employee's
employment hereunder, for any reason whatsoever, and in addition to such other
actions as may be reasonably
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<PAGE> 7
required by the Company, Employee agrees to surrender to the Company, in good
condition, any record or records kept by him containing the names, addresses,
and other information with regard to customers or potential customers of the
Company which have been served by Employee.
16. Entire Agreement. This Agreement and the Relocation Agreement dated
4/28/99 represents the entire understanding and agreement between the parties
with respect to the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made by and between
such parties, including the offer letter dated April 28, 1999 from the Company
to Employee.
17. Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
18. Assignments. Employee shall not assign his rights and/or
obligations hereunder.
19. Binding Effect. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
20. Severability. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
21. Survival. Notwithstanding anything to the contrary herein, the
provisions of Sections 10 through 28 (inclusive, except Section 13) shall
survive and remain in effect in accordance with their respective terms in the
event the employment is terminated.
22. Waivers. The failure or delay of Company at any time to require
performance by Employee of any provision of this Agreement, even if known, shall
not affect the right of Company to require performance of that provision or to
exercise any right, power or remedy hereunder, and any waiver by Company of any
breach of any provision of this Agreement should not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power or remedy under this Agreement. No
notice to or demand on Employee in any case shall, of itself, entitle such party
to any other or further notice or demand in similar or other circumstances.
23. Specific Performance. Employee acknowledges that the services to be
rendered by Employee hereunder are extraordinary and unique and are vital to the
success of the Company, and that damages at law would be an inadequate remedy
for any breach or threatened breach of this Agreement by Employee. Therefore, in
the event of a breach or threatened breach by
5
<PAGE> 8
Employee of any provision of this Agreement, then the Company shall be entitled,
in addition to all other rights or remedies, to injunctions restraining such
breach, without being required to show any actual damage or to post any bond or
other security.
24. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, to the addresses listed above or to such
other address as any party may designate by notice complying with the terms of
this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex or telefax, and (d) on the date upon which the return receipt is signed or
delivery is refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
25. Jurisdiction and Venue. The parties acknowledge that a substantial
portion of negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in Palm Beach County or
the court of the United States, Southern District of Florida; (b) consents to
the jurisdiction of each such court in any such suit, action or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
26. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
27. Employee Representations, Warranties, and Acknowledgments. Employee
represents and warrants to Company that he is fully empowered to enter and
perform his obligations under this Agreement and, without limitation, that he is
under no restrictive covenants to any person or entity that will be violated by
his entering into and performing this Agreement, and that this Agreement
constitutes the valid and legally binding obligation of Employee enforceable in
accordance with its terms. The execution and delivery of this Agreement by
Employee has been duly authorized by all necessary action. Employee shall
indemnify Company upon demand for and against any and all judgments, losses,
claims, damages, costs (including without limitation all legal fees and costs,
even if incident to appeals) incurred or suffered by any of them as a result of
the breach of the representations and warranties
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<PAGE> 9
made in this section, or as a result of the failure of the acknowledgment made
in this section to be true and correct at all times.
28. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Florida without regard to principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DALEEN TECHNOLOGIES, INC.
Its: CEO: /s/ James Daleen
----------------------------
EMPLOYEE: /s/ Stephen M. Wagman
------------------------------
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<PAGE> 10
EXHIBIT LIST
Exhibit A -Invention Assignment and Confidentiality Agreement
Exhibit B -Non-Solicitation and Non-Compete Agreement
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<PAGE> 11
EXHIBIT A TO EMPLOYMENT AGREEMENT
INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into this 28th day of April, 1999, by and between
Daleen Technologies, Inc. (DTI), and Stephen M. Wagman (hereinafter referred to
as "Employee") for and in consideration of Employee's continued employment or
engagement by DTI and the compensation that Employee shall receive during
Employee's employment or engagement, the parties agree as follows:
1. Both during and after Employee's employment or engagement:
a. Employee shall not disclose to anyone outside DTI any
Confidential Information. "Confidential Information" is
defined as information which has not been made publicly
available by DTI or the third party owner of such information,
and
l. Which was developed by DTI, and relates to DTI's past,
present, and future business, including but not
limited to developments (defined below, technical
data, specifications, designs, concepts, discoveries,
copyrights, improvements, product plans, research and
development, personal information, personnel
information, financial information, customer lists,
leads, and/or marketing programs;
2. All documents marked as confidential and/or continuing such
information; and/or
3. All information DTI has acquired or received from a third
party in confidence,
b. Employee shall use Confidential Information only for DTI's
business purposes; and
c. Employee shall use any information received in confidence by
DTI from any third party only as permitted by written
agreement between DTI and the third party; and
d. Employee shall not be permitted to justify any disregard of
the obligations of Employee hereunder by using any of the
Confidential Information to guide a search by it of
publications and other publicly available information,
selecting a series of items of knowledge from unconnected
sources and fitting them together by use of the integrated
disclosure of the information thereby to justify its disregard
of the obligations of confidence.
2. Employee shall not disclose to DTI, use in DTI's business, or cause DTI
to use any information or material which is confidential to any third
party unless DTI has a written agreement with the third party allowing
DTI to receive and use the confidential
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<PAGE> 12
information or materials. Employee will not incorporate into Employee's
work any material which is subject to the copyrights of any third party
unless DTI has the right to copy and incorporate such copyrighted
material.
3. When Employee is no longer employed or engaged by DTI, Employee shall
return to DTI all DTI property, and any and all third party property,
including all Confidential Information, drawings, computer programs or
copies thereof, documentation, notebooks and notes, reports and any
other materials on electronic or printed media.
4. Employee hereby grants, transfers and assigns to DTI all of his or her
rights, title and interest, if any, in any and all Developments,
including rights to translation and reproductions in all forms or
formats and the copyrights and patent rights thereto, if any, and he or
she agrees that DTI may copyright said materials in DTI's name and
secure renewal, reissues and extensions of such copyrights for such
periods of time as the law may permit. "Developments" is defined as any
idea, invention, process, design, concept, or useful article (whether
the design is ornamental or otherwise), computer program,
documentation, literary work, audiovisual work and any other work of
authorship, hereafter expressed, made or conceived solely or jointly by
employee during Employee's employment or engagement, whether or not
subject to patent, copyright or other forms of protection that:
a. Are related to the actual or anticipated business,
research or Development of DTI; and/or
b. Are suggested by or result from any task assigned to
Employee or work performed by Employee for or on
behalf of DTI.
Employee acknowledges that the copyrights in Developments created by
Employee in the scope of Employee's employment or engagement, belong to
DTI by operation of law, or may belong to a party engaged by DTI by
operation of law pursuant to a works for hire contract between DTI and
such contracted part. To the extent the copyrights in such works may
not be owned by DTI or such contracted party by operation of law,
Employee hereby assigns to DTI or such contracted party, as the case
may be, all copyrights (if any) Employee may have in Developments.
Items not assigned by this Section 4 are listed and described on the
attached "Schedule of Separate Works". Employee agrees not to include
any part of such items in the materials Employee prepares for DTI
unless and until such items are licensed or assigned to DTI under
separate written agreement.
At all times hereafter, Employee agrees to assist DTI in obtaining
patents or copyrights on any Developments assigned to DTI that DTI, in
its sole discretion, seeks to patent or copyright. Employee also agrees
to sign all documents, and do all things necessary to obtain such
patents or copyrights, to further assign them to DTI, and to reasonably
protect
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<PAGE> 13
them and DTI against infringement by other parties at DTI expense with
DTI prior approval.
Employee irrevocably appoints any DTI-selected designee to act, at all
time hereafter, as his or her agent and attorney-in-fact to perform all
acts necessary to obtain patents and/or copyrights as required by this
Agreement if Employee (i) refuses to perform those acts or (ii) is
unavailable, within the meaning of the United States Patent and
Copyright laws. It is expressly intended by Employee that the foregoing
power of attorney is coupled with an interest.
Employee shall keep complete, accurate, and authentic information and
records on all Developments in the manner and form reasonably requested
by DTI Such information and records, and all copies thereof, shall be
the property of DTI as to any Developments assigned DTI. Employee
agrees to promptly surrender such information and records at the
request of DTI as to any Developments.
5. In connection with any of the Developments assigned by Section 4,
Employee agrees:
a. To disclose them promptly to DTI, and
b. At DTI's request, to execute separate written assignments to DTI
and do all things reasonable necessary to enable DTI to secure
patents, register copyrights or obtain any other form of
protection for Developments in the United States and in other
countries. If Employee fails or is unable to do so, Employee
hereby authorizes DTI to act under power of attorney for Employee
to do all things to secure such rights.
c. To provide DTI with notice of any inadvertent disclosure of
Confidential Information related to any Development.
6. Without limitation of any other Agreement between Employee and DTI,
Employee shall not employ or engage or attempt to employ or engage the
services of any employee of DTI, either directly or through the agency
of a third party during the term of, or within six (6) months after,
the termination of Employee's employment or engagement with DTI.
7. DTI, its subsidiaries, licensees, successors or assigns, (direct or
indirect) are not required to designate Employee as author of any
Development when such Development is distributed publicly or otherwise.
Employee waives and releases, to the extent permitted by law, all
Employee's rights to such designation and any rights concerning future
modifications of such Developments.
8. Rights, assignments, and representations made or granted by Employee in
this Agreement, are assignable by DTI and are for the benefit of DTI's
successors, assigns, and parties contracted with DTI.
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9. Miscellaneous Provisions.
a) Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a
writing signed by the party as to whom enforcement of any such
amendment, supplement, waiver or modification is sought and
making specific reference to this Agreement.
b) Further Assurances. The parties hereby agree from time to time
to execute and deliver such further and other transfers,
assignments and documents and do all matters and things which
may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
c) Brokers. Each of the parties represents and warrants that such
party has dealt with no broker or finder in connection with
any of the transactions contemplated by this Agreement, and,
insofar as such party knows, no broker or other person is
entitled to any commission or finder's fee in connection with
any of these transactions. The parties each agree to indemnify
and hold harmless one another against any loss, liability,
damage, cost, claim or expense incurred by reason of any
brokerage commission or finder's fee alleged to be payable
because of any act, omission or statement of the indemnifying
party.
d) Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon,
inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
e) Headings. The headings contained in this Agreement are for
convenience of reference only, are not to be considered a part
hereof and shall not limit or otherwise affect in any way the
meaning or interpretation of this Agreement.
f) Severability. If any provision of this Agreement or any other
Agreement entered into pursuant hereto is contrary to,
prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but
the remainder hereof shall not be invalidated thereby and
shall be given full force and effect so far as possible. If
any provision of this Agreement may be construed in two or
more ways, one of which would render the provision invalid or
otherwise voidable or unenforceable and another of which would
render the provision valid and enforceable, such provision
shall have the meaning which renders it valid and enforceable.
g) Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any
party pursuant hereto shall survive the execution and delivery
of this Agreement and the termination of employment or
engagement of Employee.
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h) Waivers. The failure or delay of any party at any time to
require performance by another party of any provision of this
Agreement, even if known, shall not affect the right of such
party to require performance of that provision or to exercise
any right, power or remedy hereunder. Any waiver by any party
of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach
of such provision, a waiver of the provision itself, or a
waiver of any right, power or remedy under this Agreement. No
notice to or demand on any party in any case shall, of itself,
entitle such party to any other or further notice or demand in
similar or other circumstances.
i) Specific Performance. Each of the parties acknowledges that
the parties will be irreparably damage (and damages at law
would be an inadequate remedy) if this Agreement is not
specifically enforced. Therefore, in the event of a breach or
threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in
addition to all other rights or remedies, to injunctions
restraining such breach, without being required to show any
actual damage or to post any bond or other security, and/or to
a decree for specific performance of the provisions of this
Agreement.
j) Jurisdiction and Venue. The parties acknowledge that a
substantial portion of negotiations and anticipated
performance and execution of this Agreement occurred or shall
occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other
federal or state courts, each of the parties irrevocably and
unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in
Palm Beach County or the court of the United States, Southern
District of Florida; (b) consents to the jurisdiction of each
such court in any suit, action or proceeding; (c) waives any
objection which it may have to the laying of venue of any such
suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such
party by mail, as provided in this Agreement, or in such other
manner as may be provided under applicable laws or court rules
in said state.
k) Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is intended
to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. No single or
partial exercise by any party of any right, power or remedy
hereunder shall preclude any other or further exercise
thereof.
l) Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and
construed and enforced in accordance with,
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<PAGE> 16
the internal laws of the State of Florida without regard to
principles of conflicts of laws.
m) Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is
responsible for its preparations. The parties acknowledge each
contributed and is equally responsible for its preparation.
n) Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect to
the subject matter hereof, and supersedes all other
negotiations, understandings and representations (if any) made
by and among such parties.
IN WITNESS WHEREOF, the parties have duly set their hands to this Agreement,
effective as of the date stated above.
DALEEN TECHNOLOGIES, INC. EMPLOYEE
/s/ James Daleen /s/ Stephen M. Wagman
- ---------------------------- ---------------------------
DTI Authorized Signature Employee's Signature
5/12/99 Stephen Wagman
- ---------------------------- ---------------------------
Date Employee's Printed Name
---------------------------
Date
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<PAGE> 17
SCHEDULE OF SEPARATE WORKS
The following are works that are not assigned by Section 4 of the Invention
Assignment and Confidentiality Agreement, in which Employee has any right, title
or interest, and which were conceived or written either wholly or in part by
Employee, prior to or outside the scope of Employee's employment by DTI.
DESCRIPTION: (If none, enter the word "None")
Standard licenses, contracts, policies and procedures previously developed,
published and implemented by Employee. Information on technology licensing,
financing and M&A transactions previously known by Employee.
Indicate any item listed above that has been published, registered as a
copyright, or is or has been the subject of a patent application:
None
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Indicate the name of such organization or third party who also has rights in
any of the listed items (such as former employers, partners, etc.):
None
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
The foregoing is complete and accurate to the best of Employee's knowledge.
/s/ Stephen M. Wagman
- ------------------------------------------------------------------
Employee's Signature Date
/s/ Stephen Wagman
- ----------------------------
Employee's Printed Name
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<PAGE> 18
EXHIBIT B TO EMPLOYMENT AGREEMENT
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT ("Agreement") made as of this
28th day of April, 1999, by and between Daleen Technologies, Inc., a Florida
corporation with its principal office at 902 Clint Moore Road, Suite 230, Boca
Raton, Florida 33487 (hereinafter called "Daleen") and Stephen M. Wagman
(hereinafter "Employee").
WHEREAS, Employee is accepting employment with Daleen; and
WHEREAS, the parties wish to reflect their agreement as to Employee's
promises regarding Employee's solicitation and competition which have induced
Daleen to employ Employee at Employee's status with Daleen, as well as Daleen's
extension of certain severance benefits to Employee.
NOW, THEREFORE, Employee and Daleen (hereinafter sometimes referred to
collectively as the "parties" and separately as a "party") in consideration of
Employee's employment with Daleen and the covenants hereinafter set forth and
other good and valuable consideration and intending to be legally bound hereby,
agree as follows:
1. Non-solicitation. Employee will not, at any time while employed by
Daleen and for one (1) year after the termination of Employee's employment with
Daleen for any reason whatsoever, directly or indirectly (by assisting or
suggesting to another, or otherwise) solicit otherwise attempt to induce or
accept the initiative of another in such regard, alone or by combining or
conspiring with anyone, any employees, officers, directors, agents, consultants,
representatives, contractors, suppliers, distributors, customers or other
business contacts (collectively, "Business Affiliates") of Daleen to terminate
or modify its position as an employee, officer, director, agent, consultant,
representative, contractor, supplier, distributor, customer or business contact
with Daleen or to compete against Daleen.
2. Non-competition. (a) Employee shall not while employed by Daleen,
and after the termination of said employment for any reason whatsoever for the
time period after such termination described in paragraph (c) below (the
"No-Compete Period"), directly or indirectly, as owner, officer, director,
employee, agent, lender, broker, investor, consultant or representative of any
corporation or as owner of any interest in, or as an employee, agent,
consultant, partner, affiliate or in any other capacity whatsoever or
representative of any other form of business association, sole proprietorship or
partnership, conduct or be related to any business in competition with any
business of Daleen now or in the future, including without limitation, in the
Billing and Customer Care industry (herein referred to as the "Competitive
Business") anywhere within the territories, nor as to certain customers anywhere
in the United States, both listed on the "Territories and Customers" Exhibit to
the Agreement, made a part hereof, including without limitation, the
solicitation of any customers, who were at any time customers of Daleen and in
connection with a business which is competitive with the Competitive Business
except that such competitive activity will be permitted as to business
solicitation of and competition with Daleen
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as to any entity listed on an Exhibit to this Agreement made a part hereof
identified as a "No-Compete Exception", if any, subject to paragraph (c) below.
(b) In addition to, and not in limitation of the other provisions
hereof or of any other Agreement between Employee and Daleen, Employee shall not
at any time in any maimer other than in the ordinary course of good faith
competition only as permitted herein interfere with, disturb, disrupt, decrease
or otherwise jeopardize the business of Daleen or do or permit to be done
anything which may tend to take away or diminish the trade, business or good
will of Daleen or give to any person the benefit or advantage of Company's or
Seller's methods of operation, advertising, publicity, training, business
customers or accounts, or any other information relating or useful to Daleen's
business.
(c) The No-Compete Period shall increase depending upon the duration of
Employee's employment with Daleen as follows:
i) If Employee has completed one hundred eighty (180) days or
less of employment there will be a six (6) month No-Compete
Period;
ii) If Employee has completed more than one hundred eighty (180)
days of employment the No-Compete Period will be one (1) year;
DTI reserves the right to waive the Non-Compete Period at its option in
return for the payment of the severance benefit described in Section 4.
3. Legal Effect. The foregoing covenants of Employee shall be deemed
severable, and the invalidity of any covenant shall not affect the validity or
enforceability of any other covenant. The existence of any claim or cause of
action by Employee against Daleen predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Daleen of these covenants.
Daleen's failure to object to any conduct in violation of this Agreement shall
not be deemed a waiver by Daleen, but Daleen may, if it wishes, specifically
waive any part or all of those covenants to the extent that such waiver is set
forth in writing duly authorized by Daleen's Board of Directors.
Employee acknowledges and confirms that the length of the term and
geographical restrictions contained herein are fair and reasonable and not the
result of overreaching, duress or coercion of any kind. Employee further
acknowledges and confirms that his or her full, uninhibited and faithful
observance of each of the covenants contained in this Agreement will not cause
him or her any undue hardship, financial or otherwise, and that enforcement of
each of the covenants contained in this Agreement will not impair his or her
ability to obtain employment commensurate with his or her abilities and on terms
fully acceptable to him or her or otherwise to obtain income required for the
comfortable support of him or her and his or her family and the satisfaction of
the needs of his or her creditors. Employee acknowledges and confirms that his
or her special knowledge of the business of Daleen is such as would cause Daleen
serious injury and loss if he or she were to use such ability and knowledge to
the benefit of a competitor or were to compete with Daleen.
10
<PAGE> 20
In the event that any court shall finally hold that the time or
territory or any other provision stated in this Agreement constitutes an
unreasonable restriction upon Employee, Employee hereby expressly agrees that
the provisions of this Agreement shall not be rendered void, but shall apply as
to time and territory or to such other extent as such court may judicially
determine or indicate constitutes a reasonable restriction under the
circumstances involved. Employee hereby agrees that in the event of the
violation by him or her of any of the provisions of this Agreement, Daleen will
be entitled if it so elects, to institute and prosecute proceedings at law or in
equity to obtain damages with respect to such violation or to enforce the
specific performance of this Agreement by Employee or to enjoin Employee from
engaging in any activity in violation hereof without any requirement on the part
of Daleen to post any bond.
In the event Daleen should bring any legal action or other proceeding
for the enforcement of this Agreement, the time for calculating the No-Compete
Period or terms of any other restriction herein shall not include the period of
time commencing with the filing of legal action or other proceeding to enforce
the terms of this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding.
4. Severance. In further consideration of the entering into of this
Agreement by Employee, Daleen agrees to entitle Employee to a severance pay
benefit based upon base salary dependent upon the duration of Employee's
employment with Daleen, determined as follows:
a) One hundred eighty (180) days or less of employment will result in a
severance benefit equal to six (6) months salary;
b) Beyond one hundred eighty (180) days of employment will result in a
severance benefit equal to one (1) year salary.
c) If DTI waives the Non-Compete Period there shall be no severance
benefit paid for that period waived, subject to a minimum severance
of six (6) months salary.
The foregoing severance benefit shall be paid by Daleen in accordance
with DTI's current payroll policies. Employee shall not be entitled to any
severance benefit if terminated by Daleen for "cause" or if Employee voluntarily
resigns from his or her employment with Daleen subject to the provisions of the
Non-Compete period in Section 2(c). As used in this Agreement determination for
"cause" shall be defined as termination of Employee by Daleen in the event
Employee has been convicted of any felony or, in the case of other crimes,
involving moral turpitude or dishonesty, or for any breach by Employee of any
agreement with Daleen or of its employment or business policies (including
without limitation theft or misuse of company property).
5. Miscellaneous Provisions.
The provisions of this Agreement may not be amended, supplemented,
waived or changed orally, but only by a writing signed by the party as to whom
enforcement of any such amendment, supplement, waiver or modification is sought
and making specific reference to this Agreement. All of the terms and provisions
of this Agreement, whether so expressed or not,
11
<PAGE> 21
shall be binding upon, inure to the benefit of, and be enforceable by the
parties and their respective administrators, executors, legal representatives,
heirs, successors and permitted assigns. The headings contained in this
Agreement are for convenience of reference only, are not to be considered a part
hereof and shall not limit or otherwise affect in any way the meaning or
interpretation of this Agreement. The failure or delay of any party at any time
to require performance by another party of any provision of this Agreement, even
if known, shall not affect the right of such party to require performance of
that provision or to exercise any right, power or remedy hereunder. Any waiver
by any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement, No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances,
The parties acknowledge that a substantial portion of negotiations,
anticipated performance and execution of this Agreement occurred or shall occur
in Palm Beach County, Florida, and that, therefore, without limiting the
jurisdiction or venue of any other federal or state courts, each of the parties
irrevocably and unconditionally (a) agrees that any suit, action or legal
proceeding arising out of or relating to this Agreement may be brought in the
courts of record of the State of Florida in Palm Beach County or the District
Court of the United States, Southern District of Florida; (b) consents to the
jurisdiction of each such court in any suit, action or proceeding; (c) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any of such courts; and (d) agrees that service of any court
paper may be effected on such party by mail, as provided in this Agreement, or
in such other manner as may be provided under applicable laws or court rules in
said state. Except as otherwise expressly provided herein, no remedy herein
conferred upon any party is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. No single or partial exercise by any party of any
right, power or remedy hereunder shall preclude any other or further exercise
thereof. This Agreement and all transactions contemplated by this Agreement
shall be governed by, and construed and enforced in accordance with, the
internal laws of the State of Florida without regard to principles of conflicts
of laws. This Agreement shall not be construed more strongly against any party
regardless of who is responsible for its preparation. The parties acknowledge
each contributed and is equally responsible for its preparation. Any time period
provided for herein which shall end on a Saturday, Sunday or legal holiday shall
extend to 5:00 p.m. of the next full business day. This Agreement represents the
entire understanding and agreement amount the parties with respect to the
subject matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and among such parties.
12
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above.
Daleen Technologies, Inc.
/s/ Stephen M. Wagman /s/ James Daleen
- ------------------------------------ ------------------------------
Employee's Signature Its CEO
/s/ Stephen M. Wagman /s/ James Daleen
- ------------------------------------ ------------------------------
Printed Name Printed Name
13
<PAGE> 23
NO-COMPETE EXCEPTIONS
Exhibit to Non-Solicitation and Non-Compete Agreement of Stephen M. Wagman.
NONE.
14
<PAGE> 24
TERRITORIES AND CUSTOMERS
Exhibit to Non-Solicitation and Non-Compete Agreement of Stephen M. Wagman.
THE WORLD.
15
<PAGE> 1
EXHIBIT 10.10
FORM OF
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, effective as of ____________, 1999,
between the Corporation TECHNOLOGIES, INC., a Delaware corporation (the
"Corporation") and ________________________ ("Indemnitee").
W I T N E S S E T H:
WHEREAS, Indemnitee, a member of the Board of Directors and/or an
officer of the Corporation, performs a valuable service in such capacity for the
Corporation; and
WHEREAS, in order to induce Indemnitee to continue to serve as a
Director and/or an officer of the Corporation, the Corporation has determined
and agreed to enter into this Agreement with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
Director/and or an officer after the date hereof, the parties hereto agree as
follows:
1. SERVICES TO THE CORPORATION. Indemnitee will serve, at the will of
the Corporation under separate contract, if any such contract exists, as an
officer and/or Director of the Corporation, or as a director, officer or other
fiduciary of an affiliate of the Corporation (including any employee benefit
plan of the Corporation) faithfully and to the best of his ability so long as he
is duly elected and qualified in accordance with the Certificate of
Incorporation and the Bylaws, as amended or amended and restated from time to
time, of the Corporation or of such affiliate (the "Organizational Documents");
provided, however, that Indemnitee may at any time and for any reason resign
from such position or any other position (subject to any contractual obligation
that Indemnitee may have assumed apart from this Agreement) and that the
Corporation or any affiliate shall have no obligation under this Agreement to
continue Indemnitee in such position or any other position.
2. INDEMNITY OF INDEMNITEE. The Corporation hereby agrees to hold
harmless and indemnify Indemnitee to the fullest extent authorized or permitted
by the Organizational Documents and the Delaware General Corporation Law, as
amended (the "Code"), as the same may be amended from time to time (but only to
the extent that any such amendment permits the Corporation to provide broader
indemnification rights than the Organizational Documents or the Code permitted
prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
Organizational Documents, the Code, any other applicable law and the exclusions
set forth in Section 4 hereof, the Corporation hereby further agrees to hold
harmless and indemnify Indemnitee against any and all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with any threatened, pending or
completed action, suit or proceeding, whether civil,
<PAGE> 2
criminal, arbitral, administrative or investigative (including an action by or
in the right of the Corporation), to which Indemnitee is, was or at any time
becomes a party, or is threatened to be made a party, by the reason of the fact
that Indemnitee is, was or at any time becomes a director, officer, employee or
other agent of the Corporation or is or was serving or at any time serves at the
written request of the Corporation as a director, officer, employee or other
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise.
4. LIMITATIONS ON INDEMNITY. No indemnity pursuant to this Agreement
shall be paid by the Corporation:
(a) on account of any claim against Indemnitee for an accounting of
profits made from the purchase or sale by Indemnitee of securities of the
Corporation, pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or
(b) for which payment has actually been made to Indemnitee under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement; or
(c) in connection with any proceeding (or part thereof) brought or
made by Indemnitee against the Corporation, unless such indemnification is
expressly required to be made by law; or
(d) if it is finally determined to be unlawful under the Code.
5. NOTIFICATION AND DEFENSE OF CLAIM.
(a) Promptly after receipt by Indemnitee of notice of the
commencement of any action, suit or proceeding, Indemnitee will, if a claim in
respect thereto is to be made against the Corporation under this Agreement,
notify the Corporation of the commencement thereof, but the failure to so notify
the Corporation will not relieve it from any liability which it may have to
Indemnitee otherwise under this Agreement. With respect to any such action, suit
or proceeding as to which Indemnitee so notifies the Corporation:
(i) the Corporation will be entitled to participate
therein at its own expense; and
(ii) except as otherwise provided below, to the extent
that it may desire, the Corporation may assume the
defense thereof.
(b) After notice from the Corporation to Indemnitee of its
election to assume the defense thereof, the Corporation will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ counsel of his choosing in such action, suit or
proceeding but the
-2-
<PAGE> 3
fees and expenses of such counsel incurred after notice from the Corporation of
its assumption of the defense thereof shall be at the expense of Indemnitee
unless (i) the employment of counsel by Indemnitee has been authorized in
writing by the Corporation, (ii) the Corporation and Indemnitee shall reasonably
conclude that there may be a conflict of interest between the Corporation and
Indemnitee in the conduct of the defense of such action, or (iii) the
Corporation shall not in fact have employed counsel to assume the defense of
such action, in each of which case the reasonable fees and expenses of
Indemnitee's counsel shall be paid by the Corporation.
(c) The Corporation shall not be liable to Indemnitee under
this Agreement for any amounts paid in settlement of any threatened or pending
action, suit or proceeding without its prior written consent. The Corporation
shall not settle any such action, suit or proceeding in any manner which would
impose any penalty or limitation on Indemnitee without Indemnitee's prior
written consent. Neither the Corporation nor Indemnitee will unreasonably
withhold or delay its or his consent to any proposed settlement.
6. PREPAYMENT OF EXPENSES. Unless Indemnitee otherwise elects,
expenses incurred in defending any civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt by the Corporation of a written
affirmation of Indemnitee's good faith belief that his conduct meets the
standards required for indemnification under the Code and the Organizational
Documents, and Indemnitee furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay any advances if it is ultimately
determined that he is not entitled to be indemnified by the Corporation under
this Agreement.
7. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained in this Agreement shall continue during the period in
which Indemnitee is a member of the Board of Directors and/or an officer of the
Corporation and shall continue thereafter so long as Indemnitee shall be subject
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, and whether formal or
informal, by reason of the fact that Indemnitee was a director and/or an officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, agent or consultant of another corporation,
partnership, joint venture, trust or other enterprise.
8. RELIANCE. The Corporation has entered into this Agreement in order
to induce Indemnitee to continue as a member of the Board of Directors and/or an
officer of the Corporation, as the case may be, and acknowledges that Indemnitee
is relying upon this Agreement in continuing in such capacity.
9. SEVERABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
-3-
<PAGE> 4
10. GENERAL.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
principles of conflicts of law.
(b) Neither this Agreement nor any rights or obligations
hereunder shall be assigned or transferred by Indemnitee.
(c) This Agreement shall be binding upon Indemnitee and upon
the Corporation, its successors and assigns, including successors by merger or
consolidation, and shall inure to the benefit of Indemnitee, his heirs, personal
representatives and permitted assigns and to the benefit of the Corporation, its
successors and assigns.
(d) No amendment, modification or termination of this
Agreement shall be effective unless in writing signed by both parties hereof.
[Signatures contained on following page]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
INDEMNITEE: DALEEN TECHNOLOGIES, INC.
By:
- ---------------------------------- --------------------------------------
James Daleen, Chief Executive Officer
Name:
-----------------------------
Date: Date:
----------------------------- ------------------------------------
<PAGE> 1
EXHIBIT 10.11
DALEEN TECHNOLOGIES, INC.
STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
providing the opportunity to purchase Shares or to receive compensation which is
based upon appreciation in the value of Shares to Employees and Key Persons in
order to attract and retain Employees and Key Persons by providing an incentive
to work to increase the value of Shares and a stake in the future of the Company
which corresponds to the stake of each of the Company's shareholders. The Plan
provides for the grant of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards and Stock Appreciation Rights to aid the Company in
obtaining these goals.
SECTION 2.
DEFINITIONS
Each term set forth in this Section shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the Compensation Committee of the Board.
2.4 COMMON STOCK means the common stock of the Company having a
par value of $.01 per share.
2.5 COMPANY means Daleen Technologies, Inc., a Florida
corporation, and any successor to such organization.
2.6 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.
2.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.8 EXERCISE PRICE means the price which shall be paid to purchase
one (1) Share upon the exercise of an Option granted under this Plan.
2.9 FAIR MARKET VALUE means the price at which the Committee or
the Board, as the case may be, acting in good faith, determines through any
reasonable valuation method that a Share might change hands between a willing
buyer and a willing seller, neither being under any compulsion to buy or to sell
and both having reasonable knowledge of the relevant facts, which may include
opinions of independent experts.
2.10 ISO means an option granted under this Plan to purchase Shares
which is intended by the Company to satisfy the requirements of Code Section 422
as an incentive stock option.
<PAGE> 2
2.11 KEY PERSON means (i) a member of the Board who is not an
Employee, (ii) a consultant, distributor or other person who has rendered
valuable services to the Company, a Subsidiary or a Parent, (iii) a person who
has incurred, or is willing to incur, financial risk in the form of guaranteeing
or acting as co-obligor with respect to debts or other obligations of the
Company, or (iv) a person who has extended credit to the Company. Key Persons
are not limited to individuals and, subject to the preceding definition, may
include corporations, partnerships, associations and other entities.
2.12 NON-EMPLOYEE DIRECTOR means a director who (a) is not
currently an officer of the Company or any parent or subsidiary of the Company
(any of the foregoing, a "Company Entity"), or otherwise currently employed by
any Company Entity; (b) does not receive compensation directly or indirectly
from any Company Entity except in such person's capacity as a director or that
would require disclosure under Regulation S-K promulgated by the Securities and
Exchange Commission ("Regulation S-K"); and (c) does not possess an interest in
any Company transaction and is not engaged in any business relationship that
would be required to be disclosed under Regulation S-K.
2.13 NON-ISO means an option granted under this Plan to purchase
Shares which is not intended by the Company to satisfy the requirements of Code
Section 422.
2.14 OPTION means an ISO or a Non-ISO.
2.15 PARENT means any corporation which is a parent of the Company
(within the meaning of Code Section 424).
2.16 PARTICIPANT means an individual who receives a Stock Incentive
hereunder.
2.17 PLAN means the Daleen Technologies, Inc. Stock Incentive Plan,
as amended from time to time.
2.18 SHARE means a share of the Common Stock of the Company.
2.19 STOCK INCENTIVE means an ISO, a Non-ISO, a Restricted Stock
Award or a Stock Appreciation Right.
2.20 STOCK INCENTIVE AGREEMENT means an agreement between the
Company and a Participant evidencing an award of a Stock Incentive. In the case
of ISOs and Non-ISOs, the Stock Incentive Agreement shall be the Stock Option
Grant Certificate.
2.21 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code Section 424(f)).
2.22 SURRENDERED SHARES means the Shares described in Section 8.2
which (in lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 8.
2.23 TEN PERCENT SHAREHOLDER means a person who owns (after taking
into account the attribution rules of Code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
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<PAGE> 3
SECTION 3.
SHARES SUBJECT TO STOCK INCENTIVES
The total number of Shares that may be issued pursuant to Stock
Incentives under this Plan is _________________ (___________) and may be
increased subject to shareholder approval and adjusted pursuant to Section 11.
Such Shares shall be reserved, to the extent that the Company deems appropriate,
from authorized but unissued Shares, and from Shares which have been reacquired
by the Company. Furthermore, any Shares subject to a Stock Incentive which
remain after the cancellation, expiration or exchange of such Stock Incentive
thereafter shall again become available for use under this Plan, but any
Surrendered Shares which remain after the surrender of an ISO or a Non-ISO under
Section 8 shall not again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before such
shareholder approval, any Stock Incentives granted under this Plan before the
date of such approval automatically shall be granted subject to such approval.
SECTION 5.
ADMINISTRATION
This Plan shall be administered by the Board. The Board, acting in its
absolute discretion, shall exercise such powers and take such action as
expressly called for under this Plan. The Board shall have the power to
interpret this Plan and, subject to Section 13 to take such other action in the
administration and operation of the Plan as it deems equitable under the
circumstances. The Board's actions shall be binding on the Company, on each
affected Employee or Key Person, and on each other person directly or indirectly
affected by such actions.
The Board may delegate its authority under the Plan, in whole or in
part, to a Committee appointed by the Board consisting solely of two (2) or more
Non-Employee Directors. The Committee (if appointed) shall act according to the
policies and procedures set forth in the Plan and to those policies and
procedures established by the Board, and the Committee shall have such powers
and responsibilities as are set forth by the Board. Reference to the Board in
this Plan shall specifically include reference to the Committee where the Board
has delegated its authority to the Committee, and any action by the Committee
pursuant to a delegation of authority by the Board shall be deemed an action by
the Board under the Plan. Notwithstanding the above, the Board may assume the
powers and responsibilities granted to the Committee at any time, in whole or in
part.
SECTION 6.
ELIGIBILITY
Except as provided below, only Employees shall be eligible for the
grant of Stock Incentives under this Plan, but no Employee shall have the right
to be granted a Stock Incentive under this Plan merely as a result of his or her
status as an Employee. Key Persons may be eligible, subject to written approval
by the Board, for the grant of Stock Incentives under this Plan, but only if the
Key Person has provided valuable services to the Company, a Subsidiary or a
Parent, and only if the Stock Incentive is not an ISO.
-3-
<PAGE> 4
SECTION 7
TERMS OF STOCK INCENTIVES
7.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The Board, in its absolute discretion, shall grant Stock
Incentives under this Plan from time to time and shall have the right to grant
new Stock Incentives in exchange for outstanding Stock Incentives. Stock
Incentives shall be granted to Employees or Key Persons selected by the Board,
and the Board shall be under no obligation whatsoever to grant Stock Incentives
to all Employees or Key Persons, or to grant all Stock Incentives subject to the
same terms and conditions. Each grant of a Stock Incentive shall be evidenced by
a Stock Incentive Agreement.
(b) The number of Shares as to which a Stock Incentive shall
be granted and vesting schedule therefor shall be determined by the Board in its
sole discretion, subject to the provisions of Section 3 as to the total number
of shares available for grants under the Plan.
(c) Each Stock Incentive shall be evidenced by a Stock
Incentive Agreement executed by the Company and the Participant, which shall be
in such form and contain such terms and conditions as the Board in its
discretion may, subject to the provisions of the Plan, from time to time
determine.
(d) The date a Stock Incentive is granted shall be the date on
which the Board has approved the terms and conditions of the Stock Incentive
Agreement and has determined the recipient of the Stock Incentive and the number
of Shares covered by the Stock Incentive and has taken all such other action
necessary to complete the grant of the Stock Incentive.
7.2 TERMS AND CONDITIONS OF OPTIONS. Each grant of an Option shall
be evidenced by a Stock Incentive Agreement which shall:
(I) specify whether the Option is an ISO or Non-ISO; and
(II) incorporate such other terms and conditions as the Board,
acting in its absolute discretion, deems consistent with the terms of this Plan,
including (without limitation) a restriction on the number of Shares subject to
the Option which first become exercisable or subject to surrender during any
calendar year.
In determining Employee(s) or Key Person(s) to whom an Option
shall be granted and the number of Shares to be covered by such Option, the
Board may take into account the recommendations of the President of the Company
and its other officers, the duties of the Employee or Key Person, the present
and potential contributions of the Employee or Key Person to the success of the
Company, the anticipated number of years of service remaining before the
attainment by the Employee of retirement age, and other factors deemed relevant
by the Board, in its sole discretion, in connection with accomplishing the
purpose of this Plan. An Employee or Key Person who has been granted an Option
to purchase Shares, whether under this Plan or otherwise, may be granted one or
more additional Options.
If the Board grants an ISO and a Non-ISO to an Employee on the
same date, the right of the Employee to exercise or surrender one such Option
shall not be conditioned on his or her failure to exercise or surrender the
other such Option. At the time of the grant, the Board shall distinguish in
writing the number of Shares designated as ISO Shares and the number designated
as Non-ISO Shares.
(a) Exercise Price. Subject to adjustment in accordance with
Section 11 and the other provisions of this Section, the Exercise Price shall be
as set forth in the applicable Stock Incentive Agreement.
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<PAGE> 5
With respect to each grant of an ISO to a Participant who is not a Ten Percent
Shareholder, the Exercise Price shall not be less than the Fair Market Value on
the date the ISO is granted. With respect to each grant of an ISO to a
Participant who is a Ten Percent Shareholder, a Ten Percent Shareholder shall
not be less than one hundred ten percent (110%) of the Fair Market Value on the
date the ISO is granted. If a Stock Incentive is a Non-ISO, the Exercise Price
for each Share shall be no less than the minimum price required by applicable
state law, or by the Company's governing instrument, or $0.01, whichever price
is greater.
(b) Option Term. Each Option granted under this Plan shall be
exercisable in whole or in part at such time or times as set forth in the
related Stock Incentive Agreement, but no Stock Incentive Agreement shall:
(i) make an Option exercisable before the date such
Option is granted; or
(ii) make an Option exercisable after the earlier of
the:
(A) the date such Option is exercised in full, or
(B) the date which is the tenth (10th)
anniversary of the date such Option is granted, if such Option is a Non-ISO or
an ISO granted to a non-Ten Percent Shareholder, or the date which is the fifth
(5th) anniversary of the date such Option is granted, if such Option is an ISO
granted to a Ten Percent Shareholder.
A Stock Incentive Agreement may provide for the exercise of an
Option after the employment of an Employee has terminated for any reason
whatsoever, including death or disability.
(c) Payment. Payment for all shares of Stock purchased
pursuant to exercise of an Option shall be made in cash or, if the Stock
Incentive Agreement provides, by delivery to the Company of a number of Shares
which have been owned by the holder for at least six (6) months prior to the
date of exercise having an aggregate Fair Market Value of not less than the
product of the Exercise Price multiplied by the number of Shares the Participant
intends to purchase upon exercise of the Option on the date of delivery. In
addition, the Stock Incentive Agreement may provide for cashless exercise
through a brokerage transaction following registration of the Company's equity
securities under Section 12 of the Securities Exchange Act of 1934, or the
Optionee may instruct the Company to withhold Shares otherwise issuable pursuant
to the exercise of the Option having a Fair Market Value equal to the Exercise
Price of the Shares being purchased (including the withheld Shares). Except as
provided in subparagraph (f) below, payment shall be made at the time that the
Option or any part thereof is exercised, and no Shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
Notwithstanding the above, and in the sole discretion of the
Board, an Option may be exercised as to a portion or all (as determined by the
Board) of the number of Shares specified in the Stock Incentive Agreement by
delivery to the Company of a promissory note, such promissory note to be
executed by the Participant and which shall include, with such other terms and
conditions as the Board shall determine, provisions in a form approved by the
Board under which: (i) the balance of the aggregate purchase price shall be
payable in equal installments over such period and shall bear interest at such
rate (which shall not be less than the prime bank loan rate as determined by the
Board) as the Board shall approve, and (ii) the Participant shall be personally
liable for payment of the unpaid principal balance and all accrued but unpaid
interest.
(d) Conditions to Exercise of an Option. Each Option granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the
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<PAGE> 6
Board shall specify in the Stock Incentive Agreement; provided, however, that
subsequent to the grant of an Option, the Board, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part.
(e) Nontransferability of Options. Except as provided in
subparagraph (f) below, an Option shall not be transferable or assignable except
by will or by the laws of descent and distribution or except with the express
consent of the Board, and an Option shall be exercisable, during the
Participant's lifetime, only by the Participant, or in the event of the
disability of the Participant, by the legal representative of the Participant.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section, any Option in
substitution for a stock option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Board may prescribe to cause such substitute Option
to contain as nearly as possible the same terms and conditions (including the
applicable vesting and termination provisions) as those contained in the
previously issued stock option being replaced thereby.
7.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in connection with an
Option. A Stock Appreciation Right shall entitle the Participant to receive upon
exercise or payment the excess of: (I) the Fair Market Value of a specified
number of Shares at the time of exercise, over (II) a specified price which
shall be not less than the Exercise Price for that number of Shares in the case
of a Stock Appreciation Right granted in connection with a previously or
contemporaneously granted Option, or in the case of any other Stock Appreciation
Right not less than one hundred percent (100%) of the Fair Market Value of that
number of Shares at the time the Stock Appreciation Right was granted. A Stock
Appreciation Right granted in connection with an Option may only be exercised to
the extent that the related Option has not been exercised. The exercise of a
Stock Appreciation Right shall result in a pro rata surrender of the related
Option to the extent the Stock Appreciation Right has been exercised.
(a) Payment. Upon exercise or payment of a Stock Appreciation
Right, the Company shall pay to the Participant the appreciation in cash or
Shares (at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision, as the Board may determine.
(b) Conditions to Exercise. Each Stock Appreciation Right
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Board shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of a Stock Appreciation Right, the Board, at any time before complete
termination of such Stock Appreciation Right, may accelerate the time or times
at which such Stock Appreciation Right may be exercised in whole or in part.
(c) Nontransferability of Stock Appreciation Right. A Stock
Appreciation Right shall not be transferable or assignable except by will or by
the laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant, or in the event of the
disability of the Participant, by the legal representative of the Participant.
7.4 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Shares
awarded pursuant to Restricted Stock Awards shall be subject to restrictions for
periods determined by the Board. The Board shall have the power to permit, in
its discretion, an acceleration of the expiration of the applicable restriction
period with respect to any part or all of the Shares awarded to a Participant.
The Board may require a cash payment from the Participant in an amount no
greater than the aggregate Fair Market Value of the Shares awarded determined at
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<PAGE> 7
the date of grant in exchange for the grant of a Restricted Stock Award or may
grant a Restricted Stock Award without the requirement of a cash payment.
SECTION 8.
SURRENDER OF OPTIONS
8.1 GENERAL RULE. The Board, acting in its absolute discretion,
may incorporate a provision in a Stock Incentive Agreement to allow an Employee
or Key Person to surrender his or her Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such Option
exceeds Exercise Price for such Shares, and
(b) the Option to purchase such Shares is otherwise
exercisable.
8.2 PROCEDURE. The surrender of an Option in whole or in part
shall be effected by the delivery of the Stock Incentive Agreement to the Board,
together with a statement signed by the Participant which specifies the number
of Shares ("Surrendered Shares") as to which the Participant surrenders his or
her Option and how he or she desires payment be made for such Surrendered
Shares.
8.3 PAYMENT. A Participant in exchange for his or her Surrendered
Shares shall receive a payment in cash or in Shares, or in a combination of cash
and Shares, equal in amount on the date such surrender is effected to the excess
of the Fair Market Value of the Surrendered Shares on such date over the
Exercise Price for the Surrendered Shares. The Board, acting in its absolute
discretion, can approve or disapprove a Participant's request for payment in
whole or in part in cash and can make that payment in cash or in such
combination of cash and Shares as the Board deems appropriate. A request for
payment only in Shares shall be approved and made in Shares to the extent
payment can be made in whole shares of Shares and (at the Board's discretion) in
cash in lieu of any fractional Shares.
8.4 RESTRICTIONS. Any Stock Incentive Agreement which incorporates
a provision to allow a Participant to surrender his or her Option in whole or in
part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Board deems necessary to satisfy the conditions
to the exemption under Rule 16b-3 (or any successor exemption) to Section 16(b)
of the Exchange Act.
SECTION 9.
SECURITIES REGULATION
Each Stock Incentive Agreement may provide that, upon the receipt of
Shares as a result of the surrender or exercise of a Stock Incentive, the
Participant shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Incentive Agreement may
also provide that, if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended ("1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of a Stock Incentive granted under this Plan may at the discretion
of the Company bear a legend to the effect that such Shares have not been
registered under the 1933 Act or any applicable state securities law and that
such Shares may not be sold or offered for sale in the absence of an effective
registration statement as to such Shares
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<PAGE> 8
under the 1933 Act and any applicable state securities law or an opinion, in
form and substance satisfactory to the Company, of legal counsel acceptable to
the Company, that such registration is not required.
SECTION 10.
LIFE OF PLAN
No Stock Incentive shall be granted under this Plan on or after the
earlier of:
(a) the tenth (10th) anniversary of the effective date of this
Plan (as determined under Section 4 of this Plan), in which event this Plan
otherwise thereafter shall continue in effect until all outstanding Stock
Incentives have been surrendered or exercised in full or no longer are
exercisable, or
(b) the date on which all of the Shares reserved under
Section 3 of this Plan have (as a result of the surrender or exercise of Stock
Incentives granted under this Plan) been issued or no longer are available for
use under this Plan, in which event this Plan also shall terminate on such date.
SECTION 11.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Stock Incentives granted under this Plan, and the
Exercise Price of any Options, shall be adjusted by the Board in an equitable
manner to reflect any change in the capitalization of the Company, including,
but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Board shall have the right to adjust (in a manner which
satisfies the requirements of Code Section 424(a)) the number of Shares reserved
under Section 3, and the number of Shares subject to Stock Incentives granted
under this Plan, and the Exercise Price of any Options in the event of any
corporate transaction described in Code Section 424(a) which provides for the
substitution or assumption of such Stock Incentives. If any adjustment under
this Section creates a fractional Share or a right to acquire a fractional
Share, such fractional Share shall be disregarded, and the number of Shares
reserved under this Plan and the number subject to any Stock Incentives granted
under this Plan shall be the next lower number of Shares, rounding all fractions
downward. An adjustment made under this Section by the Board shall be conclusive
and binding on all affected persons and, further, shall not constitute an
increase in the number of Shares reserved under Section 3.
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<PAGE> 9
SECTION 12.
SALE OR MERGER OF THE COMPANY
If the Company (I) agrees to sell or transfer (a) eighty percent (80%)
or more of its capital stock, or (b) eighty percent (80%) or more of its assets
(as reflected on the Company's most recent audited balance sheet) and
substantially all material customer agreements, for cash or property, or for a
combination of cash and property, or (II) agrees to any merger, consolidation,
reorganization, division or other transaction in which eighty percent (80%) or
more of the issued and outstanding Shares are converted into another security or
into the right to receive securities or property, then the vesting schedule of
each outstanding Stock Incentive shall be accelerated by a period of two years,
or until such Stock Incentive is fully vested if vesting would occur within such
two year period. The foregoing acceleration of vesting schedules shall not apply
to any public offering of the Company's Common Stock in which a registration
statement covering such offering is declared effective by the Securities and
Exchange Commission.
SECTION 13.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however, no such
amendment with respect to ISOs shall be made absent the approval of the
shareholders of the Company: (a) to increase the number of Shares reserved under
Section 3, except as set forth in Section 11, (b) to extend the maximum life of
the Plan under Section 10 or the maximum exercise period under Section 7, (c) to
decrease the minimum Exercise Price under Section 7, or (d) to change the
designation of Employees or Key Persons eligible for Stock Incentives under
Section 6. The Board also may suspend the granting of Stock Incentives under
this Plan at any time and may terminate this Plan at any time; provided,
however, the Company shall not have the right to modify, amend or cancel any
Stock Incentive granted before such suspension or termination unless: (I) the
Participant consents in writing to such modification, amendment or cancellation,
or (II) there is a dissolution or liquidation of the Company or a transaction
described in Section 11 or Section 12.
SECTION 14.
MISCELLANEOUS
14.1 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company as a result of the grant of a Stock Incentive to him
or to her under this Plan or his or her exercise or surrender of such Stock
Incentive pending the actual delivery of Shares subject to such Stock Incentive
to such Participant.
14.2 NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock
Incentive to a Participant under this Plan shall not constitute a contract of
employment and shall not confer on a Participant any rights upon his or her
termination of employment or relationship with the Company in addition to those
rights, if any, expressly set forth in the Stock Incentive Agreement which
evidences his or her Stock Incentive.
14.3 WITHHOLDING. The exercise or surrender of any Stock Incentive
granted under this Plan shall constitute a Participant's full and complete
consent to whatever action the Board directs to satisfy the federal and state
tax withholding requirements, if any, which the Board in its discretion deems
applicable to such exercise or surrender.
14.4 TRANSFER. The transfer of an Employee between or among the
Company, a Subsidiary or a Parent shall not be treated as a termination of his
or her employment under this Plan.
14.5 CONSTRUCTION. This Plan shall be construed under the laws of
the State of Florida, without regard to its principles of conflicts of law.
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<PAGE> 1
EXHIBIT 10.12
DALEEN TECHNOLOGIES, INC.
1998 INCENTIVE STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
The purpose of this Plan is to provide an established plan for Daleen
Technologies, Inc., through the grant of options to purchase Common Stock of the
Company to employees of the Company and of any of its Subsidiaries, to attract
and retain persons of ability as key employees (including officers and directors
who are also employees) and to motivate such employees to exert their best
efforts on behalf of the Company and any such Subsidiary.
ARTICLE II
Definitions
The following terms used in this plan shall have the respective meanings set
forth below:
(1) "Company" shall mean Daleen Technologies, Inc., or any
successor (by merger, consolidation, purchase or otherwise) to
such corporation which shall have assumed the obligations of
such corporation under this plan.
(2) "Common Stock" shall mean the common stock (no par value) of
the Company.
(3) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to a specific provision of the Code
shall be deemed to refer to such provision as in effect at the
relevant time.
(4) "Committee" shall mean the individuals appointed to administer
the plan in accordance with the provisions of Article X
hereof.
(5) "Holder" shall mean an employee to whom an option is granted
hereunder or, after his death, the persons entitled under
Article V hereof to exercise an option granted to him
hereunder on his behalf.
(6) "Permanent Disability" shall mean a disability which renders
an employee unable to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months.
(7) "Plan" shall mean the provisions contained in this instrument
and any subsequent amendment to this instrument which shall
have been adopted by the Board of Directors of the Company
pursuant to Article IX.
(8) "Subsidiary" shall mean any corporations which at the time
qualifies as a Subsidiary of the Company in accordance with
the terms of Subsection 424(f) of the Code.
ARTICLE III
Number of Shares Available Under Plan
Options may be granted by the Company from time to time to key
employees of the Company or any Subsidiary to purchase an aggregate of 1,000,000
shares of Common Stock of the Company and such shares shall be reserved for
options granted under the Plan, subject to adjustment as provided in Article
<PAGE> 2
IV(8). The shares issued upon exercise of options granted under the Plan may be
authorized and unissued shares or shares held by the Company in its treasury.
ARTICLE IV
Option Provision
Each option granted under the Plan shall be evidenced by an agreement
which shall be subject to the following express terms and conditions and to such
other terms and conditions as the Committee may deem appropriate:
(1) Option Period. Except as provided in Article VI for 10%
shareholders, each option agreement shall specify a period of
not more than 10 years from the Date of grant for which the
option thereunder is exercisable and shall provide that the
option shall expire at the end of such period.
(2) Option Price. Except as provided in Article VI for 15%
shareholders, the option price per share shall be determined
by the Committee at the time any option is granted and shall
be not less than the fair market value on the date the option
is granted.
(3) Exercise of Option. Except as provided in Article V for
Holders who have died or become disabled, no option shall be
exercisable except during the period beginning at expiration
of such minimum period of employment by the Holder as shall be
specified by the Committee and ending three months following
termination of employment of such Holder. During the lifetime
of the Holder, the option shall be exercisable only to him.
(4) Payment of Purchase Price Upon Exercise. The purchase price of
the shares as to which an option is exercised shall be paid to
the Company (i) in cash, (ii) in stock of the Company, (iii)
to the extent permitted by law, by delivery of a recourse note
for such portion of the purchase price, and in such terms, as
shall be approved by the Committee, or (iv) such combination
of (i), (ii) or (iii) as shall be approved by the Committee at
the time of exercise. The terms of any such recourse note
shall be determined by the Committee.
(5) Amounts of Options. The aggregate fair market value
(determined as of the time the option is granted) of the
Common Stock with respect to which options granted are
exercisable for the first time by a Holder during any calendar
year (under all plans of the Company) shall not exceed
$100,000. The provisions of this Section shall be construed
and applied in accordance with Section 42(d) of the Code and
the regulations, if any, promulgated thereunder.
(6) Non-transferability. No option granted under the Plan shall be
transferable other than by will or by the laws of descent and
distribution.
(7) Investment Representation. Each option agreement shall contain
a provision that, upon demand of the Committee, the Holder
shall deliver to the Committee at the time of any exercise of
an option, a written representation that the shares to be
acquired upon such exercise are to be acquired for investment
and not for resale with a view to the distribution thereof.
Upon such demand, delivery of such representation before
delivery of any shares issued upon exercise of an option and
before the expiration of the option period shall be a
condition precedent to the right of the Holder to purchase any
shares pursuant to the option.
(8) Adjustments in Event of Change in Common Stock. In the event
of any changes in the Common Stock of the Company by reason of
any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares,
or rights
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<PAGE> 3
offering to purchase Common Stock at a price substantially
below fair market value, or for any similar change affecting
the Common Stock, the Committee may, in its sole and absolute
discretion, adjust the number and kind of shares for which
thereafter an option may be granted and sold under the Plan,
the number and kind of shares subject to option in outstanding
option agreements and the purchase price per share as the
Committee deems equitable.
(9) Qualified Options. Each option agreement which provides for
the grant of a option to an employee shall contain such other
terms and conditions as the Committee may determine to be
necessary or desirable in order to qualify such option as an
incentive stock option within the meaning of Subsection 422 of
the Code.
ARTICLE V
Exercise in the Event of Death
or Termination of Employment
(1) Exercise Upon Death. If a Holder shall die (I) while an
employee of the Company or of a Subsidiary or (ii) within
three months after termination of his employment with the
Company or a Subsidiary because of his Permanent Disability,
his option may be exercised, to the extent that the Holder
shall have been entitled to do so at the date of his
termination of employment, by his executors or administers, at
any time, or from time to time, within one year after the date
of the Holder's death, but not later than the expiration of
the option.
(2) Exercise Upon Permanent Disability. If a Holder's employment
by the Company or a Subsidiary shall terminate because of his
Permanent Disability, he may exercise his option, to the
extent that he may be entitled to do so at the date of the
termination of his employment, at any time, or from time to
time, within one year of the date of termination of his
employment, but not later than the expiration of the option.
ARTICLE VI
Provisions For 10% Shareholders
If the employee, at the time the option is granted, owns 10% or more of
the total combined voting power of all classes of stock of the Company or any
Subsidiary, the option price shall be at least 110% of the fair market value of
the stock (determined the time of grant) subject to the option and any such
option shall not be exercisable after the expiration of 5 years from the date of
grant.
ARTICLE VII
Prohibition on Grant of Option
No option shall be granted more than 10 years following the earlier of
(I) adoption of the Plan or (ii) approval of the Plan by the shareholders of the
Company.
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<PAGE> 4
ARTICLE VIII
Miscellaneous Provisions
(1) No Rights as Shareholder. No Holder shall have any rights as a
shareholder with respect to any shares subject to his or her
option before issuance to him or her of a certificate or
certificates for such shares.
(2) No Rights to Continued Employment. The Plan and any option
granted under the Plan shall not confer upon any holder any
right for continuance of employment by the Company or any
Subsidiary, nor shall they interfere in any way with the right
of the Company or any Subsidiary by which any Holder is
employed to terminate his employment at any time.
(3) Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation
of the Company to sell and deliver shares under such options,
shall be subject to all applicable federal and state laws,
rules and regulations and to such approvals by any government
or regulatory agency as may be required. The Company shall not
be required to issue or deliver any certificates for shares of
Common Stock before (a) the listing of such shares on any
stock exchange on which the Common Stock may then be listed
and (b) the completion of any registration or qualification of
such shares under any federal or state law, or any ruling or
regulation of any governmental agency which the Company shall
not be obligated to accept a note in whole or partial payment
of the purchase price to the extent that the amount or terms
of any such note shall not be in compliance with all
applicable federal and state laws, rules and regulations and
such approvals by any government or regulatory agency as may
be required have not been obtained.
ARTICLE IX
Amendment and Discontinuance
The Board of Directors of the Company may from time to time amend,
suspend or discontinue the Plan; provided, however, that no action of the Board
of Directors may alter the provisions in a manner to disqualify the plan under
Subsection 422 of the Code. With the written consent of a Holder, no amendment
or suspension of the Plan shall alter or impair any option previously granted to
him under the Plan.
ARTICLE X
Administration
(1) Committee. The Plan shall be administered by a stock option
committee consisting of not less than two nor more than five
members appointed by the Board of Directors of the Company.
Each member of the Committee shall be a member of the Board
who is not eligible to receive any option under the Plan. In
the event there are all members of the Company's Board of
Directors who are eligible to receive options under the Plan,
the Committee shall consist of such members of the Board of
Directors as determined by a majority vote of the entire Board
of Directors. Any vacancy occurring in the membership of the
Committee shall be filled by appointment by the Board.
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<PAGE> 5
(2) Powers. The Committee shall have the power, consistent with
the provisions of the plan, to:
(a) determine and design from time to time those
employees of the Company or of any Subsidiary to whom
options are to be granted and the numbers of shares
for which options shall be granted to each such
employee;
(b) determine the number of shares subject to each
option; and
(c) determine the time or times and the manner when each
option shall be exercisable and the duration of the
exercise period.
(3) Interpretations. The Committee may interpret the Plan,
prescribe, amend and rescind any rules and regulations
necessary or appropriate for the administration of the Plan,
and make such other determinations and take such other action
as it deems necessary or advisable, except as otherwise
expressly reserved to the Board of Directors of the Company in
the Plan. Without limiting the generality of the foregoing,
the Committee may, in its discretion, treat all or any portion
of any period during which a Holder is on military or on an
approved leave of absence from the Company or a Subsidiary as
a period of employment of such Holder by the Company or such
Subsidiary, as the case may be, for purposes of accrual of his
rights under his option. Any interpretation, determination, or
other action make or taken by the Committee shall be final,
binding and conclusive.
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<PAGE> 1
EXHIBIT 10.13
DALEEN TECHNOLOGIES, INC.
1997 INCENTIVE STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
The purpose of this Plan is to provide an established plan for Daleen
Technologies, Inc., through the grant of options to purchase Common Stock of
the Company to employees of the Company and of any of its Subsidiaries, to
attract and retain persons of ability as key employees (including officers and
directors who are also employees) and to motivate such employees to exert their
best efforts on behalf of the Company and any such Subsidiary.
ARTICLE II
Definitions
The following terms used in this plan shall have the respective meanings set
forth below:
(1) "Company" shall mean Daleen Technologies, Inc., or any
successor (by merger, consolidation, purchase or otherwise)
to such corporation which shall have assumed the obligations
of such corporation under this plan.
(2) "Common Stock" shall mean the common stock (no par value) of
the Company.
(3) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to a specific provision of the
Code shall be deemed to refer to such provision as in effect
at the relevant time.
(4) "Committee" shall mean the individuals appointed to
administer the plan in accordance with the provisions of
Article X hereof.
(5) "Holder" shall mean an employee to whom an option is granted
hereunder or, after his death, the persons entitled under
Article V hereof to exercise an option granted to him
hereunder on his behalf.
(6) "Permanent Disability" shall mean a disability which renders
an employee unable to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months.
(7) "Plan" shall mean the provisions contained in this instrument
and any subsequent amendment to this instrument which shall
have been adopted by the Board of Directors of the Company
pursuant to Article IX.
(8) "Subsidiary" shall mean any corporations which at the time
qualifies as a Subsidiary of the Company in accordance with
the terms of Subsection 424(f) of the Code.
ARTICLE III
Number of Shares Available Under Plan
Options may be granted by the Company from time to time to key
employees of the Company or any Subsidiary to purchase an aggregate of 250,000
shares of Common Stock of the Company and such
<PAGE> 2
shares shall be reserved for options granted under the Plan, subject to
adjustment as provided in Article IV(8). The shares issued upon exercise of
options granted under the Plan may be authorized and unissued shares or shares
held by the Company in its treasury.
ARTICLE IV
Option Provision
Each option granted under the Plan shall be evidenced by an agreement
which shall be subject to the following express terms and conditions and to
such other terms and conditions as the Committee may deem appropriate:
(1) Option Period. Except as provided in Article VI for 10%
shareholders, each option agreement shall specify a period of
not more than 10 years from the Date of grant for which the
option thereunder is exercisable and shall provide that the
option shall expire at the end of such period.
(2) Option Price. Except as provided in Article VI for 15%
shareholders, the option price per share shall be determined
by the Committee at the time any option is granted and shall
be not less than the fair market value on the date the option
is granted.
(3) Exercise of Option. Except as provided in Article V for
Holders who have died or become disabled, no option shall be
exercisable except during the period beginning at expiration
of such minimum period of employment by the Holder as shall
be specified by the Committee and ending three months
following termination of employment of such Holder. During
the lifetime of the Holder, the option shall be exercisable
only to him.
(4) Payment of Purchase Price Upon Exercise. The purchase price
of the shares as to which an option is exercised shall be
paid to the Company (i) in cash, (ii) in stock of the
Company, (iii) to the extent permitted by law, by delivery of
a recourse note for such portion of the purchase price, and
in such terms, as shall be approved by the Committee, or (iv)
such combination of (i), (ii) or (iii) as shall be approved
by the Committee at the time of exercise. The terms of any
such recourse note shall be determined by the Committee.
(5) Amounts of Options. The aggregate fair market value
(determined as of the time the option is granted) of the
Common Stock with respect to which options granted are
exercisable for the first time by a Holder during any
calendar year (under all plans of the Company) shall not
exceed $100,000. The provisions of this Section shall be
construed and applied in accordance with Section 42(d) of the
Code and the regulations, if any, promulgated thereunder.
(6) Non-transferability. No option granted under the Plan shall
be transferable other than by will or by the laws of descent
and distribution.
(7) Investment Representation. Each option agreement shall
contain a provision that, upon demand of the Committee, the
Holder shall deliver to the Committee at the time of any
exercise of an option, a written representation that the
shares to be acquired upon such exercise are to be acquired
for investment and not for resale with a view to the
distribution thereof. Upon such demand, delivery of such
representation before delivery of any shares issued upon
exercise of an option and before the expiration of the option
period shall be a condition precedent to the right of the
Holder to purchase any shares pursuant to the option.
(8) Adjustments in Event of Change in Common Stock. In the event
of any changes in the Common Stock of the Company by reason
of any stock dividend, recapitalization,
2
<PAGE> 3
reorganization, merger, consolidation, split-up, combination,
or exchange of shares, or rights offering to purchase Common
Stock at a price substantially below fair market value, or
for any similar change affecting the Common Stock, the
Committee may, in its sole and absolute discretion, adjust
the number and kind of shares for which thereafter an option
may be granted and sold under the Plan, the number and kind
of shares subject to option in outstanding option agreements
and the purchase price per share as the Committee deems
equitable.
(9) Qualified Options. Each option agreement which provides for
the grant of a option to an employee shall contain such other
terms and conditions as the Committee may determine to be
necessary or desirable in order to qualify such option as an
incentive stock option within the meaning of Subsection 422
of the Code.
ARTICLE V
Exercise in the Event of Death
or Termination of Employment
(1) Exercise Upon Death. If a Holder shall die (I) while an
employee of the Company or of a Subsidiary or (ii) within
three months after termination of his employment with the
Company or a Subsidiary because of his Permanent Disability,
his option may be exercised, to the extent that the Holder
shall have been entitled to do so at the date of his
termination of employment, by his executors or administers,
at any time, or from time to time, within one year after the
date of the Holder's death, but not later than the expiration
of the option.
(2) Exercise Upon Permanent Disability. If a Holder's employment
by the Company or a Subsidiary shall terminate because of his
Permanent Disability, he may exercise his option, to the
extent that he may be entitled to do so at the date of the
termination of his employment, at any time, or from time to
time, within one year of the date of termination of his
employment, but not later than the expiration of the option.
ARTICLE VI
Provisions For 10% Shareholders
If the employee, at the time the option is granted, owns 10% or more
of the total combined voting power of all classes of stock of the Company or
any Subsidiary, the option price shall be at least 110% of the fair market
value of the stock (determined the time of grant) subject to the option and any
such option shall not be exercisable after the expiration of 5 years from the
date of grant.
ARTICLE VII
Prohibition on Grant of Option
No option shall be granted more than 10 years following the earlier of
(I) adoption of the Plan or (ii) approval of the Plan by the shareholders of
the Company.
3
<PAGE> 4
ARTICLE VIII
Miscellaneous Provisions
(1) No Rights as Shareholder. No Holder shall have any rights as
a shareholder with respect to any shares subject to his or
her option before issuance to him or her of a certificate or
certificates for such shares.
(2) No Rights to Continued Employment. The Plan and any option
granted under the Plan shall not confer upon any holder any
right for continuance of employment by the Company or any
Subsidiary, nor shall they interfere in any way with the
right of the Company or any Subsidiary by which any Holder is
employed to terminate his employment at any time.
(3) Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation
of the Company to sell and deliver shares under such options,
shall be subject to all applicable federal and state laws,
rules and regulations and to such approvals by any government
or regulatory agency as may be required. The Company shall
not be required to issue or deliver any certificates for
shares of Common Stock before (a) the listing of such shares
on any stock exchange on which the Common Stock may then be
listed and (b) the completion of any registration or
qualification of such shares under any federal or state law,
or any ruling or regulation of any governmental agency which
the Company shall not be obligated to accept a note in whole
or partial payment of the purchase price to the extent that
the amount or terms of any such note shall not be in
compliance with all applicable federal and state laws, rules
and regulations and such approvals by any government or
regulatory agency as may be required have not been obtained.
ARTICLE IX
Amendment and Discontinuance
The Board of Directors of the Company may from time to time amend,
suspend or discontinue the Plan; provided, however, that no action of the Board
of Directors may alter the provisions in a manner to disqualify the plan under
Subsection 422 of the Code. With the written consent of a Holder, no amendment
or suspension of the Plan shall alter or impair any option previously granted
to him under the Plan.
ARTICLE X
Administration
(1) Committee. The Plan shall be administered by a stock option
committee consisting of not less than two nor more than five
members appointed by the Board of Directors of the Company.
Each member of the Committee shall be a member of the Board
who is not eligible to receive any option under the Plan. In
the event there are all members of the Company's Board of
Directors who are eligible to receive options under the Plan,
the Committee shall consist of such members of the Board of
Directors as determined by a majority vote of the entire
Board of Directors. Any vacancy occurring in the membership
of the Committee shall be filled by appointment by the Board.
4
<PAGE> 5
(2) Powers. The Committee shall have the power, consistent with the
provisions of the plan, to:
(a) determine and design from time to time those employees of the
Company or of any Subsidiary to whom options are to be
granted and the numbers of shares for which options shall be
granted to each such employee;
(b) determine the number of shares subject to each option; and
(C) determine the time or times and the manner when each option
shall be exercisable and the duration of the exercise period.
(3) Interpretations. The Committee may interpret the Plan, prescribe,
amend and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and make such other determinations
and take such other action as it deems necessary or advisable, except
as otherwise expressly reserved to the Board of Directors of the
Company in the Plan. Without limiting the generality of the foregoing,
the Committee may, in its discretion, treat all or any portion of any
period during which a Holder is on military or on an approved leave of
absence from the Company or a Subsidiary as a period of employment of
such Holder by the Company or such Subsidiary, as the case may be, for
purposes of accrual of his rights under his option. Any
interpretation, determination, or other action make or taken by the
Committee shall be final, binding and conclusive.
5
<PAGE> 1
EXHIBIT 10.14
DALEEN TECHNOLOGIES, INC.
1995 INCENTIVE STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
The purpose of this Plan is to provide an established plan for Daleen
Technologies, Inc., through the grant of options to purchase Common Stock of the
Company to employees of the Company and of any of its Subsidiaries, to attract
and retain persons of ability as key employees (including officers and directors
who are also employees) and to motivate such employees to exert their best
efforts on behalf of the Company and any such Subsidiary.
ARTICLE II
Definitions
The following terms used in this plan shall have the respective meanings set
forth below:
(1) "Company" shall mean Daleen Technologies, Inc., or any
successor (by merger, consolidation, purchase or otherwise) to
such corporation which shall have assumed the obligations of
such corporation under this plan.
(2) "Common Stock" shall mean the common stock (no par value) of
the Company.
(3) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to a specific provision of the Code
shall be deemed to refer to such provision as in effect at the
relevant time.
(4) "Committee" shall mean the individuals appointed to administer
the plan in accordance with the provisions of Article X
hereof.
(5) "Holder" shall mean an employee to whom an option is granted
hereunder or, after his death, the persons entitled under
Article V hereof to exercise an option granted to him
hereunder on his behalf.
(6) "Permanent Disability" shall mean a disability which renders
an employee unable to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months.
(7) "Plan" shall mean the provisions contained in this instrument
and any subsequent amendment to this instrument which shall
have been adopted by the Board of Directors of the Company
pursuant to Article IX.
(8) "Subsidiary" shall mean any corporations which at the time
qualifies as a Subsidiary of the Company in accordance with
the terms of Subsection 424(f) of the Code.
ARTICLE III
Number of Shares Available Under Plan
Options may be granted by the Company from time to time to key
employees of the Company or any Subsidiary to purchase an aggregate of shares of
Common Stock of the Company and such shares
<PAGE> 2
shall be reserved for options granted under the Plan, subject to adjustment as
provided in Article IV(8). The shares issued upon exercise of options granted
under the Plan may be authorized and unissued shares or shares held by the
Company in its treasury.
ARTICLE IV
Option Provision
Each option granted under the Plan shall be evidenced by an agreement
which shall be subject to the following express terms and conditions and to such
other terms and conditions as the Committee may deem appropriate:
(1) Option Period. Except as provided in Article VI for 10%
shareholders, each option agreement shall specify a period of
not more than 10 years from the Date of grant for which the
option thereunder is exercisable and shall provide that the
option shall expire at the end of such period.
(2) Option Price. Except as provided in Article VI for 15%
shareholders, the option price per share shall be determined
by the Committee at the time any option is granted and shall
be not less than the fair market value on the date the option
is granted.
(3) Exercise of Option. Except as provided in Article V for
Holders who have died or become disabled, no option shall be
exercisable except during the period beginning at expiration
of such minimum period of employment by the Holder as shall be
specified by the Committee and ending three months following
termination of employment of such Holder. During the lifetime
of the Holder, the option shall be exercisable only to him.
(4) Payment of Purchase Price Upon Exercise. The purchase price of
the shares as to which an option is exercised shall be paid to
the Company (i) in cash, (ii) in stock of the Company, (iii)
to the extent permitted by law, by delivery of a recourse note
for such portion of the purchase price, and in such terms, as
shall be approved by the Committee, or (iv) such combination
of (i), (ii) or (iii) as shall be approved by the Committee at
the time of exercise. The terms of any such recourse note
shall be determined by the Committee.
(5) Amounts of Options. The aggregate fair market value
(determined as of the time the option is granted) of the
Common Stock with respect to which options granted are
exercisable for the first time by a Holder during any calendar
year (under all plans of the Company) shall not exceed
$100,000. The provisions of this Section shall be construed
and applied in accordance with Section 42(d) of the Code and
the regulations, if any, promulgated thereunder.
(6) Non-transferability. No option granted under the Plan shall be
transferable other than by will or by the laws of descent and
distribution.
(7) Investment Representation. Each option agreement shall contain
a provision that, upon demand of the Committee, the Holder
shall deliver to the Committee at the time of any exercise of
an option, a written representation that the shares to be
acquired upon such exercise are to be acquired for investment
and not for resale with a view to the distribution thereof.
Upon such demand, delivery of such representation before
delivery of any shares issued upon exercise of an option and
before the expiration of the option period shall be a
condition precedent to the right of the Holder to purchase any
shares pursuant to the option.
(8) Adjustments in Event of Change in Common Stock. In the event
of any changes in the Common Stock of the Company by reason of
any stock dividend, recapitalization,
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<PAGE> 3
reorganization, merger, consolidation, split-up, combination,
or exchange of shares, or rights offering to purchase Common
Stock at a price substantially below fair market value, or for
any similar change affecting the Common Stock, the Committee
may, in its sole and absolute discretion, adjust the number
and kind of shares for which thereafter an option may be
granted and sold under the Plan, the number and kind of shares
subject to option in outstanding option agreements and the
purchase price per share as the Committee deems equitable.
(9) Qualified Options. Each option agreement which provides for
the grant of a option to an employee shall contain such other
terms and conditions as the Committee may determine to be
necessary or desirable in order to qualify such option as an
incentive stock option within the meaning of Subsection 422 of
the Code.
ARTICLE V
Exercise in the Event of Death
or Termination of Employment
(1) Exercise Upon Death. If a Holder shall die (I) while an
employee of the Company or of a Subsidiary or (ii) within
three months after termination of his employment with the
Company or a Subsidiary because of his Permanent Disability,
his option may be exercised, to the extent that the Holder
shall have been entitled to do so at the date of his
termination of employment, by his executors or administers, at
any time, or from time to time, within one year after the date
of the Holder's death, but not later than the expiration of
the option.
(2) Exercise Upon Permanent Disability. If a Holder's employment
by the Company or a Subsidiary shall terminate because of his
Permanent Disability, he may exercise his option, to the
extent that he may be entitled to do so at the date of the
termination of his employment, at any time, or from time to
time, within one year of the date of termination of his
employment, but not later than the expiration of the option.
ARTICLE VI
Provisions For 10% Shareholders
If the employee, at the time the option is granted, owns 10% or more of
the total combined voting power of all classes of stock of the Company or any
Subsidiary, the option price shall be at least 110% of the fair market value of
the stock (determined the time of grant) subject to the option and any such
option shall not be exercisable after the expiration of 5 years from the date of
grant.
ARTICLE VII
Prohibition on Grant of Option
No option shall be granted more than 10 years following the earlier of
(I) adoption of the Plan or (ii) approval of the Plan by the shareholders of the
Company.
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<PAGE> 4
ARTICLE VIII
Miscellaneous Provisions
(1) No Rights as Shareholder. No Holder shall have any rights as a
shareholder with respect to any shares subject to his or her
option before issuance to him or her of a certificate or
certificates for such shares.
(2) No Rights to Continued Employment. The Plan and any option
granted under the Plan shall not confer upon any holder any
right for continuance of employment by the Company or any
Subsidiary, nor shall they interfere in any way with the right
of the Company or any Subsidiary by which any Holder is
employed to terminate his employment at any time.
(3) Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options thereunder, and the obligation
of the Company to sell and deliver shares under such options,
shall be subject to all applicable federal and state laws,
rules and regulations and to such approvals by any government
or regulatory agency as may be required. The Company shall not
be required to issue or deliver any certificates for shares of
Common Stock before (a) the listing of such shares on any
stock exchange on which the Common Stock may then be listed
and (b) the completion of any registration or qualification of
such shares under any federal or state law, or any ruling or
regulation of any governmental agency which the Company shall
not be obligated to accept a note in whole or partial payment
of the purchase price to the extent that the amount or terms
of any such note shall not be in compliance with all
applicable federal and state laws, rules and regulations and
such approvals by any government or regulatory agency as may
be required have not been obtained.
ARTICLE IX
Amendment and Discontinuance
The Board of Directors of the Company may from time to time amend,
suspend or discontinue the Plan; provided, however, that no action of the Board
of Directors may alter the provisions in a manner to disqualify the plan under
Subsection 422 of the Code. With the written consent of a Holder, no amendment
or suspension of the Plan shall alter or impair any option previously granted to
him under the Plan.
ARTICLE X
Administration
(1) Committee. The Plan shall be administered by a stock option
committee consisting of not less than two nor more than five
members appointed by the Board of Directors of the Company.
Each member of the Committee shall be a member of the Board
who is not eligible to receive any option under the Plan. In
the event there are all members of the Company's Board of
Directors who are eligible to receive options under the Plan,
the Committee shall consist of such members of the Board of
Directors as determined by a majority vote of the entire Board
of Directors. Any vacancy occurring in the membership of the
Committee shall be filled by appointment by the Board.
(2) Powers. The Committee shall have the power, consistent with
the provisions of the plan, to:
(a) determine and design from time to time those
employees of the Company or of any Subsidiary to whom
options are to be granted and the numbers of shares
for which options shall be granted to each such
employee;
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<PAGE> 5
(b) determine the number of shares subject to each
option; and
(c) determine the time or times and the manner when each
option shall be exercisable and the duration of the
exercise period.
(3) Interpretations. The Committee may interpret the Plan,
prescribe, amend and rescind any rules and regulations
necessary or appropriate for the administration of the Plan,
and make such other determinations and take such other action
as it deems necessary or advisable, except as otherwise
expressly reserved to the Board of Directors of the Company in
the Plan. Without limiting the generality of the foregoing,
the Committee may, in its discretion, treat all or any portion
of any period during which a Holder is on military or on an
approved leave of absence from the Company or a Subsidiary as
a period of employment of such Holder by the Company or such
Subsidiary, as the case may be, for purposes of accrual of his
rights under his option. Any interpretation, determination, or
other action make or taken by the Committee shall be final,
binding and conclusive.
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<PAGE> 1
EXHIBIT 10.15
DALEEN TECHNOLOGIES, INC.
1998 EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN
SECTION I. PURPOSE; DEFINITIONS.
The purpose of the Daleen Technologies, Inc. 1998 Employee
Non-Qualified Stock Option Plan is to enable Daleen Technologies, Inc. to
attract, retain and reward key employees of the Company and its Subsidiaries
and Affiliates, and strengthen the mutuality of interests between such key
employees and the Company's shareholders, by offering such key employees
performance-based stock incentives and/or other equity interests or
equity-based incentives in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity to the extent permitted by the
Code.
(b) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(c) "Cause" means a conviction of a participant or the failure of
a participant to contest prosecution for a felony or any other crime involving
morale turpitude or dishonesty or a breach by a participant of any agreement
with the Company or of its employment or business policies (including without
limitation theft or misuse of Company property), or a participant's gross
negligence, willful misconduct or dishonesty, any of which is directly or
materially harmful to the business or reputation of the Company or any
Subsidiary or Affiliate, as determined by the Committee in its sole discretion,
or for any other act or omission by a participant which does not fit into the
previous categories but which the Company in good faith believes has occurred
to its detriment and about which a participant has received at least one (1)
written warning by the Company and despite such prior written warning, a
participant has on a second occasion committed such act or omission.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(e) "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
(f) "Company" means Daleen Technologies, Inc., a corporation
organized under the laws of the State of Illinois or any successor corporation.
(g) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(h) "Disinterested Person" shall have the meaning set forth in
Rule 16b-3(d)(3) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
(i) "Early Retirement" means retirement, with the express consent,
for the purposes of this Plan, of the Committee or such officer of the Company
as the Committee may designate from time to time at or before the time of such
retirement, from active employment with the Company and any Subsidiary or
Affiliate.
(j) "Fair Market Value" means for a share of Stock as of any given
date:
<PAGE> 2
(i) The closing sales price per shares of Stock on the
New York Stock Exchange on any given date
(or if such Exchange was not open for
trading on any such date, the next
preceding date on which it was open); or
(ii) If there is no price specified in (i), the mean of
the last reporting bid-and-asked quotations
for the share of Stock on the New York
Stock Exchange or American Stock Exchange,
as appropriate on any such date or next
preceding date, as the case may be; or
(iii) If there also is no price as specified in (ii), the
closing sales price or in the absence
thereof the mean of the last reported
bid-and-asked quotations, for a share of
Stock on the other exchange on which the
shares of Stock are permitted to trade
having the greatest volume of trading in
such shares during the thirty-day period
preceding any such date, or next preceding
date, as the case may be; or
(iv) If there also is no price as specified in (iii), the
final reported sales price, or if not
reported in the following manner, the
highest bid quotation, in the
over-the-courter market for the shares of
Stock, as reported by the National
Association of Securities Dealers Automatic
Quotation System, or National Quotation
Bureau Incorporated, or if such
organization is not in existence, by an
organization providing similar services, on
any such date (or if such date is not a
date for which such system or organization
generally provides reports, then on the
next preceding date for which it does so);
or
(v) If there also is no price as specified in (iv), the
price determined by the Committee by
reference to the mean of the bid-and-asked
quotations for the shares of Stock provided
by members of an association of brokers and
dealers registered pursuant to subsection
14(b) of the Securities Exchange Act of
1934, which members make a market in the
shares of Stock, for such recent dates as
the Committee shall determine to be
appropriate for fairly determining current
market value; or
(vi) If there also is no price as specified in (v), the
amount determined in good faith by the
Committee based on such relevant facts,
which may include opinions of independent
experts, as may be available to the
Committee.
(k) "Non-Qualified Stock Option" means such Stock Options that do
not qualify as "incentive stock options" within the meaning of Section 422 of
the Code [nor any other provision of the Code].
(l) "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Affiliate on or after age 65.
(m) "Offering Date" means the date on which all of the following
shall have occurred: (i) a valid registration statement shall have been duly
filed under applicable provisions of federal securities laws with respect to
the Stock, (ii) a public offering of the Stock shall have occurred, and (iii)
the Stock is then being regularly traded on a recognized, established
securities exchange.
(n) "Plan" means this Daleen Technologies, Inc. 1996 Employee
Non-Qualified Stock Option Plan, as hereinafter amended from time to time.
(o) "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 6 of this Plan.
(p) "Retirement" means Normal or Early Retirement.
(q) "Stock" means the Common Stock, no par value per share, of the
Company.
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<PAGE> 3
(r) "Stock Option" or "Option" means any option to purchase shares
of Stock (including Restricted Stock if the Committee so determines) granted
pursuant to Section 5.
(s) "Stock Option Agreement" means the written agreement between
optionee and the Company as required pursuant to Section 5 of the Plan.
(t) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(u) "Tax Benefits" means the awards described in Section 10(a) and
(b).
SECTION 2. ADMINISTRATION.
Until such time as there is a public offering of the Company's stock,
the Plan shall be administered by a Committee composed of the Board. After a
public offering of the Company's stock, the Plan shall be administered by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board and who shall serve at the pleasure of the Board. The Committee
shall be the "compensation committee" so long as all of the members thereof
meet the requirements of the preceding sentence.
The Committee shall have full authority to grant, pursuant to the
terms of the Plan, to officers and key employees (excluding any person who
serves only as a director): (i) Stock Options, (ii) Restricted Stock and/or
(iii) Tax Benefits.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company
and its Subsidiaries and Affiliates (who may also be directors of the Company)
to whom Stock Options, Restricted Stock or Tax Benefits may from time to time
be granted hereunder;
(ii) to determine whether and to what extent Stock Options,
Restricted Stock, Tax Benefits or any combination thereof, are to be granted
hereunder to one or more eligible employees;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting,
acceleration or waiver of forfeiture restrictions regarding any Stock Option or
other award and/or the shares of Stock relating thereto, based in each case on
such factors as the Committee shall determine, in its sole discretion);
(v) to determine whether and under what circumstances a Stock
Option may be settled in cash, and/or Restricted Stock, as applicable, instead
of Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other
cash awards made by the Company are to be made, and operate, on an additive or
tandem basis vis-a-vis other awards under the Plan and/or cash awards made
outside of the Plan;
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
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<PAGE> 4
All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and the Plan participants.
To the fullest extent permitted by law, the Company shall indemnify
each person made or threatened to be made a party to any civil or criminal
action or proceeding by reason of the fact that he, or his testator or
intestate, is or was a member of the Committee.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be Five Hundred Thousand (500,000). Such
shares may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
If any shares of Stock that have been optioned cease to be subject to
a Stock Option, or if any such shares of Stock that are subject to any
Restricted Stock award, granted hereunder are forfeited or any such award
otherwise terminates without a payment being made to the participant in the
form of Stock, such shares shall again be available for distribution in
connection with future awards under the Plan. Awards that may be satisfied
either by the issuance of shares of Stock or by cash or other consideration
shall be counted against the maximum number of shares of Stock that may be
issued under this Plan, even though the awards are ultimately satisfied by the
payment of consideration other than shares of Stock. However, awards will not
reduce the number of shares of Stock that may be issued pursuant to this Plan
if the settlement of the award will not require the issuance of shares of
Stock.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, Stock split or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Options granted under
the Plan, in the number of shares subject to other outstanding awards granted
under the Plan and in the consideration to be received upon the exercise of
Stock Options, lapse of restrictions on Restricted Stock, or Tax Benefits as
may be determined to be appropriate by the Committee, in its sole discretion,
provided that the number of shares subject to any award shall always be a whole
number.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company and its Subsidiaries
and Affiliates (but excluding members of the Committee and any person who
serves only as a director) who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and/or
its Subsidiaries and Affiliates are eligible to be granted awards under the
Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan and/or cash, or other awards made outside
of the Plan. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
Stock Options granted under the Plan shall be the Non-Qualified Stock
Options. The Committee shall have the complete and absolute authority to grant
to any optionee Non-Qualified Stock Options.
Each such person so selected to receive Stock Options shall have a
reasonable period of time within which to accept or reject the offered Stock
Option. Failure to accept within the period so fixed by the Committee may be
treated as a rejection. Each person who accepts a Stock Option shall enter into
a written Stock Option Agreement with the Company, in such form as Committee
may prescribe, setting forth the terms and conditions of the Stock Option,
consistent with the provisions of this Plan.
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In its sole discretion, the Committee may grant "Limited"
Non-Qualified Stock Options under this Section 5, i.e., Non-Qualified Stock
Options that become exercisable only in the event of a Change in Control and/or
a Potential Change in Control, subject to such terms and conditions as the
Committee may specify at grant.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
(b) OPTION TERM. Any Stock Option granted under the Plan shall be
granted within 10 years of the date hereof. The term of each Stock Option shall
be fixed by the Committee, but no Stock Option shall be exercisable more than
ten years and one day after the date such Stock Option is granted.
(c) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined
by the Committee at or after grant, but no Stock Option shall be exercisable
prior to the first anniversary date of the granting of the Option. If the
Committee provides, in its sole discretion, that any Stock Option is
exercisable only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall determine, in its sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise
provisions apply under Section 5(c), Stock Options may be exercised in whole or
in part at anytime during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may also be made in the form of exercisable
Stock Options or unrestricted Stock already owned by the optionee or Restricted
Stock subject to an award hereunder (based, in each case, on the Fair Market
Value of the Stock on the date the option is exercised, as determined by the
Committee).
If payment of the option exercise price of a Stock Option is
made in whole or in part in the form of Restricted Stock such Restricted Stock
(and any replacement shares relating thereto) shall remain (or be) restricted,
as the case may be, in accordance with the original terms of the Restricted
Stock award in question, and any additional Stock received upon the exercise
shall be subject to the same forfeiture restrictions or deferral limitations,
unless otherwise determined by the Committee, in its sole discretion, at or
after grant.
No shares of Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the right to dividends
or other rights of a shareholder with respect to shares subject to the Option
when the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
Section 14(a) of this Plan.
(e) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) TERMINATION BY DEATH. If an optionee's employment by the
Company or any Subsidiary or Affiliate terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), by the legal
representative of the estate or by the legatee of the optionee under the will
of the optionee, for a period of one year (or such longer or shorter period as
the Committee may specify at or after grant) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is shorter.
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(g) TERMINATION BY REASON OF DISABILITY. If an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine at or
after grant (or as may be determined in accordance with procedures established
by the Committee), for a period of one year (or such longer or shorter period
as the Committee may specify at or after grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such one-year period (or such other period as the
Committee shall specify at grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Normal or Early Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at
the time of such Retirement or on such accelerated basis as the Committee may
determine at or after grant (or as may be determined in accordance with
procedures established by the Committee), for a period of three (3) months (or
such longer or shorter period as Committee may specify at or after grant) from
the date of such termination of employment or the expiration of the stated term
of such Stock Option, whichever period is the shorter; provided, however, that,
if the optionee dies within such three-month (3) period (or such other period
as the Committee may specify at grant), any unexercised Stock Option held by
such optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of twelve months from the date
of such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(i) OTHER TERMINATION. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at grant, if
an optionee's employment by the Company and any Subsidiary or Affiliate
terminates for any reason other than death, Disability or Normal or Early
Retirement, the Stock Option shall thereupon terminate, except that such Stock
Option may be exercised, to the extent otherwise then exercisable, for the
lesser of three months or the balance of such Stock Option's term if the
optionee is involuntarily terminated by the Company or any Subsidiary or
Affiliate without Cause.
(j) BUYOUT PROVISIONS. The Committee may at any time offer to buy
out for a payment in cash, Stock, or Restricted Stock an option previously
granted, based on such terms and conditions as the Committee shall establish
and communicate to the optionee at the time that such offer is made.
(k) SETTLEMENT PROVISIONS. If the option agreement so provides at
grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares
to be issued with respect to the spread value of an exercised Option take the
form of Restricted Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value (as determined by the Committee) of such
Restricted Stock determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
(l) NO RIGHTS AS STOCKHOLDERS. No optionee nor any personal
representative of an optionee shall, with respect to any shares of Stock
issuable upon the exercise of a Stock Option, be, or shall have of the rights
and privileges of, a stockholder of the Company with respect to any shares of
Stock purchasable or issuable upon the exercise of the Stock Option, in whole
or in part, prior to the Exercise Date of the Stock Option.
(m) IMPROPER CONDUCT. Notwithstanding any other provisions set
forth herein, if any optionee shall (i) commit any act of malfeasance or
wrongdoing affecting the Company, (ii) breach any covenant not to compete or
Employment Contract with the Company or any other agreement with the Company,
or (iii) engage in conduct that would warrant the optionee's discharge for
cause (excluding general dissatisfaction with the performance of optionee's
duties, but including any act of disloyalty or any conduct clearly intending to
bring discredit upon the Company, any unexercised portion of the Stock Option
shall immediately terminate and be void.
(n) Each Stock Option granted hereunder may only be exercised to
the extent that the Optionee is vested in such Stock Option. Each Stock Option
shall vest separately in accordance with the option vesting schedule determined
by the Committee, in its sole discretion, which will be incorporated in the
Stock Option Agreement. The Stock Option
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vesting schedule will be accelerated in the sole discretion of the Committee,
if the Committee determines that the acceleration of the Stock Option vesting
schedule would be desirable for the Company.
SECTION 6. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan and/or cash or other awards made outside of the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Restricted Stock will be made, the number of shares to be awarded, the price
(if any) to be paid by the recipient of Restricted Stock (subject to Section
6(b) below), the time or times within which such awards may be subject to
forfeiture, and all other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock
upon the attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the
same with respect to each recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be equal to or less than their Fair Market Value and may be
zero.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify
at grant) after the award date by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required under Section
6(b)(i) above.
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such participant, and may, if the Committee determines in its sole
discretion, bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award.
(iv) The Committee may require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of
Restricted Stock; award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to this Section 6 may in the sole discretion of the Committee
be subject to any of the following restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant may not
be permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under the Plan. The Committee, in its sole discretion,
may provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the
Committee may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section
6(c)(i) above, upon issuance of the shares under the Stock Option, the
participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares, and the right to receive any cash
dividends. The Committee, in its sole discretion, as determined at the
time of award, may permit or require the payment of cash dividends to
be deferred and, if the Committee so determines, reinvested, subject
to Section
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11(e) below, in additional Restricted Stock to the extent shares are
available under Section 3 of this Plan, or otherwise reinvested.
Pursuant to Section 3 above, Stock dividends issued with respect to
Restricted Stock shall be treated as additional shares of Restricted
Stock that are subject to the same restrictions and other terms and
conditions that apply to the shares with respect to which such
dividends are issued.
(iii) Subject to the applicable provisions of the award
agreement and this Section 6, upon termination of a participant's
employment with the Company and any Subsidiary or Affiliate for any
reason during the Restriction Period, all shares still subject to
restriction will vest, or be forfeited, in accordance with the terms
and conditions established by the Committee at grant.
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, certificates for an appropriate number of unrestricted shares
shall be delivered to the participant promptly.
SECTION 7. CHANGE IN CONTROL PROVISIONS.
(a) IMPACT OF EVENT. In the event of:
(1) a "Change in Control" as defined in Section 7(b)
below or
(2) a "Potential Change in Control" as defined in Section
7(c) below,
the following acceleration and valuation provisions shall apply:
(i) Any Stock Options outstanding for at least six months
(including Limited Non-Qualifying Stock Options) awarded under the
Plan not previously exercisable and vested shall become fully
exercisable and vested;
(ii) The restrictions and deferral limitations applicable
to any Restricted Stock and/or Tax Benefits, in each case to the
extent not already lapsed or still applicable under the Plan, shall
lapse and no longer be applicable, and such shares and awards shall be
deemed fully vested and owned by the participant;
(iii) The value of all outstanding Stock Options,
Restricted Stock, and Tax Benefits, in each case to the extent vested,
shall, unless otherwise determined by the Committee in its sole
discretion at or after grant but prior to any Change in Control, be
cashed out on the basis of the Change in Control Price as defined in
Section 7(d) as of the date of such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control;
provided, however, that the Committee may in the agreement relating to any
Stock Option, Restricted Stock, and/or Tax Benefits provide that the Change in
Control or Potential Change in Control provision of this Section 7 shall not
become effective unless the Committee or the Board shall determine before, on
or within fifteen (15) days after the occurrence of any event described in
Section 7(b) or 7(c) that a Change in Control or Potential Change in Control
has occurred.
(b) DEFINITION OF "CHANGE IN CONTROL." For purposes of Section
7(a), a "Change in Control" means the happening of any of the following:
(i) Prior to and on the Offering Date, "Change in
Control" shall mean any event that results in the Company's President,
James Daleen, owning less than fifty (50%) percent of the Stock.
(ii) After the Offering Date, "Change in Control" shall
mean:
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(I) A change in control of a nature that would
be required to be reported in response to any form or report to the
Securities and Exchange Commission or any stock exchange on which the
Company's shares are listed which requires the reporting of a change
in control of the Company;
(II) When any "person," as such term is used in
Section 13(d) and 14(d) of the Exchange Act (other than the Company or
a Subsidiary or any Company or Subsidiary employee benefit plan
(including any trustee of such plan acting as trustee) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act)), directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of the
Company's then outstanding securities;
(III) When, during any period of two consecutive
years during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, provided, however, that a director who was not a director at
the beginning of such period shall be deemed to have satisfied the
two-year requirement if such director was elected by, or on the
recommendation of or with the approval of, at least three-quarters of
the directors who were directors at the beginning of such period
(either actually or by prior operation of this Section 7(b)(iii)); or
(IV) A majority of the members of the Board in
office prior to the happening of any event determines in its sole
discretion that as a result of such event there has been a change in
control.
(c) DEFINITION OF "POTENTIAL CHANGE IN CONTROL." For purposes of
Section 7(a), a "Potential Change in Control" means the happening after the
Offering Date of any one of the following:
(i) The approval by shareholders of any agreement by the
Company, the consummation of which would result in a Change in Control
of the Company as defined in Section 7(b)(ii); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group other than the Company or a
Subsidiary or any Company employee benefit plan (including any trustee
of such plan acting as such trustee) of securities of the Company
representing five percent or more of the combined voting power of the
Company's outstanding securities and the adoption by the Board of
Directors of a resolution to the effect that a Potential Change in
Control of the Company has occurred for purposes of this Plan.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE." For purposes of this
Section 7, "Change in Control Price" means the highest Fair Market Value price
per share paid or offered in any bona fide transaction related to a potential
or actual Change in Control of the Company at any time during the preceding
sixty-day period as determined by the Committee except where applicable, the
date on which a cashout occurs under Section 7(a)(iii).
SECTION 8. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan and the Committee
may amend or alter the Plan, but no amendment, alteration, or discontinuation
shall be made which would impair the rights of an optionee or participant under
a Stock Option (or Limited Non-Qualified Stock Option), Restricted Stock award,
theretofore granted, without the optionee's or participant's consent, or which,
without the approval of the Company's stockholders, would:
(a) except as expressly provided in this Plan, increase the total
number of shares reserved for the purposes of the Plan;
(b) except as expressly provided in this Plan, decrease the option
price of any Stock Option to less than 100% of the Fair Market Value on the
date of grant; or
(c) change the employees or class of employees eligible to
participate in the Plan; or
(d) extend the maximum option period under Section 5(b) of the
Plan.
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The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one-for-one or other basis), including
previously granted Stock Options having higher option exercise prices.
Subject to the above provision, the Board and/or Committee shall have
broad authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trust or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards or grants hereunder, provided, however, that unless the Committee
otherwise determines with the consent of the affected participant, the
existence of any such trust or other arrangement is consistent with the
"unfunded" status of the Plan.
SECTION 10. TAX BENEFITS.
The Committee shall have the right to grant to any recipient of a
Stock Option or Restricted Stock award:
(a) a cash or stock award to enable the recipient to pay, as and
when they become due, any federal, state or local income taxes (collectively,
"Taxes") payable as a result of the grant, receipt, exercise, award, lapse of
restriction or forgiveness of indebtedness in connection with any Stock Option,
Restricted Stock award, or awarded or granted under the Plan (collectively, the
"Grant") in an amount or having a Fair Market Value equal to (i) the Taxes
payable on the Grant plus (ii) any taxes payable upon the payment provided for
under clause (i), and/or
(b) a cash or stock award to any such recipient who as result of a
Change in Control or a Potential Change in Control is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code or any similar provision in
an amount equal to (x) the amount of the Excise Tax thereon, plus (y) any
federal, state and local income tax and/or Excise Tax upon the payment provided
for under clause (x).
Any awards described in Section 10(a) or (b) shall be referred to
herein as "Tax Benefits."
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent to and
agree with the Company in writing that the optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions. The Committee may require that upon the receipt of any
Stock, or any rights to acquire Stock, the acquiring person shall execute in
favor of the Company an agreement restricting the transfer of such Stock, or
the rights to acquire such Stock, giving the Company a right of first refusal
with respect to such Stock, giving the Company the right to acquire such Stock
upon the death, disability or termination of employment
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<PAGE> 11
with the Company, and such other similar or different provisions as the
Committee in its sole and absolute discretion deems advisable or in the best
interests of the Company.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, providing for the same or similar awards
as provided under this Plan.
(c) The adoption of the Plan shall not confer upon any employee of
the Company or any Subsidiary or Affiliate any right to continued employment
with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any federal, state, or local taxes of any kind required by law or
the Company to be withheld with respect to such amount. Unless otherwise
determined by the Committee, withholding obligations may be settled with Stock
or exercisable Stock Options, including Stock or Stock Options that are part of
the award that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such payment or
arrangements, and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible
if sufficient shares of Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Stock Options, Stock
Purchase Rights and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Florida.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of December 17, 1997, subject to the
approval of the Plan by the holders of two thirds (2/3) of the shares of the
Company's Common Stock. Any grants made under the Plan prior to such approval
shall be effective when made (unless otherwise specified by the Committee at
the time of grant), but shall be conditioned on, and subject to, such approval
of the Plan by such shareholders.
SECTION 13. TERM OF PLAN.
No Stock Option, Restricted Stock award, or Tax Benefit shall be
granted pursuant to the Plan on or after the tenth anniversary of the date of
stockholder approval of the Plan, but any thereof granted prior to such tenth
anniversary may extend beyond that date.
SECTION 14. COMPLIANCE WITH SECURITIES AND OTHER LAWS.
In no event shall the Company be required to sell or issue shares of
Stock under any award if the sale or issuance thereof would constitute a
violation of applicable federal or state securities law or regulation or a
violation of any other law or regulation of any governmental authority or any
national securities exchange. As a condition to any sale or issuance of shares
of Stock, the Company may place legends on shares of stock, issue stop transfer
orders, and require such agreements or undertakings as the Company may deem
necessary or advisable to assure compliance with any such law or regulation,
including, if the Company or its counsel deems it appropriate, representations
from the person to whom an
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<PAGE> 12
award is granted that he or she is acquiring the shares of stock solely for
investment and not with a view to distribution and that no distribution of the
shares of Stock will be made unless registered pursuant to applicable federal
and state securities laws, or in the opinion of counsel of the Company, such
registration is unnecessary.
WITNESS: DALEEN TECHNOLOGIES, INC.,
a Florida Corporation
/s/ Richard A. Schell /s/ James Daleen
- -------------------------- ---------------------------------
Richard A. Schell James Daleen
CEO and Chairman of the Board
/s/ Judith A. Daleen
- --------------------------
Judith A. Daleen
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<PAGE> 1
EXHIBIT 10.16
DALEEN TECHNOLOGIES, INC.
1996 EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN
SECTION I. PURPOSE; DEFINITIONS.
The purpose of the Daleen Technologies, Inc. 1996 Employee
Non-Qualified Stock Option Plan is to enable Daleen Technologies, Inc. to
attract, retain and reward key employees of the Company and its Subsidiaries
and Affiliates, and strengthen the mutuality of interests between such key
employees and the Company's shareholders, by offering such key employees
performance-based stock incentives and/or other equity interests or
equity-based incentives in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity to the extent permitted by the
Code.
(b) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(c) "Cause" means a conviction of a participant or the failure of
a participant to contest prosecution for a felony or any other crime involving
morale turpitude or dishonesty or a breach by a participant of any agreement
with the Company or of its employment or business policies (including without
limitation theft or misuse of Company property), or a participant's gross
negligence, willful misconduct or dishonesty, any of which is directly or
materially harmful to the business or reputation of the Company or any
Subsidiary or Affiliate, as determined by the Committee in its sole discretion,
or for any other act or omission by a participant which does not fit into the
previous categories but which the Company in good faith believes has occurred
to its detriment and about which a participant has received at least one (1)
written warning by the Company and despite such prior written warning, a
participant has on a second occasion committed such act or omission.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(e) "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
(f) "Company" means Daleen Technologies, Inc., a corporation
organized under the laws of the State of Illinois or any successor corporation.
(g) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(h) "Disinterested Person" shall have the meaning set forth in
Rule 16b-3(d)(3) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
(i) "Early Retirement" means retirement, with the express consent,
for the purposes of this Plan, of the Committee or such officer of the Company
as the Committee may designate from time to time at or before the time of such
retirement, from active employment with the Company and any Subsidiary or
Affiliate.
(j) "Fair Market Value" means for a share of Stock as of any given
date:
<PAGE> 2
(i) The closing sales price per shares of Stock on the
New York Stock Exchange on any given date
(or if such Exchange was not open for
trading on any such date, the next
preceding date on which it was open); or
(ii) If there is no price specified in (i), the mean of
the last reporting bid-and-asked quotations
for the share of Stock on the New York
Stock Exchange or American Stock Exchange,
as appropriate on any such date or next
preceding date, as the case may be; or
(iii) If there also is no price as specified in (ii), the
closing sales price or in the absence
thereof the mean of the last reported
bid-and-asked quotations, for a share of
Stock on the other exchange on which the
shares of Stock are permitted to trade
having the greatest volume of trading in
such shares during the thirty-day period
preceding any such date, or next preceding
date, as the case may be; or
(iv) If there also is no price as specified in (iii), the
final reported sales price, or if not
reported in the following manner, the
highest bid quotation, in the
over-the-courter market for the shares of
Stock, as reported by the National
Association of Securities Dealers Automatic
Quotation System, or National Quotation
Bureau Incorporated, or if such
organization is not in existence, by an
organization providing similar services, on
any such date (or if such date is not a
date for which such system or organization
generally provides reports, then on the
next preceding date for which it does so);
or
(v) If there also is no price as specified in (iv), the
price determined by the Committee by
reference to the mean of the bid-and-asked
quotations for the shares of Stock provided
by members of an association of brokers and
dealers registered pursuant to subsection
14(b) of the Securities Exchange Act of
1934, which members make a market in the
shares of Stock, for such recent dates as
the Committee shall determine to be
appropriate for fairly determining current
market value; or
(vi) If there also is no price as specified in (v), the
amount determined in good faith by the
Committee based on such relevant facts,
which may include opinions of independent
experts, as may be available to the
Committee.
(k) "Non-Qualified Stock Option" means such Stock Options that do
not qualify as "incentive stock options" within the meaning of Section 422 of
the Code [nor any other provision of the Code].
(l) "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Affiliate on or after age 65.
(m) "Offering Date" means the date on which all of the following
shall have occurred: (i) a valid registration statement shall have been duly
filed under applicable provisions of federal securities laws with respect to
the Stock, (ii) a public offering of the Stock shall have occurred, and (iii)
the Stock is then being regularly traded on a recognized, established
securities exchange.
(n) "Plan" means this Daleen Technologies, Inc. 1996 Employee
Non-Qualified Stock Option Plan, as hereinafter amended from time to time.
(o) "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 6 of this Plan.
(p) "Retirement" means Normal or Early Retirement.
(q) "Stock" means the Common Stock, no par value per share, of the
Company.
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<PAGE> 3
(r) "Stock Option" or "Option" means any option to purchase shares
of Stock (including Restricted Stock if the Committee so determines) granted
pursuant to Section 5.
(s) "Stock Option Agreement" means the written agreement between
optionee and the Company as required pursuant to Section 5 of the Plan.
(t) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(u) "Tax Benefits" means the awards described in Section 10(a) and
(b).
SECTION 2. ADMINISTRATION.
Until such time as there is a public offering of the Company's stock,
the Plan shall be administered by a Committee composed of the Board. After a
public offering of the Company's stock, the Plan shall be administered by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board and who shall serve at the pleasure of the Board. The Committee
shall be the "compensation committee" so long as all of the members thereof
meet the requirements of the preceding sentence.
The Committee shall have full authority to grant, pursuant to the
terms of the Plan, to officers and key employees (excluding any person who
serves only as a director): (i) Stock Options, (ii) Restricted Stock and/or
(iii) Tax Benefits.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company
and its Subsidiaries and Affiliates (who may also be directors of the Company)
to whom Stock Options, Restricted Stock or Tax Benefits may from time to time
be granted hereunder;
(ii) to determine whether and to what extent Stock Options,
Restricted Stock, Tax Benefits or any combination thereof, are to be granted
hereunder to one or more eligible employees;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting,
acceleration or waiver of forfeiture restrictions regarding any Stock Option or
other award and/or the shares of Stock relating thereto, based in each case on
such factors as the Committee shall determine, in its sole discretion);
(v) to determine whether and under what circumstances a Stock
Option may be settled in cash, and/or Restricted Stock, as applicable, instead
of Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other
cash awards made by the Company are to be made, and operate, on an additive or
tandem basis vis-a-vis other awards under the Plan and/or cash awards made
outside of the Plan;
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
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<PAGE> 4
All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and the Plan participants.
To the fullest extent permitted by law, the Company shall indemnify
each person made or threatened to be made a party to any civil or criminal
action or proceeding by reason of the fact that he, or his testator or
intestate, is or was a member of the Committee.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be Four Hundred Thousand (400,000). Such
shares may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
If any shares of Stock that have been optioned cease to be subject to
a Stock Option, or if any such shares of Stock that are subject to any
Restricted Stock award, granted hereunder are forfeited or any such award
otherwise terminates without a payment being made to the participant in the
form of Stock, such shares shall again be available for distribution in
connection with future awards under the Plan. Awards that may be satisfied
either by the issuance of shares of Stock or by cash or other consideration
shall be counted against the maximum number of shares of Stock that may be
issued under this Plan, even though the awards are ultimately satisfied by the
payment of consideration other than shares of Stock. However, awards will not
reduce the number of shares of Stock that may be issued pursuant to this Plan
if the settlement of the award will not require the issuance of shares of
Stock.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, Stock split or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Options granted under
the Plan, in the number of shares subject to other outstanding awards granted
under the Plan and in the consideration to be received upon the exercise of
Stock Options, lapse of restrictions on Restricted Stock, or Tax Benefits as
may be determined to be appropriate by the Committee, in its sole discretion,
provided that the number of shares subject to any award shall always be a whole
number.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company and its Subsidiaries
and Affiliates (but excluding members of the Committee and any person who
serves only as a director) who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and/or
its Subsidiaries and Affiliates are eligible to be granted awards under the
Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan and/or cash, or other awards made outside
of the Plan. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
Stock Options granted under the Plan shall be the Non-Qualified Stock
Options. The Committee shall have the complete and absolute authority to grant
to any optionee Non-Qualified Stock Options.
Each such person so selected to receive Stock Options shall have a
reasonable period of time within which to accept or reject the offered Stock
Option. Failure to accept within the period so fixed by the Committee may be
treated as a rejection. Each person who accepts a Stock Option shall enter into
a written Stock Option Agreement with the Company, in such form as Committee
may prescribe, setting forth the terms and conditions of the Stock Option,
consistent with the provisions of this Plan.
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<PAGE> 5
In its sole discretion, the Committee may grant "Limited"
Non-Qualified Stock Options under this Section 5, i.e., Non-Qualified Stock
Options that become exercisable only in the event of a Change in Control and/or
a Potential Change in Control, subject to such terms and conditions as the
Committee may specify at grant.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
(b) OPTION TERM. Any Stock Option granted under the Plan shall be
granted within 10 years of the date hereof. The term of each Stock Option shall
be fixed by the Committee, but no Stock Option shall be exercisable more than
ten years and one day after the date such Stock Option is granted.
(c) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined
by the Committee at or after grant, but no Stock Option shall be exercisable
prior to the first anniversary date of the granting of the Option. If the
Committee provides, in its sole discretion, that any Stock Option is
exercisable only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall determine, in its sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise
provisions apply under Section 5(c), Stock Options may be exercised in whole or
in part at anytime during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may also be made in the form of exercisable
Stock Options or unrestricted Stock already owned by the optionee or Restricted
Stock subject to an award hereunder (based, in each case, on the Fair Market
Value of the Stock on the date the option is exercised, as determined by the
Committee).
If payment of the option exercise price of a Stock Option is
made in whole or in part in the form of Restricted Stock such Restricted Stock
(and any replacement shares relating thereto) shall remain (or be) restricted,
as the case may be, in accordance with the original terms of the Restricted
Stock award in question, and any additional Stock received upon the exercise
shall be subject to the same forfeiture restrictions or deferral limitations,
unless otherwise determined by the Committee, in its sole discretion, at or
after grant.
No shares of Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the right to dividends
or other rights of a shareholder with respect to shares subject to the Option
when the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
Section 14(a) of this Plan.
(e) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) TERMINATION BY DEATH. If an optionee's employment by the
Company or any Subsidiary or Affiliate terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), by the legal
representative of the estate or by the legatee of the optionee under the will
of the optionee, for a period of one year (or such longer or shorter period as
the Committee may specify at or after grant) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is shorter.
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<PAGE> 6
(g) TERMINATION BY REASON OF DISABILITY. If an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine at or
after grant (or as may be determined in accordance with procedures established
by the Committee), for a period of one year (or such longer or shorter period
as the Committee may specify at or after grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such one-year period (or such other period as the
Committee shall specify at grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Normal or Early Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at
the time of such Retirement or on such accelerated basis as the Committee may
determine at or after grant (or as may be determined in accordance with
procedures established by the Committee), for a period of three (3) months (or
such longer or shorter period as Committee may specify at or after grant) from
the date of such termination of employment or the expiration of the stated term
of such Stock Option, whichever period is the shorter; provided, however, that,
if the optionee dies within such three-month (3) period (or such other period
as the Committee may specify at grant), any unexercised Stock Option held by
such optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of twelve months from the date
of such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(i) OTHER TERMINATION. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at grant, if
an optionee's employment by the Company and any Subsidiary or Affiliate
terminates for any reason other than death, Disability or Normal or Early
Retirement, the Stock Option shall thereupon terminate, except that such Stock
Option may be exercised, to the extent otherwise then exercisable, for the
lesser of three months or the balance of such Stock Option's term if the
optionee is involuntarily terminated by the Company or any Subsidiary or
Affiliate without Cause.
(j) BUYOUT PROVISIONS. The Committee may at any time offer to buy
out for a payment in cash, Stock, or Restricted Stock an option previously
granted, based on such terms and conditions as the Committee shall establish
and communicate to the optionee at the time that such offer is made.
(k) SETTLEMENT PROVISIONS. If the option agreement so provides at
grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares
to be issued with respect to the spread value of an exercised Option take the
form of Restricted Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value (as determined by the Committee) of such
Restricted Stock determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
(l) NO RIGHTS AS STOCKHOLDERS. No optionee nor any personal
representative of an optionee shall, with respect to any shares of Stock
issuable upon the exercise of a Stock Option, be, or shall have of the rights
and privileges of, a stockholder of the Company with respect to any shares of
Stock purchasable or issuable upon the exercise of the Stock Option, in whole
or in part, prior to the Exercise Date of the Stock Option.
(m) IMPROPER CONDUCT. Notwithstanding any other provisions set
forth herein, if any optionee shall (i) commit any act of malfeasance or
wrongdoing affecting the Company, (ii) breach any covenant not to compete or
Employment Contract with the Company or any other agreement with the Company,
or (iii) engage in conduct that would warrant the optionee's discharge for
cause (excluding general dissatisfaction with the performance of optionee's
duties, but including any act of disloyalty or any conduct clearly intending to
bring discredit upon the Company, any unexercised portion of the Stock Option
shall immediately terminate and be void.
(n) Each Stock Option granted hereunder may only be exercised to
the extent that the Optionee is vested in such Stock Option. Each Stock Option
shall vest separately in accordance with the option vesting schedule determined
by the Committee, in its sole discretion, which will be incorporated in the
Stock Option Agreement. The Stock Option
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<PAGE> 7
vesting schedule will be accelerated in the sole discretion of the Committee,
if the Committee determines that the acceleration of the Stock Option vesting
schedule would be desirable for the Company.
SECTION 6. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan and/or cash or other awards made outside of the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Restricted Stock will be made, the number of shares to be awarded, the price
(if any) to be paid by the recipient of Restricted Stock (subject to Section
6(b) below), the time or times within which such awards may be subject to
forfeiture, and all other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock
upon the attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the
same with respect to each recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be equal to or less than their Fair Market Value and may be
zero.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify
at grant) after the award date by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required under Section
6(b)(i) above.
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such participant, and may, if the Committee determines in its sole
discretion, bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award.
(iv) The Committee may require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of
Restricted Stock; award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to this Section 6 may in the sole discretion of the Committee
be subject to any of the following restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant may not
be permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under the Plan. The Committee, in its sole discretion,
may provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the
Committee may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section
6(c)(i) above, upon issuance of the shares under the Stock Option, the
participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares, and the right to receive any cash
dividends. The Committee, in its sole discretion, as determined at the
time of award, may permit or require the payment of cash dividends to
be deferred and, if the Committee so determines, reinvested, subject
to Section
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<PAGE> 8
11(e) below, in additional Restricted Stock to the extent shares are
available under Section 3 of this Plan, or otherwise reinvested.
Pursuant to Section 3 above, Stock dividends issued with respect to
Restricted Stock shall be treated as additional shares of Restricted
Stock that are subject to the same restrictions and other terms and
conditions that apply to the shares with respect to which such
dividends are issued.
(iii) Subject to the applicable provisions of the award
agreement and this Section 6, upon termination of a participant's
employment with the Company and any Subsidiary or Affiliate for any
reason during the Restriction Period, all shares still subject to
restriction will vest, or be forfeited, in accordance with the terms
and conditions established by the Committee at grant.
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, certificates for an appropriate number of unrestricted shares
shall be delivered to the participant promptly.
SECTION 7. CHANGE IN CONTROL PROVISIONS.
(a) IMPACT OF EVENT. In the event of:
(1) a "Change in Control" as defined in Section 7(b)
below or
(2) a "Potential Change in Control" as defined in Section
7(c) below,
the following acceleration and valuation provisions shall apply:
(i) Any Stock Options outstanding for at least six months
(including Limited Non-Qualifying Stock Options) awarded under the
Plan not previously exercisable and vested shall become fully
exercisable and vested;
(ii) The restrictions and deferral limitations applicable
to any Restricted Stock and/or Tax Benefits, in each case to the
extent not already lapsed or still applicable under the Plan, shall
lapse and no longer be applicable, and such shares and awards shall be
deemed fully vested and owned by the participant;
(iii) The value of all outstanding Stock Options,
Restricted Stock, and Tax Benefits, in each case to the extent vested,
shall, unless otherwise determined by the Committee in its sole
discretion at or after grant but prior to any Change in Control, be
cashed out on the basis of the Change in Control Price as defined in
Section 7(d) as of the date of such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control;
provided, however, that the Committee may in the agreement relating to any
Stock Option, Restricted Stock, and/or Tax Benefits provide that the Change in
Control or Potential Change in Control provision of this Section 7 shall not
become effective unless the Committee or the Board shall determine before, on
or within fifteen (15) days after the occurrence of any event described in
Section 7(b) or 7(c) that a Change in Control or Potential Change in Control
has occurred.
(b) DEFINITION OF "CHANGE IN CONTROL." For purposes of Section
7(a), a "Change in Control" means the happening of any of the following:
(i) Prior to and on the Offering Date, "Change in
Control" shall mean any event that results in the Company's President,
James Daleen, owning less than fifty (50%) percent of the Stock.
(ii) After the Offering Date, "Change in Control" shall
mean:
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<PAGE> 9
(I) A change in control of a nature that would
be required to be reported in response to any form or report to the
Securities and Exchange Commission or any stock exchange on which the
Company's shares are listed which requires the reporting of a change
in control of the Company;
(II) When any "person," as such term is used in
Section 13(d) and 14(d) of the Exchange Act (other than the Company or
a Subsidiary or any Company or Subsidiary employee benefit plan
(including any trustee of such plan acting as trustee) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act)), directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of the
Company's then outstanding securities;
(III) When, during any period of two consecutive
years during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, provided, however, that a director who was not a director at
the beginning of such period shall be deemed to have satisfied the
two-year requirement if such director was elected by, or on the
recommendation of or with the approval of, at least three-quarters of
the directors who were directors at the beginning of such period
(either actually or by prior operation of this Section 7(b)(iii)); or
(IV) A majority of the members of the Board in
office prior to the happening of any event determines in its sole
discretion that as a result of such event there has been a change in
control.
(c) DEFINITION OF "POTENTIAL CHANGE IN CONTROL." For purposes of
Section 7(a), a "Potential Change in Control" means the happening after the
Offering Date of any one of the following:
(i) The approval by shareholders of any agreement by the
Company, the consummation of which would result in a Change in Control
of the Company as defined in Section 7(b)(ii); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group other than the Company or a
Subsidiary or any Company employee benefit plan (including any trustee
of such plan acting as such trustee) of securities of the Company
representing five percent or more of the combined voting power of the
Company's outstanding securities and the adoption by the Board of
Directors of a resolution to the effect that a Potential Change in
Control of the Company has occurred for purposes of this Plan.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE." For purposes of this
Section 7, "Change in Control Price" means the highest Fair Market Value price
per share paid or offered in any bona fide transaction related to a potential
or actual Change in Control of the Company at any time during the preceding
sixty-day period as determined by the Committee except where applicable, the
date on which a cashout occurs under Section 7(a)(iii).
SECTION 8. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan and the Committee
may amend or alter the Plan, but no amendment, alteration, or discontinuation
shall be made which would impair the rights of an optionee or participant under
a Stock Option (or Limited Non-Qualified Stock Option), Restricted Stock award,
theretofore granted, without the optionee's or participant's consent, or which,
without the approval of the Company's stockholders, would:
(a) except as expressly provided in this Plan, increase the total
number of shares reserved for the purposes of the Plan;
(b) except as expressly provided in this Plan, decrease the option
price of any Stock Option to less than 100% of the Fair Market Value on the
date of grant; or
(c) change the employees or class of employees eligible to
participate in the Plan; or
(d) extend the maximum option period under Section 5(b) of the
Plan.
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The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one-for-one or other basis), including
previously granted Stock Options having higher option exercise prices.
Subject to the above provision, the Board and/or Committee shall have
broad authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trust or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards or grants hereunder, provided, however, that unless the Committee
otherwise determines with the consent of the affected participant, the
existence of any such trust or other arrangement is consistent with the
"unfunded" status of the Plan.
SECTION 10. TAX BENEFITS.
The Committee shall have the right to grant to any recipient of a
Stock Option or Restricted Stock award:
(a) a cash or stock award to enable the recipient to pay, as and
when they become due, any federal, state or local income taxes (collectively,
"Taxes") payable as a result of the grant, receipt, exercise, award, lapse of
restriction or forgiveness of indebtedness in connection with any Stock Option,
Restricted Stock award, or awarded or granted under the Plan (collectively, the
"Grant") in an amount or having a Fair Market Value equal to (i) the Taxes
payable on the Grant plus (ii) any taxes payable upon the payment provided for
under clause (i), and/or
(b) a cash or stock award to any such recipient who as result of a
Change in Control or a Potential Change in Control is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code or any similar provision in
an amount equal to (x) the amount of the Excise Tax thereon, plus (y) any
federal, state and local income tax and/or Excise Tax upon the payment provided
for under clause (x).
Any awards described in Section 10(a) or (b) shall be referred to
herein as "Tax Benefits."
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent to and
agree with the Company in writing that the optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions. The Committee may require that upon the receipt of any
Stock, or any rights to acquire Stock, the acquiring person shall execute in
favor of the Company an agreement restricting the transfer of such Stock, or
the rights to acquire such Stock, giving the Company a right of first refusal
with respect to such Stock, giving the Company the right to acquire such Stock
upon the death, disability or termination of employment
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<PAGE> 11
with the Company, and such other similar or different provisions as the
Committee in its sole and absolute discretion deems advisable or in the best
interests of the Company.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, providing for the same or similar awards
as provided under this Plan.
(c) The adoption of the Plan shall not confer upon any employee of
the Company or any Subsidiary or Affiliate any right to continued employment
with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any federal, state, or local taxes of any kind required by law or
the Company to be withheld with respect to such amount. Unless otherwise
determined by the Committee, withholding obligations may be settled with Stock
or exercisable Stock Options, including Stock or Stock Options that are part of
the award that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such payment or
arrangements, and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible
if sufficient shares of Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Stock Options, Stock
Purchase Rights and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Florida.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of November 30, 1995, subject to the
approval of the Plan by the holders of two thirds (2/3) of the shares of the
Company's Common Stock. Any grants made under the Plan prior to such approval
shall be effective when made (unless otherwise specified by the Committee at
the time of grant), but shall be conditioned on, and subject to, such approval
of the Plan by such shareholders.
SECTION 13. TERM OF PLAN.
No Stock Option, Restricted Stock award, or Tax Benefit shall be
granted pursuant to the Plan on or after the tenth anniversary of the date of
stockholder approval of the Plan, but any thereof granted prior to such tenth
anniversary may extend beyond that date.
SECTION 14. COMPLIANCE WITH SECURITIES AND OTHER LAWS.
In no event shall the Company be required to sell or issue shares of
Stock under any award if the sale or issuance thereof would constitute a
violation of applicable federal or state securities law or regulation or a
violation of any other law or regulation of any governmental authority or any
national securities exchange. As a condition to any sale or issuance of shares
of Stock, the Company may place legends on shares of stock, issue stop transfer
orders, and require such agreements or undertakings as the Company may deem
necessary or advisable to assure compliance with any such law or regulation,
including, if the Company or its counsel deems it appropriate, representations
from the person to whom an
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<PAGE> 12
award is granted that he or she is acquiring the shares of stock solely for
investment and not with a view to distribution and that no distribution of the
shares of Stock will be made unless registered pursuant to applicable federal
and state securities laws, or in the opinion of counsel of the Company, such
registration is unnecessary.
DALEEN TECHNOLOGIES, INC.,
a Florida Corporation
WITNESS:
/s/ Richard A. Schell /s/ James Daleen
- -------------------------- ---------------------------------
Richard A. Schell James Daleen
President, CEO and Chairman of the Board
/s/ Judith A. Daleen
- --------------------------
Judith A. Daleen
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<PAGE> 1
EXHIBIT 10.17
DALEEN TECHNOLOGIES, INC.
1994 EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN
SECTION I. PURPOSE; DEFINITIONS.
The purpose of the Daleen Technologies, Inc. 1994 Employee
Non-Qualified Stock Option Plan is to enable Daleen Technologies, Inc. to
attract, retain and reward key employees of the Company and its Subsidiaries
and Affiliates, and strengthen the mutuality of interests between such key
employees and the Company's shareholders, by offering such key employees
performance-based stock incentives and/or other equity interests or
equity-based incentives in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity to the extent permitted by the
Code.
(b) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(c) "Cause" means a conviction of a participant or the failure of
a participant to contest prosecution for a felony or any other crime involving
morale turpitude or dishonesty or a breach by a participant of any agreement
with the Company or of its employment or business policies (including without
limitation theft or misuse of Company property), or a participant's gross
negligence, willful misconduct or dishonesty, any of which is directly or
materially harmful to the business or reputation of the Company or any
Subsidiary or Affiliate, as determined by the Committee in its sole discretion,
or for any other act or omission by a participant which does not fit into the
previous categories but which the Company in good faith believes has occurred
to its detriment and about which a participant has received at least one (1)
written warning by the Company and despite such prior written warning, a
participant has on a second occasion committed such act or omission.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(e) "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
(f) "Company" means Daleen Technologies, Inc., a corporation
organized under the laws of the State of Illinois or any successor corporation.
(g) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(h) "Disinterested Person" shall have the meaning set forth in
Rule 16b-3(d)(3) as promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or any successor definition adopted by the
Commission.
<PAGE> 2
(i) "Early Retirement" means retirement, with the express consent,
for the purposes of this Plan, of the Committee or such officer of the Company
as the Committee may designate from time to time at or before the time of such
retirement, from active employment with the Company and any Subsidiary or
Affiliate.
(j) "Fair Market Value" means for a share of Stock as of any given
date:
(i) The closing sales price per shares of Stock on the
New York Stock Exchange on any given date
(or if such Exchange was not open for
trading on any such date, the next
preceding date on which it was open); or
(ii) If there is no price specified in (i), the mean of
the last reporting bid-and-asked quotations
for the share of Stock on the New York
Stock Exchange or American Stock Exchange,
as appropriate on any such date or next
preceding date, as the case may be; or
(iii) If there also is no price as specified in (ii), the
closing sales price or in the absence
thereof the mean of the last reported
bid-and-asked quotations, for a share of
Stock on the other exchange on which the
shares of Stock are permitted to trade
having the greatest volume of trading in
such shares during the thirty-day period
preceding any such date, or next preceding
date, as the case may be; or
(iv) If there also is no price as specified in (iii), the
final reported sales price, or if not
reported in the following manner, the
highest bid quotation, in the
over-the-counter market for the shares of
Stock, as reported by the National
Association of Securities Dealers Automatic
Quotation System, or National Quotation
Bureau Incorporated, or if such
organization is not in existence, by an
organization providing similar services, on
any such date (or if such date is not a
date for which such system or organization
generally provides reports, then on the
next preceding date for which it does so);
or
(v) If there also is no price as specified in (iv), the
price determined by the Committee by
reference to the mean of the bid-and-asked
quotations for the shares of Stock provided
by members of an association of brokers and
dealers registered pursuant to subsection
14(b) of the Securities Exchange Act of
1934, which members make a market in the
shares of Stock, for such recent dates as
the Committee shall determine to be
appropriate for fairly determining current
market value; or
(vi) If there also is no price as specified in (v), the
amount determined in good faith by the
Committee based on such relevant facts,
which may include opinions of independent
experts, as may be available to the
Committee.
(k) "Non-Qualified Stock Option" means such Stock Options that do
not qualify as "incentive stock options" within the meaning of Section 422 of
the Code [nor any other provision of the Code].
(l) "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Affiliate on or after age 65.
(m) "Offering Date" means the date on which all of the following
shall have occurred: (i) a valid registration statement shall have been duly
filed under applicable provisions of federal securities laws with respect to
the Stock, (ii) a public offering of the Stock shall have occurred, and (iii)
the Stock is then being regularly traded on a recognized, established
securities exchange.
(n) "Plan" means this Daleen Technologies, Inc. 1998 Employee
Non-Qualified Stock Option Plan, as hereinafter amended from time to time.
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<PAGE> 3
(o) "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 6 of this Plan.
(p) "Retirement" means Normal or Early Retirement.
(q) "Stock" means the Common Stock, no par value per share, of the
Company.
(r) "Stock Option" or "Option" means any option to purchase shares
of Stock (including Restricted Stock if the Committee so determines) granted
pursuant to Section 5.
(s) "Stock Option Agreement" means the written agreement between
optionee and the Company as required pursuant to Section 5 of the Plan.
(t) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(u) "Tax Benefits" means the awards described in Section 10(a) and
(b).
SECTION 2. ADMINISTRATION.
Until such time as there is a public offering of the Company's stock,
the Plan shall be administered by a Committee composed of the Board. After a
public offering of the Company's stock, the Plan shall be administered by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board and who shall serve at the pleasure of the Board. The Committee
shall be the "compensation committee" so long as all of the members thereof
meet the requirements of the preceding sentence.
The Committee shall have full authority to grant, pursuant to the
terms of the Plan, to officers and key employees (excluding any person who
serves only as a director): (i) Stock Options, (ii) Restricted Stock and/or
(iii) Tax Benefits.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company
and its Subsidiaries and Affiliates (who may also be directors of the Company)
to whom Stock Options, Restricted Stock or Tax Benefits may from time to time
be granted hereunder;
(ii) to determine whether and to what extent Stock Options,
Restricted Stock, Tax Benefits or any combination thereof, are to be granted
hereunder to one or more eligible employees;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting,
acceleration or waiver of forfeiture restrictions regarding any Stock Option or
other award and/or the shares of Stock relating thereto, based in each case on
such factors as the Committee shall determine, in its sole discretion);
(v) to determine whether and under what circumstances a Stock
Option may be settled in cash, and/or Restricted Stock, as applicable, instead
of Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other
cash awards made by the Company are to be made, and operate, on an additive or
tandem basis vis-a-vis other awards under the Plan and/or cash awards made
outside of the Plan;
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<PAGE> 4
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and the Plan participants.
To the fullest extent permitted by law, the Company shall indemnify
each person made or threatened to be made a party to any civil or criminal
action or proceeding by reason of the fact that he, or his testator or
intestate, is or was a member of the Committee.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be One Hundred Twenty-Five Thousand
(125,000). Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
If any shares of Stock that have been optioned cease to be subject to
a Stock Option, or if any such shares of Stock that are subject to any
Restricted Stock award, granted hereunder are forfeited or any such award
otherwise terminates without a payment being made to the participant in the
form of Stock, such shares shall again be available for distribution in
connection with future awards under the Plan. Awards that may be satisfied
either by the issuance of shares of Stock or by cash or other consideration
shall be counted against the maximum number of shares of Stock that may be
issued under this Plan, even though the awards are ultimately satisfied by the
payment of consideration other than shares of Stock. However, awards will not
reduce the number of shares of Stock that may be issued pursuant to this Plan
if the settlement of the award will not require the issuance of shares of
Stock.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, Stock split or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Options granted under
the Plan, in the number of shares subject to other outstanding awards granted
under the Plan and in the consideration to be received upon the exercise of
Stock Options, lapse of restrictions on Restricted Stock, or Tax Benefits as
may be determined to be appropriate by the Committee, in its sole discretion,
provided that the number of shares subject to any award shall always be a whole
number.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company and its Subsidiaries
and Affiliates (but excluding members of the Committee and any person who
serves only as a director) who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and/or
its Subsidiaries and Affiliates are eligible to be granted awards under the
Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan and/or cash, or other awards made outside
of the Plan. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
Stock Options granted under the Plan shall be the Non-Qualified Stock
Options. The Committee shall have the complete and absolute authority to grant
to any optionee Non-Qualified Stock Options.
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<PAGE> 5
Each such person so selected to receive Stock Options shall have a
reasonable period of time within which to accept or reject the offered Stock
Option. Failure to accept within the period so fixed by the Committee may be
treated as a rejection. Each person who accepts a Stock Option shall enter into
a written Stock Option Agreement with the Company, in such form as Committee
may prescribe, setting forth the terms and conditions of the Stock Option,
consistent with the provisions of this Plan.
In its sole discretion, the Committee may grant "Limited"
Non-Qualified Stock Options under this Section 5, i.e., Non-Qualified Stock
Options that become exercisable only in the event of a Change in Control and/or
a Potential Change in Control, subject to such terms and conditions as the
Committee may specify at grant.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
(b) OPTION TERM. Any Stock Option granted under the Plan shall be
granted within 10 years of the date hereof. The term of each Stock Option shall
be fixed by the Committee, but no Stock Option shall be exercisable more than
ten years and one day after the date such Stock Option is granted.
(c) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined
by the Committee at or after grant, but no Stock Option shall be exercisable
prior to the first anniversary date of the granting of the Option. If the
Committee provides, in its sole discretion, that any Stock Option is
exercisable only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall determine, in its sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise
provisions apply under Section 5(c), Stock Options may be exercised in whole or
in part at anytime during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may also be made in the form of exercisable
Stock Options or unrestricted Stock already owned by the optionee or Restricted
Stock subject to an award hereunder (based, in each case, on the Fair Market
Value of the Stock on the date the option is exercised, as determined by the
Committee).
If payment of the option exercise price of a Stock Option is
made in whole or in part in the form of Restricted Stock such Restricted Stock
(and any replacement shares relating thereto) shall remain (or be) restricted,
as the case may be, in accordance with the original terms of the Restricted
Stock award in question, and any additional Stock received upon the exercise
shall be subject to the same forfeiture restrictions or deferral limitations,
unless otherwise determined by the Committee, in its sole discretion, at or
after grant.
No shares of Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the right to dividends
or other rights of a shareholder with respect to shares subject to the Option
when the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
Section 14(a) of this Plan.
(e) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) TERMINATION BY DEATH. If an optionee's employment by the
Company or any Subsidiary or Affiliate terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant
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<PAGE> 6
(or as may be determined in accordance with procedures established by the
Committee), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of one year (or such
longer or shorter period as the Committee may specify at or after grant) from
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is shorter.
(g) TERMINATION BY REASON OF DISABILITY. If an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine at or
after grant (or as may be determined in accordance with procedures established
by the Committee), for a period of one year (or such longer or shorter period
as the Committee may specify at or after grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such one-year period (or such other period as the
Committee shall specify at grant), any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee's
employment by the Company or any Subsidiary or Affiliate terminates by reason
of Normal or Early Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at
the time of such Retirement or on such accelerated basis as the Committee may
determine at or after grant (or as may be determined in accordance with
procedures established by the Committee), for a period of three (3) months (or
such longer or shorter period as Committee may specify at or after grant) from
the date of such termination of employment or the expiration of the stated term
of such Stock Option, whichever period is the shorter; provided, however, that,
if the optionee dies within such three-month (3) period (or such other period
as the Committee may specify at grant), any unexercised Stock Option held by
such optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of twelve months from the date
of such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(i) OTHER TERMINATION. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at grant, if
an optionee's employment by the Company and any Subsidiary or Affiliate
terminates for any reason other than death, Disability or Normal or Early
Retirement, the Stock Option shall thereupon terminate, except that such Stock
Option may be exercised, to the extent otherwise then exercisable, for the
lesser of three months or the balance of such Stock Option's term if the
optionee is involuntarily terminated by the Company or any Subsidiary or
Affiliate without Cause.
(j) BUYOUT PROVISIONS. The Committee may at any time offer to buy
out for a payment in cash, Stock, or Restricted Stock an option previously
granted, based on such terms and conditions as the Committee shall establish
and communicate to the optionee at the time that such offer is made.
(k) SETTLEMENT PROVISIONS. If the option agreement so provides at
grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares
to be issued with respect to the spread value of an exercised Option take the
form of Restricted Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value (as determined by the Committee) of such
Restricted Stock determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
(l) NO RIGHTS AS STOCKHOLDERS. No optionee nor any personal
representative of an optionee shall, with respect to any shares of Stock
issuable upon the exercise of a Stock Option, be, or shall have of the rights
and privileges of, a stockholder of the Company with respect to any shares of
Stock purchasable or issuable upon the exercise of the Stock Option, in whole
or in part, prior to the Exercise Date of the Stock Option.
(m) IMPROPER CONDUCT. Notwithstanding any other provisions set
forth herein, if any optionee shall (i) commit any act of malfeasance or
wrongdoing affecting the Company, (ii) breach any covenant not to compete or
Employment Contract with the Company or any other agreement with the Company,
or (iii) engage in conduct that would warrant the optionee's discharge for
cause (excluding general dissatisfaction with the performance of optionee's
duties, but
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including any act of disloyalty or any conduct clearly intending to bring
discredit upon the Company, any unexercised portion of the Stock Option shall
immediately terminate and be void.
(n) Each Stock Option granted hereunder may only be exercised to
the extent that the Optionee is vested in such Stock Option. Each Stock Option
shall vest separately in accordance with the option vesting schedule determined
by the Committee, in its sole discretion, which will be incorporated in the
Stock Option Agreement. The Stock Option vesting schedule will be accelerated
in the sole discretion of the Committee, if the Committee determines that the
acceleration of the Stock Option vesting schedule would be desirable for the
Company.
SECTION 6. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan and/or cash or other awards made outside of the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Restricted Stock will be made, the number of shares to be awarded, the price
(if any) to be paid by the recipient of Restricted Stock (subject to Section
6(b) below), the time or times within which such awards may be subject to
forfeiture, and all other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock
upon the attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the
same with respect to each recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be equal to or less than their Fair Market Value and may be
zero.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify
at grant) after the award date by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required under Section
6(b)(i) above.
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such participant, and may, if the Committee determines in its sole
discretion, bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award.
(iv) The Committee may require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of
Restricted Stock; award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to this Section 6 may in the sole discretion of the Committee
be subject to any of the following restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant may not
be permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under the Plan. The Committee, in its sole discretion,
may provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part, based on
service, performance and/or such other factors or criteria as the
Committee may determine, in its sole discretion.
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(ii) Except as provided in this paragraph (ii) and Section
6(c)(i) above, upon issuance of the shares under the Stock Option, the
participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares, and the right to receive any cash
dividends. The Committee, in its sole discretion, as determined at the
time of award, may permit or require the payment of cash dividends to
be deferred and, if the Committee so determines, reinvested, subject
to Section 11(e) below, in additional Restricted Stock to the extent
shares are available under Section 3 of this Plan, or otherwise
reinvested. Pursuant to Section 3 above, Stock dividends issued with
respect to Restricted Stock shall be treated as additional shares of
Restricted Stock that are subject to the same restrictions and other
terms and conditions that apply to the shares with respect to which
such dividends are issued.
(iii) Subject to the applicable provisions of the award
agreement and this Section 6, upon termination of a participant's
employment with the Company and any Subsidiary or Affiliate for any
reason during the Restriction Period, all shares still subject to
restriction will vest, or be forfeited, in accordance with the terms
and conditions established by the Committee at grant.
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, certificates for an appropriate number of unrestricted shares
shall be delivered to the participant promptly.
SECTION 7. CHANGE IN CONTROL PROVISIONS.
(a) IMPACT OF EVENT. In the event of:
(1) a "Change in Control" as defined in Section 7(b)
below or
(2) a "Potential Change in Control" as defined in Section
7(c) below,
the following acceleration and valuation provisions shall apply:
(i) Any Stock Options outstanding for at least six months
(including Limited Non-Qualifying Stock Options) awarded under the
Plan not previously exercisable and vested shall become fully
exercisable and vested;
(ii) The restrictions and deferral limitations applicable
to any Restricted Stock and/or Tax Benefits, in each case to the
extent not already lapsed or still applicable under the Plan, shall
lapse and no longer be applicable, and such shares and awards shall be
deemed fully vested and owned by the participant;
(iii) The value of all outstanding Stock Options,
Restricted Stock, and Tax Benefits, in each case to the extent vested,
shall, unless otherwise determined by the Committee in its sole
discretion at or after grant but prior to any Change in Control, be
cashed out on the basis of the Change in Control Price as defined in
Section 7(d) as of the date of such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control;
provided, however, that the Committee may in the agreement relating to any
Stock Option, Restricted Stock, and/or Tax Benefits provide that the Change in
Control or Potential Change in Control provision of this Section 7 shall not
become effective unless the Committee or the Board shall determine before, on
or within fifteen (15) days after the occurrence of any event described in
Section 7(b) or 7(c) that a Change in Control or Potential Change in Control
has occurred.
(b) DEFINITION OF "CHANGE IN CONTROL." For purposes of Section
7(a), a "Change in Control" means the happening of any of the following:
(i) Prior to and on the Offering Date, "Change in
Control" shall mean any event that results in the Company's President,
James Daleen, owning less than fifty (50%) percent of the Stock.
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<PAGE> 9
(ii) After the Offering Date, "Change in Control" shall
mean:
(I) A change in control of a nature that would
be required to be reported in response to any form or report to the
Securities and Exchange Commission or any stock exchange on which the
Company's shares are listed which requires the reporting of a change
in control of the Company;
(II) When any "person," as such term is used in
Section 13(d) and 14(d) of the Exchange Act (other than the Company or
a Subsidiary or any Company or Subsidiary employee benefit plan
(including any trustee of such plan acting as trustee) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act)), directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of the
Company's then outstanding securities;
(III) When, during any period of two consecutive
years during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority
thereof, provided, however, that a director who was not a director at
the beginning of such period shall be deemed to have satisfied the
two-year requirement if such director was elected by, or on the
recommendation of or with the approval of, at least three-quarters of
the directors who were directors at the beginning of such period
(either actually or by prior operation of this Section 7(b)(iii)); or
(IV) A majority of the members of the Board in
office prior to the happening of any event determines in its sole
discretion that as a result of such event there has been a change in
control.
(c) DEFINITION OF "POTENTIAL CHANGE IN CONTROL." For purposes of
Section 7(a), a "Potential Change in Control" means the happening after the
Offering Date of any one of the following:
(i) The approval by shareholders of any agreement by the
Company, the consummation of which would result in a Change in Control
of the Company as defined in Section 7(b)(ii); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group other than the Company or a
Subsidiary or any Company employee benefit plan (including any trustee
of such plan acting as such trustee) of securities of the Company
representing five percent or more of the combined voting power of the
Company's outstanding securities and the adoption by the Board of
Directors of a resolution to the effect that a Potential Change in
Control of the Company has occurred for purposes of this Plan.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE." For purposes of this
Section 7, "Change in Control Price" means the highest Fair Market Value price
per share paid or offered in any bona fide transaction related to a potential
or actual Change in Control of the Company at any time during the preceding
sixty-day period as determined by the Committee except where applicable, the
date on which a cashout occurs under Section 7(a)(iii).
SECTION 8. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan and the Committee
may amend or alter the Plan, but no amendment, alteration, or discontinuation
shall be made which would impair the rights of an optionee or participant under
a Stock Option (or Limited Non-Qualified Stock Option), Restricted Stock award,
theretofore granted, without the optionee's or participant's consent, or which,
without the approval of the Company's stockholders, would:
(a) except as expressly provided in this Plan, increase the total
number of shares reserved for the purposes of the Plan;
(b) except as expressly provided in this Plan, decrease the option
price of any Stock Option to less than 100% of the Fair Market Value on the
date of grant; or
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<PAGE> 10
(c) change the employees or class of employees eligible to
participate in the Plan; or
(d) extend the maximum option period under Section 5(b) of the
Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one-for-one or other basis), including
previously granted Stock Options having higher option exercise prices.
Subject to the above provision, the Board and/or Committee shall have
broad authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trust or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards or grants hereunder, provided, however, that unless the Committee
otherwise determines with the consent of the affected participant, the
existence of any such trust or other arrangement is consistent with the
"unfunded" status of the Plan.
SECTION 10. TAX BENEFITS.
The Committee shall have the right to grant to any recipient of a
Stock Option or Restricted Stock award:
(a) a cash or stock award to enable the recipient to pay, as and
when they become due, any federal, state or local income taxes (collectively,
"Taxes") payable as a result of the grant, receipt, exercise, award, lapse of
restriction or forgiveness of indebtedness in connection with any Stock Option,
Restricted Stock award, or awarded or granted under the Plan (collectively, the
"Grant") in an amount or having a Fair Market Value equal to (i) the Taxes
payable on the Grant plus (ii) any taxes payable upon the payment provided for
under clause (i), and/or
(b) a cash or stock award to any such recipient who as result of a
Change in Control or a Potential Change in Control is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code or any similar provision in
an amount equal to (x) the amount of the Excise Tax thereon, plus (y) any
federal, state and local income tax and/or Excise Tax upon the payment provided
for under clause (x).
Any awards described in Section 10(a) or (b) shall be referred to
herein as "Tax Benefits."
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent to and
agree with the Company in writing that the optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions. The Committee may require that upon the receipt of any
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<PAGE> 11
Stock, or any rights to acquire Stock, the acquiring person shall execute in
favor of the Company an agreement restricting the transfer of such Stock, or
the rights to acquire such Stock, giving the Company a right of first refusal
with respect to such Stock, giving the Company the right to acquire such Stock
upon the death, disability or termination of employment with the Company, and
such other similar or different provisions as the Committee in its sole and
absolute discretion deems advisable or in the best interests of the Company.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, providing for the same or similar awards
as provided under this Plan.
(c) The adoption of the Plan shall not confer upon any employee of
the Company or any Subsidiary or Affiliate any right to continued employment
with the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any federal, state, or local taxes of any kind required by law or
the Company to be withheld with respect to such amount. Unless otherwise
determined by the Committee, withholding obligations may be settled with Stock
or exercisable Stock Options, including Stock or Stock Options that are part of
the award that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such payment or
arrangements, and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible
if sufficient shares of Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Stock Options, Stock
Purchase Rights and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Florida.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of November 10, 1994, subject to the
approval of the Plan by the holders of two thirds (2/3) of the shares of the
Company's Common Stock. Any grants made under the Plan prior to such approval
shall be effective when made (unless otherwise specified by the Committee at
the time of grant), but shall be conditioned on, and subject to, such approval
of the Plan by such shareholders.
SECTION 13. TERM OF PLAN.
No Stock Option, Restricted Stock award, or Tax Benefit shall be
granted pursuant to the Plan on or after the tenth anniversary of the date of
stockholder approval of the Plan, but any thereof granted prior to such tenth
anniversary may extend beyond that date.
SECTION 14. COMPLIANCE WITH SECURITIES AND OTHER LAWS.
In no event shall the Company be required to sell or issue shares of
Stock under any award if the sale or issuance thereof would constitute a
violation of applicable federal or state securities law or regulation or a
violation of any other law or regulation of any governmental authority or any
national securities exchange. As a condition to any sale or issuance of
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<PAGE> 12
shares of Stock, the Company may place legends on shares of stock, issue stop
transfer orders, and require such agreements or undertakings as the Company may
deem necessary or advisable to assure compliance with any such law or
regulation, including, if the Company or its counsel deems it appropriate,
representations from the person to whom an award is granted that he or she is
acquiring the shares of stock solely for investment and not with a view to
distribution and that no distribution of the shares of Stock will be made
unless registered pursuant to applicable federal and state securities laws, or
in the opinion of counsel of the Company, such registration is unnecessary.
DALEEN TECHNOLOGIES, INC.,
a Florida Corporation
WITNESS:
- -------------------------- ----------------------------------------
Richard A. Schell James Daleen
President, CEO and Chairman of the Board
- --------------------------
Judith A. Daleen
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<PAGE> 1
Exhibit 10.18
Congress Corporate Plaza, Building 3
Innovative Selective Software, Inc.
902 Clint Moore Road, Suite 230
Boca Raton, Florida 33487
Lease Drafted: July 2, 1992
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between
Crow-Childress-Donner, Limited, a Texas limited partnership ("Landlord"), and
Innovative Selective Software, Inc., an Illinois corporation ("Tenant"):
W I T N E S S E T H:
1.01 PREMISES. In consideration of the obligation of Tenant to pay rent and
of the other terms, provisions and covenants hereof, Landlord leases to Tenant
and Tenant leases from Landlord, all that portion of certain real property
situated within the County of Palm Beach, State of Florida, legally described in
Exhibit A, and the buildings and improvements to be constructed thereon as
outlined on the site plan contained in Exhibit B (the "Premises"), including any
truck loading areas specifically marked in red on said Exhibit B for the
exclusive use of Tenant. The Premises and the building within which the Premises
are located (the "Building") are part of a larger development (the
"Development") commonly known as Congress Corporate Plaza, Phase II.
2.01 TERM OF LEASE. The term of this lease shall commence on the "Rent
Commencement Date", as hereinafter defined, and ending 36 months thereafter,
provided however, that in the event the rent commencement date is a date other
than the first day of a calendar month, said term shall extend for said number
of months in addition to the remainder of the calendar month following the rent
commencement date.
2.02 RENT COMMENCEMENT DATE. The "Rent Commencement Date" shall be the date
that Tenant first uses the Premises or any portion thereof for any purpose
permitted under this lease. In the event this lease pertains to a building or
building interior finish to be constructed, the "Rent Commencement Date" shall
be the date upon which the buildings and other improvements erected and to be
erected upon the premises shall have been substantially completed in accordance
with the plans and specifications described on Exhibit "C" attached hereto and
incorporated herein by reference, provided however, that if Landlord shall be
delayed in such substantial completion as a result of: (i) Tenant's failure to
agree to plans, specifications, and cost estimates, within a reasonable period
of time; (ii) Tenant's request for materials, finishes or installations other
than Landlord's standard; (iii) Tenant's changes in plans: the commencement date
and the payment of rent hereunder shall be accelerated by the number of days of
such delay, and provided further that if Landlord cannot substantially complete
the premises as a result of any events (i) through (iii) above, Landlord may as
its election complete so much of Landlord's work as may be practical under the
circumstances and, by written notice to Tenant, establish the commencement date
as the date of such partial completion, subject to any applicable accelerations
due to delays resulting from events (i) through (iii) above. Taking possession
by Tenant shall be deemed conclusively to establish that said buildings and
other improvements have been completed in accordance with the plans and
specifications and that the premises are in good and satisfactory condition, as
of when possession was so taken. Tenant acknowledges that no representations as
to the repair of the premises have been made by Landlord, unless such are
expressly set forth in the lease. After such "Rent Commencement Date" Tenant
shall, upon demand, execute and deliver to Landlord a letter of acceptance of
delivery of the premises. In the event of any dispute as to substantial
completion of work performed, execute or required to be performed by Landlord,
the certificate of Landlord's architect or general contractor shall be
conclusive.
3.01 BASE RENT. Tenant agrees to pay to Landlord rent for the premises, in
advance, without demand, deduction or set off, for the entire term hereof at the
rate of * Dollars ($______) per month. One such monthly installment shall be
due and payable on the date hereof and a like monthly installment shall be due
and payable on or before the first day of each calendar month succeeding the
rent commencement date, except that the rental payment for any fractional
calendar month at the commencement of the lease period shall be prorated. The
rental payment is subject to adjustment as provided below.
3.02 RENT ESCALATION. [* See Attached Rider]
4.01 SECURITY DEPOSIT. Tenant agrees to deposit with Landlord on the date
hereof the sum of Five thousand two hundred dollars and no/00 Dollars
($5,200.00), which sum shall be held by Landlord, without obligation for
interest, as security for the full, timely and faithful performance of Tenant's
covenants and obligations under this Lease, it being expressly agreed that such
deposit is not an advance rental deposit or a measure of Landlord's damages.
Upon the occurrence of any event of default by Tenant, Landlord may, from
Landlord: ____________ Tenant: ____________
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<PAGE> 2
time to time, without prejudice to any other remedy, use such funds to the
extent necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by Tenant's
default; and Tenant shall pay to Landlord on demand the amount so applied in
order to restore the security deposit to its original amount. Although the
security deposit shall be deemed the property of Landlord, any remaining balance
of such deposit shall be returned by Landlord at such time after termination of
this Lease when Landlord shall have determined that all Tenant's obligations
under this Lease have been fulfilled.
5.01 PERMITTED USE. The Premises shall be continuously used for the sole
purpose of general business offices and/or for receiving, storing, shipping and
selling (other than at retail) products, materials and merchandise made and/or
distributed by Tenant and for no other use or purpose. Tenant shall at its own
cost and expense obtain any and all licenses and permits necessary for any such
use. The overnight parking of automobiles, trucks or other vehicles, and the
outside storage of any property including trash or garbage are prohibited.
Tenant agrees that it shall, at its own cost and expenses keep its employees,
agents, customers, invitees, and/or licensees from parking on any streets
running through or contiguous to the buildings or development of which the
premises are part thereof. Tenant agrees that no washing of any type will take
place in the premises including the truck apron and parking areas. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of
Development or unreasonably interfere with such tenants' use of their respective
premises or permit any use which would adversely affect the reputation of the
Development. Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive, highly flammable or constitutes a
hazardous substance or waste. Tenant shall not permit the Premises to be used
for any purpose (including, without limitation, the storage of merchandise) in
any manner which would render the insurance thereon void or increase the
insurance rate thereof. Tenant agrees to indemnify and hold Landlord harmless
against any and all loss, costs and claims, including attorney's fees relating
to the improper storage, handling, transportation or disposal of explosive,
highly flammable or hazardous materials or resulting from any other improper
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the Premises, and shall promptly comply with all governmental
orders and directives for the correction, prevention and abatement of any
violations or nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense. If, as a result of any change in the governmental laws,
ordinances and regulations, the Premises must be altered to accommodate lawfully
the use and occupancy thereof, such alterations shall be made only with the
consent of Landlord, but the entire cost thereof shall be borne by Tenant;
provided that the necessity of Landlord's consent shall in no way create any
liability against Landlord for failure of Tenant to comply with such laws,
ordinances and regulations. Tenant shall take whatever other actions are
necessary so that the Premises and Tenant's use thereof complies with the Fire
Prevention Code of the National Fire Protection Association and any other fire
prevention laws, ordinances, rules or regulations applicable to the Premises.
6.01 TENANT'S TAXES. Tenant shall be responsible to pay before delinquency
all franchise taxes, assessments, levies or charges measured by or based in
whole or in part upon the rents payable hereunder or the gross receipts of
Tenant and all sales taxes and other taxes imposed upon or assessed by reason of
the rents and other charges payable hereunder. The Florida sales tax imposed on
rent and on other charges payable hereunder shall be paid by Tenant to Landlord
with the payment of Tenant's rental payments and other charges payable
hereunder.
7.01 DEFINITION OF OPERATING COSTS. The term "Operating Costs" shall mean
all costs and expenses paid or incurred by Landlord or on Landlord's behalf in
connection with the ownership, management, repair, replacement, remodeling,
maintenance and operation of the Development (including, without limitation, all
assessed real property taxes, assessments (whether general or special) and
governmental charges of any kind and nature whatsoever including assessments due
to deed restrictions and/or owner's associations, which accrue against the
building and/or development of which the premises are a part, the costs of
maintaining and repairing parking lots, parking structures, easements, and
landscaping, property management fees, utility costs to the extent not
separately metered, insurance premiums, depreciation of the costs of replacement
(as defined below) of the building and improvements in the Development but not
including any structural repairs or replacements which are normally chargeable
to capital accounts under sound accounting principles, and the Building's share
of costs of the Development). The term "operating costs" does not include: (i)
costs of alterations of tenants' premises; (ii) costs of curing construction
defects; (iii) interest and principal payments on mortgages, and other debt
cost; (iv) real estate brokers' leasing commissions or compensation; (v) any
cost or expenditure for which Landlord is reimbursed, whether by insurance
proceeds or otherwise; (vi) cost of any service furnished to any other occupant
of the Building which Landlord does not provide to tenant hereunder. Structural
repairs and replacements are repairs and replacements to the foundations,
load-bearing walls, columns and joists and replacement of roofing and roof deck.
Notwithstanding anything contained herein to the contrary, depreciation of any
capital improvements which are intended to reduce Operating Costs, or are
required under any governmental laws, regulations or ordinances which were not
applicable to the Building or the Development at the time it was constructed, or
are recommended by the N.F.P.A. Life Safety Code, shall be included in Operating
Costs. The useful life of any such improvement as well as all non-structural
replacements shall be reasonably determined by Landlord. In addition, interest
on the undepreciated cost of any such improvement or non-structural replacement
(at the prevailing construction loan rate available to Landlord on the date the
cost of such improvement was incurred) shall also be included in Operating
Costs. If Landlord selects the accrual method of accounting rather than the cash
accounting method for Operating Costs purposes, Operating Costs shall be deemed
to have been paid when such expenses have accrued. Landlord shall have the right
at any time and from time to time to elect, which election shall be subject to
revocation, to exclude that portion of Operating Costs attributable to any
separately assessed part of the Development and any separate building within the
Development. During any period that Operating Costs attributable to any
separately assessed part of the Development and/or separate building are so
excluded from Operating Costs, then for the purposes of calculating Tenant's
proportionate share of Operating Costs as provided in Section 7.02, the
denominator shall not include the rentable area of such separately assessed part
of the Development and/or such separate building. Landlord may, in a reasonable
manner, allocate insurance premiums for so-called "blanket" insurance policies
which insure other properties as well as the Development and said allocated
amount shall be deemed to be an Operating Cost.
If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
7.02 TENANT'S PROPORTIONATE SHARE OF OPERATING COSTS. Tenant shall pay to
Landlord, as additional rent, its proportionate share of operating costs
calculated on the basis of the ratio set forth in Section 8.01. Any payments
with respect to any partial calendar year in which the Term commences or ends
shall be prorated. Tenant agrees to pay $1,250.00 per month per Paragraph 8.01
of this Lease as an escrow amount for operating costs as defined in Article
7.01. Landlord may, at any time, deliver to Tenant its estimate (or revised
estimate) of such additional amounts payable under this Section for each
calendar year. On or before the first day of the next month and on or before the
first day of each month thereafter, Tenant shall pay to Landlord as additional
rent such amount as Landlord reasonably determines to be necessary to bring and
keep Tenant current. As soon as practicable after the close of each calendar
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<PAGE> 3
year, Landlord shall deliver to Tenant a statement showing the total amount
payable by Tenant under this Article. If such statement shows an amount due from
Tenant that is less than the estimated payments previously paid by Tenant, it
shall be accompanied by a refund of the excess to Tenant or at Landlord's option
the excess shall be credited against the next monthly installment of rent. If
such statement shows an amount due from Tenant that is more than the estimated
payments paid by Tenant, Tenant shall pay the deficiency to Landlord, as
additional rent. In the event an amount is due and is not paid within thirty
(30) days after the date of Landlord's statement to tenant, the unpaid amount
shall bear interest at the rate of eighteen (18%) percent per annum from the
date of such statement until payment by tenant. Landlord and Tenant acknowledge
that certain of the costs of management, operation and maintenance of the
Development are allocated among all of the buildings in the Development using
methods of allocation that are considered reasonable and appropriate under the
circumstances. Tenant hereby consents to such allocations provided that the
determination of such costs and the allocation of all or part thereof to
Operating Costs hereunder shall be in accordance with generally accepted
accounting principles applied on a consistent basis. Tenant or its'
representatives shall have the right after seven (7) days prior written notice
to Landlord to examine Landlord's books and records of Operating Costs during
normal business hours within twenty (20) days following the furnishing of the
statement to Tenant. Unless Tenant takes written exception to any item within
thirty (30) days following the furnishing of the statement to Tenant (which item
shall be paid in any event), such statement shall be considered as final and
accepted by Tenant. The taking of exception to any item shall not excuse Tenant
from the obligation to make timely payment based upon the statement as delivered
by Landlord.
8.01 TENANT'S PROPORTIONATE SHARE. (a) Tenants "proportionate share" as
used in this Lease with respect to the Building shall mean a fraction the
numerator of which shall be the rentable area contained in the Premises and the
denominator of which shall be the rentable area contained in the Building, as
determined by Landlord. Tenant's "proportionate share" as used in this Lease
with respect to costs relating to more than the Building, shall mean a fraction
the numerator of which shall be the rentable area which is 5,000 SF for year 1,
4,000 SF for year 2 and 8,345 square feet thereafter contained in the Premises
and the denominator of which shall be the rentable area of all buildings, as
determined by Landlord, within the Development. Notwithstanding anything
contained in the Lease to the contrary, Landlord shall have the right, from time
to time, to add or exclude from the Development real property and any buildings
constructed thereon. In the event Landlord elects to add to or exclude from the
Development, Landlord shall notify Tenant in writing of any such addition or
exclusion which notice shall describe the property added or excluded.
9.01 TENANT'S OBLIGATIONS. (a) Tenant shall at its own cost and expense
keep and maintain all parts of the Premises and such portion of the Development
within the exclusive control of Tenant in good condition, promptly making all
necessary repairs and replacements, whether ordinary or extraordinary, with
materials and workmanship of the same character, kind and quality as the
original, including but not limited to, windows, glass and plate glass, doors,
skylights, any special office entries, interior walls and finish work, floors
and floor coverings, heating and air conditioning systems, electrical systems
and fixtures, sprinkler systems, water heaters, dock board, truck doors, dock
bumpers, and plumbing work and fixtures. Tenant as part of its obligation
hereunder shall keep the whole of the Premises in a clean and sanitary
condition. Tenant will as far as possible keep all such parts of the Premises
from deteriorating, ordinary wear and tear excepted, and from falling
temporarily out of repair, and upon termination of this Lease in any way. Tenant
will yield up the Premises to Landlord in good condition and repair, loss by
fire or other casualty covered by insurance to be secured pursuant to Article 15
excepted (but not excepting any damage to glass or loss not reimbursed by
insurance because of the existence of a deductible under the appropriate
policy). Tenant shall not damage any demising wall or disturb the integrity and
supports provided by any demising wall and shall, at its sole cost and expense,
properly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees. Tenant shall, at its own cost and expense, as
additional rent, pay for the repair of any damage to the Premises, the Building,
or the Development resulting from and/or caused in whole or in part by the
negligence or misconduct of Tenant, its agents, servants, employees, patrons,
customers, or any other person entering upon the Development as a result of
Tenant's business activities or caused by Tenant's default hereunder.
(b) Tenant at its own cost and expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor approved
by Landlord, for servicing all heating and air conditioning systems and
equipment servicing the Premises and an executed copy of such contract shall be
delivered to Landlord. This service contract must include all services suggested
by the equipment manufacturer within the operations/maintenance manual and must
become effective within thirty (30) days of the date Tenant takes possession of
the Premises. Landlord may (but shall not be required to), upon notice to
Tenant, elect to enter into such a maintenance service contract on behalf of
Tenant or perform the work itself and, in either case, charge Tenant therefore,
together with a reasonable charge for overhead.
9.02 LANDLORD'S OBLIGATIONS. Landlord shall maintain in good repair,
reasonable wear and tear and any casualty covered by the provisions of Article
15 excepted, all parts of the Development, other than tenants' demised premises
or portions of the Development within the exclusive control of tenants of the
Development, making all necessary repairs and replacements, whether ordinary or
extraordinary structural or nonstructural, including roof, foundation, walls,
downspouts, gutters, regular mowing of any grass, trimming, weed removal and
general landscape maintenance, including any rail spur areas, exterior painting,
exterior lighting, exterior signs and common sewage plumbing and the maintenance
of all paved areas including driveways and alleys, including, but not limited
to, cleaning, repaving, restripping and resealing. Tenant shall immediately give
Landlord written notice of any defect or need for repairs, after which Landlord
shall have a reasonable opportunity to repair the same or cure such defect.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible under any of the provisions of this Lease shall be
limited to the cost of such repairs or maintenance or the curing of such defect.
The term "walls" as used herein shall not include windows, glass or plate glass,
doors, special store front or office entry.
10.01 ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including, without limitation, the roof and wall
penetrations) without the prior written consent of Landlord. If Landlord shall,
consent to any alterations, additions or improvements proposed by Tenant, Tenant
shall construct the same in accordance with all governmental laws, ordinances,
rules and regulations and all requirements of Landlord's and Tenant's insurance
policies and only in accordance with plans and specifications approved by
Landlord; and any contractor or person selected by Tenant to make the same, or,
at Landlord's option and discretion, the alterations, additions or improvements
shall be made by Landlord for Tenant's account and Tenant shall fully reimburse
Landlord for the entire cost thereof. Tenant may, without the consent of
Landlord, but at its own cost and expense and in good workmanlike manner erect
such shelves, bins, machinery and other trade fixtures as it may deem advisable,
without altering the basic character of the Building or Development and without
overloading the floor or damaging such Building or Development, and in each case
after complying with all applicable governmental laws, ordinances, regulations
and other requirements. All shelves, bins, machinery and trade fixtures
installed by Tenant may be removed by Tenant prior to the termination of this
Lease if Tenant so elects, and shall be removed by the date of termination of
this Lease or upon earlier vacating of the Premises if required by Landlord;
upon any such removal Tenant shall restore the Premises to their original
condition. All such removals and restoration shall be accomplished in a good and
workmanlike manner so as not to damage the primary structure or structural
quality of the Building.
11.01 SIGNS AND WINDOW TREATMENT. Tenant shall not install any signs upon
the Building or Development. Landlord will provide, at Tenant's request and
cost, Landlord's standard identification sign, which sign shall be removed by
Tenant upon termination of this Lease at which time Tenant shall restore the
property to the same condition as prior to installation of said sign. Tenant
shall not install drapes, curtains, blinds or any window treatment without
Landlord's prior written consent. Landlord may from time to time require Tenant
to change its signage to conform to a revised standard for the Building,
provided Landlord pays
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the cost of removing and replacing such signs. Landlord shall maintain all
signs and the cost thereof shall be charged to the Tenant.
12.01 INSPECTIONS. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
premises or in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this lease. During the period that is six
(6) months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any
reasonable time during business hours for the purpose of showing the premises
and shall have the right to erect on the premises a suitable sign indicating
the premises are available. Tenant shall give written notice to Landlord at
least thirty (30) days prior to vacating the premises and shall arrange to meet
with Landlord for a joint inspection of the premises prior to vacating. In the
event of Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the premises shall be
conclusively deemed correct for purposes of determining Tenant's responsibility
for repairs and restoration.
13.01 UTILITIES. Tenant shall pay for all gas, heat, light, power,
telephone, and other utilities and services used on or from the Premises,
including without limitation, Tenant's proportionate share as determined by
Landlord for the use of such utilities which are not separately metered and any
central station signaling system installed in the Premises or the Building,
together with any taxes, penalties and surcharges or the like pertaining
thereto and any maintenance charges for utilities. Tenant shall furnish and
install all electric light bulbs, tubes and ballasts, other than those
originally provided to the Premises by Landlord. Landlord shall in no event be
liable for any interruption or failure of utility services on or to the
Premises.
14.01 ASSIGNMENT AND SUBLETTING. (a) Tenant shall not have the right to
assign, sublet, transfer or encumber this lease, or any interest therein,
without the prior written consent of Landlord. Any attempted assignment,
subletting, transfer or encumbrance by Tenant in violation of the terms and
covenants of this Paragraph shall be void. All cash or other proceeds of any
assignment, such proceeds as exceed the rentals called for hereunder in the case
of a subletting and all cash or other proceeds of any other transfer of Tenant's
interest in this lease shall be paid to Landlord, whether such assignment,
subletting or other transfer is consented to by landlord or not, unless Landlord
agrees to the contrary in writing, and Tenant hereby assigns all rights it might
have or ever acquire in any such proceeds to Landlord. Any assignment,
subletting or other transfer of Tenant's interest in this lease shall be for an
amount equal to the then fair market value of such interest. These covenants
shall run with the land and shall bind Tenant and Tenant's heirs, executors,
administrators, personal representatives, representatives in any bankruptcy
proceeding, successors and assigns. Any assignee, sublessee or transferee of
Tenant's interest in this lease (all such assignees, sublessees and transferees
being hereinafter referred to as "successors"), by assuming Tenant's obligations
hereunder shall assume liability to Landlord for all amounts paid to persons
other than Landlord by such successors in contravention of this Paragraph. No
assignment, subletting or other transfer, whether consented to by Landlord or
not, shall relieve Tenant of its liability hereunder. Upon the occurrence of an
"event of default" as hereinafter defined, if the premises or any part thereof
are then assigned or sublet, Landlord, in addition to any other remedies herein
provided, as provided by law, may at its option collect directly from such
assignee or subtenant all rents becoming due to Tenant under such assignment or
sublease and apply such rent against any sums due to Landlord for Tenant
hereunder, and no such collection shall be construed to constitute a novation or
a release of Tenant from the further performance of Tenant's obligations
hereunder.
(b) If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. 101 et seq., (The "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
landlord shall be held in trust for the benefit of the Landlord and be promptly
paid or delivered to Landlord.
(c) Any person or entity to which this lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
15.01 FIRE AND CASUALTY DAMAGE. (a) Landlord agrees to maintain
insurance covering the building of which the premises are a part in an amount
not less than eighty (80%) percent (or such greater percentage as may be
necessary to comply with the provisions of any co-insurance clauses of the
policy) of the replacement cost thereof, insuring against the perils of Fire,
Lightning, Extended Coverage, Vandalism and Malicious Mischief, extended by
Special Extended Coverage Endorsement to insure against all other Risks of
Direct Physical Loss, such coverages and endorsements to be as defined,
provided and limited in the standard bureau forms prescribed by the insurance
regulatory authority for the state in which the premises are situated for use
by insurance companies admitted in such state for the writing of such insurance
on risks located within such state. Subject to the provisions of subparagraphs
15.01(c), 15.01(d), and 15.01(e) below, such insurance shall be for the sole
benefit of Landlord and under its sole control.
(b) If the building situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, tenant shall give written notice
thereof to Landlord.
(c) If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be completed
within two hundred (200) days after the date upon which Landlord is notified by
Tenant of such damage, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective upon the date of the
occurrence of such damage.
(d) If the buildings situated upon the premises should be damaged by any
peril covered by insurance to be provided by Landlord under subparagraph
15.01(a) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within two hundred (200) days after the date
upon which Landlord is notified by Tenant of such damage, this lease shall not
terminate, and Landlord shall at its sole cost and expense thereupon proceed
with reasonable diligence to rebuild and repair such buildings to substantially
the condition in which they existed prior to such damage, except that Landlord
shall not be required to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the premises by Tenant and except that Tenant shall pay to Landlord upon
demand any amount by which Landlord's cost of such rebuilding, repair and/or
replacement exceeds net insurance proceeds paid to Landlord in connection with
such damage and except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term of the lease exclusive of any option
which is unexercised at the time of such damage. If the premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. In
the event that Landlord should fail to complete such repairs and rebuilding
within two hundred (200) days after the date upon which Landlord is notified by
Tenant of such damage, Tenant may at its option terminate this lease by
delivering written notice of termination to Landlord as Tenant's exclusive
remedy, whereupon all rights and or obligations hereunder shall cease and
terminate. Should construction be delayed because of changes, deletions, or
additions in construction requested by Tenant, strikes, lockouts, casualties,
acts of God, war, material or labor shortages, governmental regulation or
control or other causes beyond the reasonable control of Landlord, the period
of restoration, repair or rebuilding shall be extended for the time Landlord is
so delayed.
(e) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering
written notice of termination to Tenant within fifteen (15) days after such
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requirement is made by any such holder, whereupon all rights and obligations
hereunder shall cease and terminate.
(f) Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
party may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage
occurring during such times as the releasor's policies shall contain a clause
or endorsement to the effect that any such release shall not adversely affect
or impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of the Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause or endorsement.
16.01 LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees of any other person entering upon the
premises, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation the
trustee and beneficiaries if Landlord is a trust). Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses, including
without limitation attorney's fees and damages, both real and alleged, arising
out of any such damage or injury; except injury to persons or damage to property
the sole cause of which is the gross negligence of Landlord or the failure of
Landlord to repair any part of the premises which Landlord is obligated to
repair and maintain hereunder within a reasonable time after the receipt of
written notice from Tenant of needed repairs. Tenant shall procure and maintain
throughout the term of the lease a policy or policies of insurance, at its sole
cost and expense, insuring both Landlord and Tenant against all claims, demands
or actions arising out of or in connection with (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenant's liability assumed under this lease, the
limits of such policy or policies to be in the amount of not less than
$2,000,000 per occurrence in respect to injury to persons (including death), and
in the amount of not less than $250,000 per occurrence in respect to property
damage or destruction, including loss of use thereof. All such policies shall be
procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certified copies of such policies, together with receipt evidencing
payment of premiums therefore, shall be delivered to Landlord prior to the
commencement date of this lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of the renewal thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be cancelled or changed to reduce insurance provided thereby.
17.01 CONDEMNATION. (a) If the whole or any substantial part of the
Premises or Building should be taken for any public or quasi-public use under
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof and the taking would prevent or materially
interfere with the use of the Premises or Building for the purpose for which
they are then being used, this Lease shall terminate effective when the legal
taking shall occur as if the date of such taking were the date originally fixed
in the Lease for the expiration of the Term.
(b) If the part of the Premises or Building shall be taken for any public
or quasi-public use under governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this Lease
is not terminated as provided above, this Lease shall not terminate but the
rent payable hereunder during the unexpired portion of this Lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances and Landlord shall undertake to restore the Premises to a
condition suitable for Tenant's use, as near to the condition thereof
immediately prior to such taking as is reasonably feasible under all the
circumstances.
(c) In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their
respective interests in any condemnation precedings; provided that Tenant shall
not be entitled to receive any award for the loss of any improvements paid for
by Landlord or for Tenant's loss of its leasehold interest, the right to such
award as to such items being hereby assigned by Tenant to Landlord.
18.01 HOLDING OVER. Tenant will, at the termination of this lease by lapse
of time or otherwise, yield up immediate possession to Landlord with all repairs
and maintenance required herein to be performed by Tenant completed. If Landlord
agrees in writing that Tenant may hold over after the expiration or termination
of this lease, unless the parties hereto otherwise agree in writing on the terms
of such holding over, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than (5) days advance written notice, or by
Tenant at any time upon not less than thirty (30) days advance written notice,
and all of the other terms and provisions of this lease shall be applicable
during that period, except that Tenant shall pay Landlord from time to time upon
demand, as rental for the period of any hold over, an amount equal to double the
rent in effect on the termination date, computed on a daily basis for each day
of the hold over period. Tenant shall also pay to Landlord all damages sustained
by Landlord resulting from retention of possession by Tenant, including the loss
of any proposed subsequent tenant for any portion of the Premises. No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this lease except as otherwise expressly provided. The preceding
provisions of this paragraph shall not be construed as consent for Tenant to
hold over.
19.01 QUIET ENJOYMENT. Landlord represents and warrants that it has full
right and authority to enter into this Lease and that Tenant, upon paying the
rental herein set forth and performing its other covenants and agreements herein
set forth, shall peaceably and quietly have, hold and enjoy the Premises for the
Term without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease. Landlord agrees to make reasonable efforts to protect
Tenant from interference or disturbance by other tenants or third persons;
however, Landlord shall not be liable for any such interference or disturbance,
not shall Tenant be released from any of the obligations of this Lease because
of such interference or disturbance. In the event this Lease is a sublease, then
Tenant agrees to take the Premises subject to the provisions of the prior lease.
20.01 EVENTS OF DEFAULT. The following events shall be deemed to be
events of default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein
when due and such failure shall continue for a period of five (5) days from the
date such payment was due.
(b) Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit
of creditors; or Tenant or any such guarantor shall commence any case,
proceeding or other action seeking to have an order for relief entered on its
behalf as a debtor to adjudicate it as bankrupt or insolvent, or seeking
reorganization or relief of debtors or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or of any
substantial part of its property; or Tenant or any such guarantor shall take
any action to authorize or in contemplation of any of the actions set forth
above in this paragraph; or
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(c) Any case, proceeding or other action against Tenant or any guarantor
of Tenant's obligations hereunder shall be commenced seeking to have an order
for relief entered against it as debtor or to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
(d) A receiver or trustee shall be appointed for all or substantially all
of the assets of the Tenant.
(e) Tenant shall desert or vacate any substantial portion of the premises.
(f) Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 26.01 hereof within twenty (20) days after any such lien
or encumbrance is filed against the premises.
(g) Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 20.01, and shall not
cure such failure within twenty (20) days after written notice thereof to
Tenant.
(h) Tenant shall fail to continuously operate its business at the
premises for the permitted use set forth in Paragraph 5.01 whether or not
Tenant is in default of the rental payment due under this lease.
20.02 REMEDIES. (a) Upon the occurrence of any of such events of default
described in Paragraph 20.01 hereof, Landlord shall have the option to pursue
any one or more of the following remedies without any notice or demand
whatsoever:
(1) Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord, and if Tenant fails so to do,
Landlord may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession
of the premises and expel or remove Tenant and any other person who
may be occupying such premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim of
damages therefore.
(2) Enter upon and take possession of the premises and expel or remove
Tenant and any other person who may be occupying such premises or any
part thereof, by force if necessary, without being liable for
prosecution or any claim for damages therefore, and relet the premises
and receive the rent therefore.
(3) Enter upon the premises, by force if necessary, without being liable
for prosecution or any claim for damages therefore, and do whatever
Tenant is obligated to do under the terms of this lease; and Tenant
agrees to reimburse Landlord on demand for any expenses which Landlord
may incur in thus effecting compliance with Tenant's obligations under
this lease, and Tenant further agrees that Landlord shall not be
liable for any damages resulting to the Tenant from such action,
whether caused by the negligence of Landlord or otherwise.
(4) Alter all locks and other security devices at the premises without
terminating this lease.
(b) In the event Landlord may elect to regain possession of the premises
by a forcible detainer proceeding, Tenant hereby specifically waives any
statutory notice which may be required prior to such proceeding, and agrees
that Landlord's execution of this lease is, in part, consideration for this
waiver.
(c) In the event Tenant fails to pay any installment of rent hereunder as
when such installment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to give (5%) percent of such installment; and the
failure to pay such amount within five (5) days after demand therefore shall be
an event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law
and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner.
(d) In the event Tenant's check, given to Landlord in payment, is returned
by the bank for non-payment, Tenant agrees to pay all expenses incurred by
Landlord as a result thereof.
(e) Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No such alteration of locks or other security devices and
no removal or other exercise of dominion by Landlord over the property of Tenant
or others at the premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby consenting, after any event of default, to the
aforesaid exercise of dominion over Tenant's property within the premises. All
claims for damages by reason of such re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. Tenant agrees
that any re-entry by Landlord may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as Landlord may elect, and Landlord shall not be liable for
trespass or otherwise.
(f) In the event Landlord elects to terminate the lease by reason of an
event of default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord, at the address specified for notice to Landlord
herein, the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the greater of (i) the total
rental hereunder for the remaining portion of the lease term (had such term not
been terminated by Landlord prior to the date of expiration and (ii) the then
present value of the then fair rental value of the premises for such period.
(g) In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Section 3.01 diminished
by any net sums thereafter received by Landlord through reletting the premises
during said period (after deducting expenses incurred by Landlord as provided
in subparagraph 20.02(h). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph
may be brought from time to time, on one or more occasions, without the
necessity of Landlord's waiting until expiration of the lease term.
(h) In case of any evenly of default or breach by Tenant, or threatened or
anticipatory breach or default, Tenant shall also be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, in addition to
any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the premises into condition
acceptable to a new tenant or tenants, and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
(i) In the event of termination or repossession of the premises for an
event of default, Landlord shall not have any obligation to relet or to attempt
to relet the premises, or any portion thereof, or to collect rental after
reletting; and in the event of reletting, Landlord may relet the whole or any
portion of the premises for any period to any tenant and for any use and
purpose.
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(j) If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligations to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
(k) In the event that Landlord shall have taken possession of the premises
pursuant to the authority herein granted then Landlord shall have the right to
keep in place and use all of the furniture, fixtures and equipment at the
premises, including that which is owned or leased to Tenant at all times prior
to any foreclosure thereon by Landlord or repossession thereof by any lessor
thereof or third party having a lien thereon, Landlord shall also have the right
to remove from the premises (without the necessity of obtaining a distress
warrant, writ of sequestration or other legal process) all or any portion of
such furniture, fixtures, equipment and other property located thereon and to
place same in storage at any premises within the County in which the premises is
located; and in such event, Tenant shall be liable to Landlord for costs
incurred by Landlord in connection with such removal and storage. Landlord shall
also have the right to relinquish possession of all or any portion of such
furniture, fixtures, equipment and other property to any person ("Claimant")
claiming to be entitled to possession thereof who presents to Landlord a copy of
any instrument represented to Landlord by Claimant to have been executed by
Tenant (or an predecessor Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Landlord to inquire into the
authenticity of said instrument's copy of Tenant's or Tenant's predecessor's
signature(s) thereon and without the necessity of Landlord making any nature of
investigation or inquiry as to the validity of the factual or legal basis upon
which Claimant purports to act; and Tenant agrees to indemnify and hold Landlord
harmless from all cost, expense, loss, damage and liability incident to
Landlord's relinquishment of possession of all or any portion of such furniture,
fixtures, equipment or other property to Claimant. Any and all property which
may be removed from the Premises by Landlord pursuant to the authority of this
Lease or of Law, to which Tenant is or may be entitled, may be handled, removed
and stored, as the case may be, by or at the direction of Landlord at the risk,
cost and expense of Tenant, and Landlord shall in no event be responsible for
the value, preservation or safekeeping thereof. Tenant shall pay to Landlord,
upon demand any and all expenses incurred in such removal and all storage
charges against such property so long as the same shall be in Landlord's
possession or under Landlord's control. Any such property of Tenant not retaken
by Tenant from storage within thirty (30) days after the removal from the
Premises shall conclusively be presumed to have been conveyed by Tenant to
Landlord under this Lease as a bill of sale without further payment or credit by
Landlord to Tenant. The rights of Landlord herein stated shall be in addition to
any and all other rights which Landlord has or may hereafter have at law or in
equity; and Tenant stipulates and agrees that the rights herein granted Landlord
are commercially reasonable.
21.01 RIGHTS RESERVED TO LANDLORD. Landlord reserves and may exercise
the following rights without affecting Tenant's obligations hereunder:
(a) To change the name or the street address of the Building or
the Development;
(b) To install and maintain a sign or signs on the exterior of
the Building;
(c) To designate all sources furnishing sign painting and
lettering, lamps and bulbs used on the Premises;
(d) To retain at all times pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any
particular business or undertaking in the Building or the
Development;
(f) To change the arrangement and/or location of entrances and
corridors in and to the Building and to add, remove, rename
or modify buildings, roadways, parking areas, walkways,
landscaping, lakes, grading and other improvements in or to
the Development.
22.01 (intentionally omitted)
23.01 LANDLORD'S LIEN. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the Premises, and such property shall
not be removed therefrom without the consent of Landlord until all arrearages
in rent as well as any and all other sums of money then due to Landlord
hereunder shall first have been paid and discharged. In the event of a default
under this Lease, Landlord shall have, in addition to any other remedies
provided herein or by law, all rights and remedies under the Uniform Commercial
Code, including without limitation the right to sell the property described in
this Section at public or private sale upon five (5) days notice to Tenant.
Tenant hereby agrees to execute such financing statements and other instruments
necessary or desirable in Landlord's discretion to perfect the security interest
hereby created.
24.01 SUBORDINATION. Tenant accepts this Lease subject and subordinate
to any mortgage and/or deed of trust now or at any time hereafter constituting a
lien or charge upon the Development, the Building, or the Premises, without the
necessity of any act or execution of any additional instrument of subordination;
provided, however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the purpose of evidencing
the subjection and subordination of this Lease to the lien of any such mortgage
or for the purpose of evidencing the superiority of this Lease to the lien of
any such mortgage as may be the case.
25.01 MECHANICS LIENS AND OTHER TAXES. (a) Tenant shall have no
authority, express or implied, to create or place any lien or encumbrance of any
kind or nature whatsoever upon, or in any manner to bind the interests of
Landlord in the premises or to charge the rentals payable hereunder for any
claim in favor of any person dealing with Tenant, including those who may
furnish materials or perform labor for any construction or repairs, and each
such claim shall affect and each such lien shall attach to, if at all, only the
leasehold interest granted to Tenant by this instrument. Tenant covenants and
agrees that it will pay or cause to be paid all sums legally due and payable by
it on account of any labor performed or materials furnished in connection with
any work performed on the premises on which any lien is or can be validly and
legally asserted against its leasehold interest in the premises or the
improvements thereon and that it will save and hold Landlord harmless from any
and all loss, cost or expense based on or arising out of asserted claims or
liens against the leasehold estate or against the right, title and interest of
the Landlord in the premises or under the terms of this lease. Tenant agrees to
give Landlord immediate written notice if any lien or encumbrance
7
<PAGE> 8
is placed on the premises.
(b) Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if
the assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
26.01 NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making of
any payment shall be deemed to be complied with when and if the following steps
are taken:
(a) All rent and other payments required to be made by Tenant to Landlord
shall be payable to: TCAC - Crow-Childress-Donner, Limited or to such other
entity at the such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith.
(b) Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered, whether actually received or not, when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out
below, or at such other address as they have theretofore specified by written
notice delivered in accordance herewith:
LANDLORD: TENANT:
Crow-Childress-Donner, Limited Innovative Selective Software, Inc.
c/o Trammell Crow Company 902 Clint Moore Road, Suite 230
6400 Congress Avenue, Suite 2000 Boca Raton, Florida 33487
Boca Raton, Florida 33487
If and when included within the term "Landlord", or "Tenant", as used in
this instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments. All parties included within the terms "Landlord" and "Tenant",
respectively, shall be bound by notices given in accordance with the provisions
of this paragraph to the same effect as if each had received such notice.
27.01 MISCELLANEOUS. (a) Words of any gender used in this Lease shall be
held or construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.
(b) The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord
shall have the right to assign any of its rights and obligations under this
Lease and Landlord's grantee or Landlord's successor, as the case may be, shall
upon such assignment, become Landlord hereunder, thereby freeing and relieving
the grantor or assignor, as the case may be, of all covenants and obligations
of Landlord hereunder. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or
other appropriate documentation evidencing the due authorization of such party
to enter into this Lease. Nothing herein contained shall give any other
tenant in the Development or the Building any enforceable rights either against
Landlord or Tenant as a result of the covenants and obligations of either party
set forth herein. If there is more than one Tenant, the obligations of Tenant
shall be joint and several. Any indemnification of, insurance of, or option
granted to Landlord shall also include or be exercisable by Landlord's agents
and employees.
(c) The captions inserted in this Lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
(d) In no event shall Landlord's liability for any breach of this Lease
exceed the amount of rental then remaining unpaid for the then current Term
(exclusive of any renewal periods which have not then actually commenced). This
provision is not intended to be a measure or agreed amount of Landlord's
liability with respect to any particular breach and shall not be utilized by
any court or otherwise for the purpose of determining any liability of Landlord
hereunder, except only as a maximum amount not to be exceeded in any event. In
addition, it is expressly understood and agreed that nothing in this Lease
shall be construed as creating any liability against Landlord, or its
successors and assigns, personally, and in particular without limiting the
generality of the foregoing, there shall be no personal liability to pay any
indebtedness accruing hereunder or to perform any covenant, either express or
implied, herein contained, and that all personal liability of Landlord, or its
successors and assigns, of every sort, if any, is hereby expressly waived by
Tenant, and that so far as Landlord, or its successors and assigns is concerned
Tenant shall look solely to the Building for the payment thereof.
(e) Except as set forth in Section 8.01 above, this Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
(f) All obligations of Tenant not fully performed as of the expiration or
earlier termination of the term of this Lease shall survive the expiration or
earlier termination of the Term, including without limitation, all payment
obligations with respect to Operating Costs and all obligations concerning the
condition of the Premises. Upon the expiration or earlier termination of the
Term, and prior to Tenant vacating the Premises, Landlord and Tenant shall
jointly inspect the Premises and Tenant shall pay to Landlord any amount
estimated by Landlord as necessary to put the Premises, including without
limitation heating and air conditioning systems and equipment therein, in good
condition and repair. Any work required to be done by Tenant prior to its
vacation of the Premises which has not been completed upon such vacation, shall
be completed by Landlord and billed to Tenant at cost plus fifteen percent.
Tenant shall also, prior to vacating the Premises, pay to Landlord the amount,
as estimated by Landlord, of Tenant's obligation hereunder for Operating Costs.
All such amounts shall be used and held by Landlord for payment of such
8
<PAGE> 9
obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefor upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall
be credited against the amount payable by Tenant under this Section.
(g) If any clause, provision or portion of this Lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable under applicable law, such event shall not affect, impair or
render invalid or unenforceable the remainder of this Lease nor any other
clause, phrase, provision or portion hereof, nor shall it affect the
application of any clause, phrase, provision or portion hereof to other
persons or circumstances, and it is also the intention of the parties to
this Lease that in lieu of each such clause, phrase, provision or portion
of this Lease that is invalid or unenforceable, there be added as a part of
this Lease a clause, phrase, provision or portion as similar in terms to
such invalid or unenforceable clause, phrase, provision or portion as may
be possible and be valid and enforceable.
(h) Submission of this Lease shall not be deemed to be a reservation
of the Premises. Landlord shall not be bound hereby until its delivery to
Tenant of an executed copy hereof signed by Landlord, already having been
signed by Tenant, and until such delivery Landlord reserves the right to
exhibit and lease the Premises to other prospective tenants.
Notwithstanding anything contained herein to the contrary Landlord may
withhold delivery of possession of the Premises from Tenant until such time
as Tenant has paid to Landlord the security deposit required hereunder and
the first month's rent as required hereunder, and any other sums required
hereunder.
(i) Tenant shall at any time and from time to time within ten (10)
days after written request from Landlord, execute and deliver to Landlord
an estoppel certificate, in form reasonable satisfactory to Landlord.
(j) Whenever a time period is prescribed for action to be taken by
Landlord, Landlord shall not be liable or responsible for, and there shall
be excluded from the computations for any such time period, any delays due
to causes beyond the control of Landlord.
(k) Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over a time. Levels of radon that
exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit. The above statement is
incorporated in the lease as a requirement in order to comply with Florida
Statute 404.056(8).
(1) ATTACHED HERETO AND MADE PART OF THIS LEASE IS A RIDER TO LEASE.
28.01 EFFECTIVE DATE. All references in this Lease to "the date hereof"
or similar references shall be deemed to refer to the last date in point of
time, on which all parties hereto have executed this Lease.
The parties intending to be bound hereby execute or cause this Lease to
be executed this 4th day of August, 1992.
WITNESSES: LANDLORD: Crow-Childress-Donner, Limited,
a Texas limited partnership
/s/ Janet Horne By: /s/ Leo V. Ghitis
------------------------ -----------------------------------
/s/ Edward Mitchell Leo V. Ghitis, Agent
------------------------
Agent
---------------------------------------
Title:
/s/ Jeffrey Jackness TENANT: Innovative Selective Software, Inc.,
------------------------ an Illinois corporation
/s/ Susan Colecik
------------------------
By: /s/ James Daleen
------------------------------------
President
---------------------------------------
Title:
9
<PAGE> 10
RIDER TO THE LEASE AGREEMENT BETWEEN
CROW-CHILDRESS-DONNER, LIMITED, A
TEXAS LIMITED PARTNERSHIP, ("LANDLORD") AND
INNOVATIVE SELECTIVE SOFTWARE, INC.,
A ILLINOIS CORPORATION ("TENANT")
FOR PREMISES AT:
902 CLINT MOORE ROAD, SUITE 230, BOCA RATON, FL 33487
29.01 Base Rent: The base rental rate as defined in Paragraph 3.01 of
the lease will be as follows:
Months Annual Base Rent Monthly Base Rent
1-12 $37,302.15 $3,108.51
13-24 $38,421.21 $3,201.77
25-36 $39,573.85 $3,297.82
30.01 Tenant Improvements: Landlord agrees to construct only once in
building standard materials the following improvements more
accurately shown on Exhibit "C":
1. In Room 122 Landlord will add a 8' base cabinet with sink.
2. In Room 115 Landlord will create a classroom with door as
shown on Exhibit "C".
3. In Room 118 Landlord will remove one door and the partition
in the middle of the room.
4. In Room 119 Landlord will remove the partition in the
middle of the room.
5. In Rooms 120 and 121 Landlord will construct a partition.
6. In Room 140 Landlord will move the door between Room 142
and 140 and Landlord will demo all other walls.
7. In Room 142 Landlord will demo all walls to create a
storage area.
8. Landlord will paint the entire premises.
9. Landlord will ensure that tenants electric and A/C is
properly divided and that there is sufficient A/C throughout
the tenants space.
10. Landlord will add double glass doors in storage room and
enlarge walkway.
11. Landlord will add two closets in hallway.
12. Landlord will add glass windows 4' x 6' in Rooms 120 and
121.
13. Landlord will create a larger reception area by demolishing
two walls.
These are the only improvements to be completed. These are shown
on Exhibit "C" attached.
31.01 James Daleen agrees to provide Landlord with a personal
guarantee for an amount equal to the entire lease term.
<PAGE> 11
RIDER TO THE LEASE AGREEMENT BETWEEN
CROW-CHILDRESS-DONNER, LIMITED, A
TEXAS LIMITED PARTNERSHIP, ("LANDLORD") AND
INNOVATIVE SELECTIVE SOFTWARE, INC.,
A ILLINOIS CORPORATION ("TENANT")
FOR PREMISES AT:
902 CLINT MOORE ROAD, SUITE 230, BOCA RATON, FL 33487
32.01 American Disability Act: Tenant, at Tenant's sole expense, shall comply
with all laws, rules, orders, ordinances, directions, regulations and
requirements of federal, state, county and municipal authorities now in
force or which may hereafter be in force, which shall impose any duty
upon the Landlord or Tenant with respect to the use, occupation or
alteration of the premises.
33.01 Acceptance of Premises. Tenant acknowledges that it has inspected the
premises, knows the condition thereof, and accepts such premises, and
specifically the buildings and improvements comprising the same, in their
present condition, as suitable for the purposes for which the premises
are leased. Taking of possession by Tenant shall be deemed conclusively
to establish that said buildings and other improvements are in good and
satisfactory condition as of when possession was taken. Tenant further
acknowledges that no representations as to the repair of the premises,
nor premises to alter, remodel or improve the premises have been made by
Landlord, unless such are expressly set forth in this lease. If this
lease is executed before the premises becomes vacant or otherwise
available and ready for occupancy, of if any present tenant or occupant
of the premises holds over, and Landlord cannot, using good faith
efforts, acquire possession of the premises prior to the date above
recited as the commencement date of this lease, Landlord shall not be
deemed to be in default hereunder, nor in any way liable to Tenant
because of such failure, and Tenant agrees to accept possession of the
premises at such time as Landlord is able to tender the same, which date
shall thenceforth be deemed the "commencement date"; and the term of this
lease shall automatically be extended so as to include the full number of
months hereinbefore provided for, except that if the commencement date is
other than the first day of calendar month, such term shall also be
extended for the remainder of the calendar month in which possession is
tendered. Landlord hereby waives payment of rent covering any period
prior to such tendering of possession. After the commencement date,
Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the premises.
34.01 Tenant agrees to relocate out of Suite 276 upon five days written notice
from Landlord. Tenant agrees to leave Suite 276 in clean, good repair
and move-in condition. After vacating Suite 276, Tenant agrees to lease
and take possession of Suite 230 and have the lease on Suite 230 commence
immediately upon taking possession of Suite 230. Upon taking possession
of Suite 230, Landlord and Tenant agree to release each other from any
and all obligations they have with respect to Suite 276 provided Tenant
is not in default and Tenant has left Suite 276 in the condition
prescribed in this paragraph.
<PAGE> 12
RIDER TO THE LEASE AGREEMENT BETWEEN
CROW-CHILDRESS-DONNER, LIMITED, A
TEXAS LIMITED PARTNERSHIP, ("LANDLORD") AND
INNOVATIVE SELECTIVE SOFTWARE, INC.,
A ILLINOIS CORPORATION ("TENANT")
FOR PREMISES AT:
902 CLINT MOORE ROAD, SUITE 230, BOCA RATON, FL 33487
35.01 Security Deposit: Supplementing Section 4.01 of the Lease, the Security
Deposit will be $5,020.00. The tenant is required to deposit with
Landlord the additional funds of $3,330.00 over their existing
security deposit of $1,690.00.
36.01 In the common area maintenance, all Landlord controllable expenses
will be capped at a 5% increase per year on a cumulative basis. This
includes all common area maintenance expenses except property taxes,
utilities and trash removal.
The parties intending to be bound hereby execute or cause this Rider to be
executed this 4th day of August, 1992.
ATTEST/WITNESS LANDLORD
By: /s/ Janet Horne Crow-Childress-Donner, Limited,
----------------- a Texas limited partnership
By: /s/ Edward Mitchell By: /s/ Leo Ghitis
----------------- -----------------
Title: Agent
-----------------
ATTEST/WITNESS TENANT
By: /s/ Jeffrey Jackness Innovative Selective Software,
----------------- Inc.
By: /s/ Susan Colecik By: /s/ James Daleen
----------------- -----------------
Title: President
-----------------
<PAGE> 13
CCP Phase II, Building 3
EXHIBIT A
LEGAL DESCRIPTION
Approximately 8,345 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as 902 Clint Moore
Road, Suite 232, Boca Raton, Florida as shown in Exhibit B. Further described as
Congress Corporate Plaza, Phase II situated within a development known as
Congress Corporate Plaza containing of approximately 106,044 square feet.
<PAGE> 14
EXHIBIT B
[ARCHITECTURAL DESIGN OF SPACE]
<PAGE> 15
EXHIBIT C
[ARCHITECTURAL DESIGN OF SPACE]
<PAGE> 16
EXHIBIT D
(OMITTED)
<PAGE> 17
EXHIBIT E
ENVIRONMENTAL MATTERS
(1) TENANT'S COVENANTS REGARDING HAZARDOUS MATERIALS.
(A) COMPLIANCE WITH ENVIRONMENTAL LAWS. Tenant shall at all times and in
all respects comply with all federal, state and local laws, ordinances and
regulations ("Hazardous Materials Laws") relating to industrial hygiene,
environmental protection or the use, analysis, generation, manufacture,
storage, presence, disposal or transportation of any oil, flammable explosives,
asbestos, urea formaldehyde, radioactive materials or waste, or other
hazardous, toxic, contaminated or polluting materials, substances or wastes,
including, without limitations, any "hazardous substances," "hazardous wastes,"
"hazardous materials" or "toxic substances" under any such laws, ordinances or
regulations (collectively, "Hazardous Materials").
(B) HAZARDOUS MATERIALS HANDLING. Tenant shall at its own expense procure,
maintain in effect and comply with all conditions of any and all permits,
licenses and other governmental and regulatory approvals required for Tenant's
use of the Premises, including, without limitation, discharge of (appropriately
treated) materials or wastes into or through any sanitary sewer serving the
Premises. Except as discharged into the sanitary sewer in strict accordance and
conformity with all applicable Hazardous Materials Laws, Tenant shall cause any
and all Hazardous Materials removed from the Premises to be removed and
transported solely by duly licensed haulers to duly licensed facilities for
final disposal of such materials and wastes. Tenant shall in all respects
handle, treat, deal with and manage any and all Hazardous Materials in, on under
or about the Premises in total conformity with all applicable Hazardous
Materials Laws and prudent industry practices regarding management of such
Hazardous Materials. All reporting obligations imposed by Hazardous Materials
Laws are strictly the responsibility of Tenant. Upon expiration or earlier
termination of the term of the Lease, Tenant shall cause all Hazardous Materials
to be removed from the Premises and transported for use, storage or disposal in
accordance and compliance with all applicable Hazardous Materials Laws. Tenant
shall not take any remedial action in response to the presence of any Hazardous
Materials in or about the Premises or any Building, nor enter into any
settlement agreement, consent decree or other compromise in respect to any
claims relating to any Hazardous Materials in any way connected with the
Premises or Building, without first notifying Landlord of Tenant's intention to
do so and affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, Tenant shall remove any tanks or fixtures which
contain or contained, or are contaminated with Hazardous Materials.
(C) NOTICES. Tenant shall immediately notify Landlord in writing of: (i)
any enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Tenant, the Premises or
Building relating to damage, contribution, cost recovery compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any reports made to any environmental agency arising out of or in
connection with any Hazardous Materials; and (iv) any reports made to any
environmental agency arising out of or in connection with any Hazardous
Materials in, on or removed from the Premises or Building, including any
complaints, notices, warnings, reports or asserted violations in connection
therewith. Tenant shall also supply to Landlord as promptly as possible, and in
any event within five (5) business days after Tenant first receives or sends
the same, with copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Premises, Building or Tenant's
use thereof. Tenant shall promptly deliver to Landlord copies of hazardous
waste manifests reflecting the legal and proper disposal of all Hazardous
Materials removed from the Premises.
<PAGE> 18
(2) Indemnification of Landlord. Tenant shall indemnify, defend (by
counsel acceptable to Landlord), protect, and hold Landlord, and each of
Landlord's partners, employees, agents, attorneys, successors, and assigns, free
and harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death of or
injury to any person or damage to any property whatsoever (including water
tables and atmosphere), arising from or caused in whole or in part, directly or
indirectly, by (A) the presence in, on, under or about the Premises or Building
or discharge in or from the Premises or Building of any Hazardous Materials or
Tenant's use, analysis, storage, transportation, disposal, release, threatened
release, discharge or generation of Hazardous Materials to, in, on, under, about
or from the Premises or Building, or (B) Tenant's failure to comply with any
Hazardous Materials Law whether knowingly or unknowingly, the standard herein
being one of strict liability. Tenant's obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary repair, cleanup or detoxification or decontamination of
the Premises or Building, and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith, and shall
survive the expiration or earlier termination of the term of the Lease. For
purposes of the release and indemnity provision hereof, any acts or omissions of
Tenant, or by employees, agents, assignees, contractors or subcontractors of
Tenant or others acting for or on behalf of Tenant (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant.
(3) Additional Insurance or Financial Capacity. If at any time it
reasonably appears to Landlord that Tenant is not maintaining sufficient
insurance or other means of financial capacity to enable Tenant to fulfill its
obligation to Landlord hereunder, whether or not then accrued, liquidated,
conditional or contingent, Tenant shall procure and thereafter maintain in full
force and effect such insurance or other form of financial assurance, with or
from companies or persons and in forms reasonably acceptable to Landlord, as
Landlord may from time to time reasonably request. Landlord may procure such
insurance if Tenant fails to meet its obligation hereunder and the cost thereof
shall be passed through to Tenant.
(4) Environmental Audit; Right of Entry. Landlord shall have the right to
require Tenant to undertake and submit to Landlord a periodic environmental
audit from an environmental company approved by Landlord, which audit shall
cover Tenant's compliance with this Section. Tenant shall promptly comply with
all requirements of such audit and cure all matters raised therein at Tenant's
sole cost.
(5) Radon Gas - Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
The above statement is incorporated in the lease as a requirement in order
to comply with Florida Statute 404.056(8).
<PAGE> 1
EXHIBIT 10.19
FIRST AMENDMENT TO THE LEASE
between
REGENT HOLDING CORPORATION
and
DALEEN TECHNOLOGIES, INC.
A ILLINOIS CORPORATION
for premises located at
902 Clint Moore Road, Suite 230
Boca Raton, Florida 33487
SUBMISSION OF THIS FIRST AMENDMENT FOR EXAMINATION DOES NOT CONSTITUTE AN
OFFER TO AMEND THE LEASE, AND THIS FIRST AMENDMENT SHALL BECOME EFFECTIVE ONLY
UPON EXECUTION AND DELIVERY HEREOF BY LANDLORD TO TENANT.
<PAGE> 2
FIRST AMENDMENT TO LEASE
BETWEEN REGENT HOLDING CORPORATION,
A FLORIDA CORPORATION ("LANDLORD") SUCCESSOR TO
CROW-CHILDRESS-DONNER, LIMITED
A TEXAS LIMITED PARTNERSHIP AND DALEEN
TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT")
SUCCESSOR TO INNOVATIVE SELECTIVE
SOFTWARE, INC., AN ILLINOIS CORPORATION
902 CLINT MOORE ROAD, SUITE 230
BOCA RATON, FLORIDA 33487
THIS FIRST AMENDMENT TO LEASE is made this 29th day of December, 1994 BETWEEN
REGENT HOLDING CORPORATION, A FLORIDA CORPORATION ("LANDLORD") SUCCESSOR TO
CROW-CHILDRESS-DONNER, LIMITED A TEXAS LIMITED PARTNERSHIP AND DALEEN
TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT") SUCCESSOR TO INNOVATIVE
SELECTIVE SOFTWARE, INC., AN ILLINOIS CORPORATION.
BACKGROUND
A. Daleen Technologies, Inc., successor to Innovative Selective
Software, Inc., is the Tenant under the Lease dated July 4, 1992
("Original Lease"), with Regent Holding Corporation, as Landlord,
for premises located in Congress Corporate Plaza II. The Landlord
leased to Tenant suite 230 consisting of approximately 8,345 square
feet ("Original Premises"), for a period of 36 months ("Original
Term") which is due to expire September 30, 1995.
B. At the time Landlord and Tenant wishes to expand the premises,
extend the Term of the Lease and modify the Base Rent.
WITNESSETH
In consideration of the mutual promises of the parties, intending to be legally
bound, hereby agree as follows:
1. THE PREMISES: In order to accommodate Tenant's need for additional
space, Landlord shall lease to Tenant effective January 1, 1995
("Expansion Date"), suite 232 at Congress Corporate Plaza II equal
to approximately 4,471 square feet ("Expansion Space"). The
Expansion Space is hatched and outlined on Exhibit B-1 of this First
Amendment. The Expansion Space and the Original Premises shall be
collectively referred to as "the Premises" and are more
specifically described in Exhibit A-1.
2. TERM: The Original Term of the Lease for the Premises shall be
amended and extended for a period of fifty-one (51) months
("Extended Term") from the New Rent Commencement Date, as herein
defined the New Rent Commencement Date shall be October 1, 1995.
<PAGE> 3
FIRST AMENDMENT TO LEASE
BETWEEN REGENT HOLDING CORPORATION,
A FLORIDA CORPORATION ("LANDLORD") SUCCESSOR TO
CROW-CHILDRESS-DONNER, LIMITED
A TEXAS LIMITED PARTNERSHIP AND DALEEN
TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT")
SUCCESSOR TO INNOVATIVE SELECTIVE
SOFTWARE, INC., AN ILLINOIS CORPORATION
902 CLINT MOORE ROAD, SUITE 230
BOCA RATON, FLORIDA 33487
(CONTINUED)
3. BASE RENT: In accordance with Section 3.01 of the Lease, Tenant
shall pay Base Rent during the remaining portion of the Original
Term and during the Extended Term according to the following
schedule:
<TABLE>
<CAPTION>
MONTH OF MONTHLY ANNUAL
EXTENDED TERM BASE RENT BASE RENT
------------- --------- ---------
<S> <C> <C>
January 1, 1995 - April 30, 1995 $3,297.82 $39,573.84
May 1, 1995 - September 30, 1995 $5,160.74 $61,928.84
October 1, 1995 - September 30, 1996 $5,340.00 $64,080.00
October 1, 1996 - September 30, 1997 $5,607.00 $67,284.00
October 1, 1997 - September 30, 1998 $5,887.35 $70,648.20
October 1, 1998 - September 30, 1999 $6,181.72 $74,180.61
October 1, 1999 - December 31, 1999 $6,490.81 $77,889.64
</TABLE>
4. ACCEPTANCE OF PREMISES: Tenant acknowledges that it has inspected
the Premises, knows the condition thereof, and accepts such
Premises, and specifically the building and improvements comprising
the same, in their present condition, as suitable for the purposes
for which the Premises are leased. Taking of possession by Tenant
shall be deemed conclusively to establish that said buildings and
other improvements are in good and satisfactory condition as of when
possession was taken. Tenant further acknowledges that no
representations as to the repair of the Premises, nor promises to
alter, remodel or improve the Premises have been made by Landlord,
unless such are expressly set forth in this Lease.
5. LANDLORD'S LIEN PROTECTION: Neither Tenant nor anyone claiming by,
through or under Tenant, including, without limitation, contractors,
subcontractors, materialmen, mechanics and laborers, shall have any
right to file or place mechanic's, materialmen's or other liens of
any kind whatsoever upon the demised premises or upon the tract of
land described on Exhibit A, or any portion thereof; on the
contrary, any such liens are specifically prohibited and shall be
null and void and of no further force or effect.
Tenant has no power to subject Landlord's interest in the demised
premises to any claim or lien of any kind or character and any
persons dealing with Tenant must look solely to the credit of the
Tenant for payment.
<PAGE> 4
FIRST AMENDMENT TO LEASE
BETWEEN REGENT HOLDING CORPORATION,
A FLORIDA CORPORATION ("LANDLORD") SUCCESSOR TO
CROW-CHILDRESS-DONNER, LIMITED
A TEXAS LIMITED PARTNERSHIP AND DALEEN
TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT")
SUCCESSOR TO INNOVATIVE SELECTIVE
SOFTWARE, INC., AN ILLINOIS CORPORATION
902 CLINT MOORE ROAD, SUITE 230
BOCA RATON, FLORIDA 33487
(CONTINUED)
6. RIGHT OF FIRST REFUSAL: If Landlord receives an offer (an "Outside
Offer") from a prospective tenant to lease space contiguous to the
Premises which Landlord desires to accept, Tenant shall have the
right of first refusal, subordinate to any preexisting rights or
options to renew, to lease such space from the Landlord upon the
identical terms and provisions contained in the Outside Offer.
Tenant shall have seven (7) calendar days from receipt of
notification by Landlord of the Outside Offer to elect to exercise
this right of first refusal by providing written notification of
such election to the Landlord and entering into a legally binding
agreement. In the event the Tenant fails to timely exercise this
right of first refusal, then the Landlord shall be free to
consummate the lease transaction specified in the Outside Offer with
the prospective tenant which has submitted the Outside Offer or with
any other prospective tenant. Tenant's right of first refusal shall
terminate upon Tenant electing not to exercise its right, and
thereafter Landlord may lease the space without first offering it to
Tenant.
7. SECURITY DEPOSIT: Landlord currently owes Tenant the amount
approximately equal to $4,934.14 due to over payment of Operating
Costs as per the Lease. Landlord's shall hold such overpayment as
"Additional Security Deposit." Such Additional Security Deposit
shall be deposited with Landlord according to the conditions set
forth in Paragraph 4.01 of the Original Lease.
8. OPERATING COSTS: Tenant shall pay all Operating Costs for the
Expansion Space during the term provided herein according to the
terms of the Original Lease with the exception that the square
footage of the premises shall be changed effective Jan. 1, 1995 to
approximately 12,816 square feet.
<PAGE> 5
FIRST AMENDMENT TO LEASE
BETWEEN REGENT HOLDING CORPORATION,
A FLORIDA CORPORATION ("LANDLORD") SUCCESSOR TO
CROW-CHILDRESS-DONNER, LIMITED
A TEXAS LIMITED PARTNERSHIP AND DALEEN
TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT")
SUCCESSOR TO INNOVATIVE SELECTIVE
SOFTWARE, INC., AN ILLINOIS CORPORATION
902 CLINT MOORE ROAD, SUITE 230
BOCA RATON, FLORIDA 33487
(CONTINUED)
9. MISCELLANEOUS: Except as set forth in the First Amendment, the Lease
is not otherwise modified and where the provisions of this First
Amendment conflict with the Lease, the First Amendment shall
override.
The parties intending to be bound hereby execute or cause this Second
Amendment to be executed this 29 day of December, 1999.
WITNESSES: LANDLORD:
/s/ [ILLEGIBLE]
- ------------------------------- Regent Holding Corporation
a Florida Corporation
/s/ TRACY ROSARIO
- -------------------------------
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Agent
--------------------------------
TENANT:
Daleen Technologies, Inc.,
a Illinois Corporation
/s/ [ILLEGIBLE]
- -------------------------------
By: /s/ [ILLEGIBLE]
/s/ TRACY ROSARIO -----------------------------------
- -------------------------------
Title: V.P. Finance and CFO
--------------------------------
<PAGE> 6
CCP Phase II, Building 3
EXHIBIT A-1
LEGAL DESCRIPTION
Approximately 12,816 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as 902 Clint Moore
Road, Suite 230, Boca Raton, Florida as shown in Exhibit B. Further described as
Congress Corporate Plaza, Phase II situated within a development known as
Congress Corporate Plaza containing of approximately 106,044 square feet.
<PAGE> 7
EXHIBIT B-1
[ARCHITECTURAL DESIGN OF SPACE]
<PAGE> 1
EXHIBIT 10.20
Daleen Technologies, Inc.
902 Clint Moore Road, Suite 138
Boca Raton, FL 33487
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between Regent Holding
Corporation, a Florida Corporation ("Landlord"), and Daleen Technologies, Inc.,
a Florida Corporation ("Tenant"):
WITNESSETH:
1.01 PREMISES. In consideration of the obligation of Tenant to pay rent
and of the other terms, provisions and covenants hereof, Landlord leases to
Tenant and Tenant leases from Landlord, all that portion of certain real
property situated within the County of Palm Beach, State of Florida, legally
described in Exhibit A, and the buildings and improvements to be constructed
thereon as outlined on the site plan contained in Exhibit B (the "Premises").
Including any truck loading areas specifically marked in red on said Exhibit B
for the exclusive use of Tenant. The Premises and the building within which the
Premises are located (the "Building") are part of a larger development (the
"Development") commonly known as Congress Corporate Plaza, Phase II.
2.01 TERM OF LEASE. The term of this lease shall commence on the "Rent
Commencement Date", as hereinafter defined, and ending 12 months thereafter,
provided however, that in the event the rent commencement date is a date other
than the first day of a calendar month, said term shall extend for said
number of months in addition to the remainder of the calendar month following
the rent commencement date.
2.02 RENT COMMENCEMENT DATE. The "Rent Commencement Date" shall be the
date that Tenant first uses the Premises or any portion thereof for any purpose
permitted under this lease. In the event this lease pertains to a building or
building interior finish to be constructed, the "Rent Commencement Date" shall
be the date upon which the buildings and other improvements erected and to be
erected upon the premises shall have been substantially completed in accordance
with the plans and specifications described on Exhibit "C" attached hereto and
incorporated herein by reference, provided however, that if Landlord shall be
delayed in such substantial completion as a result of: (i) Tenant's failure to
agree to plans, specifications, and cost estimates, within a reasonable period
of time; (ii) Tenant's request for materials, finishes or installations other
than Landlord's standard; (iii) Tenant's changes in plans; the commencement date
and the payment of rent hereunder shall be accelerated by the number of days of
such delay, and provided further that if Landlord cannot substantially complete
the premises as a result of any events (i) through (iii) above, Landlord may as
its election complete so much of Landlord's work as may be practical under the
circumstances and, by written notice to Tenant, establish the commencement date
as the date of such partial completion, subject to any applicable accelerations
due to delays resulting from events (i) through (iii) above. Taking possession
by Tenant shall be deemed conclusively to establish that said buildings and
other improvements have been completed in accordance with the plans and
specifications and that the premises are in good and satisfactory condition, as
of when possession was so taken. Tenant acknowledges that no representations as
to the repair of the premises have been made by Landlord, unless such are
expressly set forth in the lease. After such "Rent Commencement Date" Tenant
shall, upon demand, execute and deliver to Landlord a letter of acceptance of
delivery of the premises. In the event of any dispute as to substantial
completion of work performed, execute or required to be performed by Landlord,
the certificate of Landlord's architect or general contractor shall be
conclusive.
3.01 BASE RENT. Tenant agrees to pay to Landlord rent for the premises, in
advance, without demand, deduction or set off, for the entire term hereof at the
rate of Three Thousand Eight Hundred Seventy Six Dollars ($3,876.00) per month.
One such monthly installment shall be due and payable on the date hereof and a
like monthly installment shall be due and payable on or before the first day of
each calendar month succeeding the rent commencement date, except that the
rental payment for any fractional calendar month at the commencement of the
lease period shall be prorated. The rental payment is subject to adjustment as
provided below.
3.02 RENT ESCALATION. [DELETED]
4.01 SECURITY DEPOSIT. Tenant agrees to deposit with Landlord on the date
hereof the sum of Five Thousand Five Hundred Ninety Six and 29/100 Dollars
($5,596.29), which sum shall be held by Landlord, without obligation for
interest, as security for the full, timely and faithful performance of Tenant's
covenants and obligations under this Lease, it being expressly agreed that
such deposit is not an advance rental deposit or a measure of Landlord's
damages. Upon the occurrence of any event of default by Tenant, Landlord may,
from
1
<PAGE> 2
time to time, without prejudice to any other remedy, use such funds to the
extent necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by Tenant's
default; and Tenant shall pay to Landlord on demand the amount so applied in
order to restore the security deposit to its original amount. Although the
security deposit shall be deemed the property of Landlord, any remaining balance
of such deposit shall be returned by Landlord at such time after termination of
this Lease when Landlord shall have determined that all Tenant's obligations
under this Lease have been fulfilled.
5.01 PERMITTED USE. The Premises shall be continuously used for the sole
purpose of general business offices and/or for receiving, storing, shipping and
selling (other than at retail) products, materials and merchandise made and/or
distributed by Tenant and for no other use or purpose. Tenant shall at its own
cost and expense obtain any and all licenses and permits necessary for any such
use. The overnight parking of automobiles, trucks or other vehicles, and the
outside storage of any property including trash or garbage are prohibited.
Tenant agrees that it shall, at its own cost and expenses keep its employees,
agents, customers, invitees, and/or licensees from parking on any streets
running through or contiguous to the buildings or development of which the
premises are part thereof. Tenant agrees that no washing of any type will take
place in the premises including the truck apron and parking areas. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of
Development or unreasonably interfere with such tenants' use of their respective
premises or permit any use which would adversely affect the reputation of the
Development. Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive, highly flammable or constitutes a
hazardous substance or waste. Tenant shall not permit the Premises to be used
for any purpose (including, without limitation, the storage of merchandise) in
any manner which would render the insurance thereon void or increase the
insurance rate thereof. Tenant agrees to indemnify and hold Landlord harmless
against any and all loss, costs and claims, including attorney's fees relating
to the improper storage, handling, transportation or disposal of explosive,
highly flammable or hazardous materials or resulting from any other improper
use. Tenant shall comply with all governmental laws, ordinances and regulations
applicable to the Premises, and shall promptly comply with all governmental
orders and directives for the correction, prevention and abatement of any
violations or nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense. If, as a result of any change in the governmental laws,
ordinances and regulations, the Premises must be altered to accommodate lawfully
the use and occupancy thereof, such alterations shall be made only with the
consent of Landlord, but the entire cost thereof shall be borne by Tenant;
provided that the necessity of Landlord's consent shall in no way create any
liability against Landlord for failure of Tenant to comply with such laws,
ordinances and regulations. Tenant shall take whatever other actions are
necessary so that the Premises and Tenant's use thereof complies with the Fire
Prevention Code of the National Fire Protection Association and any other fire
prevention laws, ordinances, rules or regulations applicable to the Premises.
6.01 TENANT'S TAXES. Tenant shall be responsible to pay before delinquency
all franchise taxes, assessments, levies or charges measured by or based in
whole or in part upon the rents payable hereunder or the gross receipts of
Tenant and all sales taxes and other taxes imposed upon or assessed by reason of
the rents and other charges payable hereunder. The Florida sales tax imposed on
rent and on other charges payable hereunder shall be paid by Tenant to Landlord
with the payment of Tenant's rental payments and other charges payable
hereunder.
7.01 DEFINITION OF OPERATING COSTS. The term "Operating Costs" shall mean
all costs and expenses paid or incurred by Landlord or on Landlord's behalf in
connection with the ownership, management, repair, replacement, remodeling,
maintenance and operation of the Development (including, without limitation, all
assessed real property taxes, assessments (whether general or special) and
governmental charges of any kind and nature whatsoever including assessments due
to deed restrictions and/or owner's associations, which accrue against the
building and/or development of which the premises are a part, the costs of
maintaining and repairing parking lots, parking structures, easements, and
landscaping, property management fees, utility costs to the extent not
separately metered, insurance premiums, depreciation of the costs of replacement
(as defined below) of the building and improvements in the Development but not
including any structural repairs or replacements which are normally chargeable
to capital accounts under sound accounting principles, and the Building's share
of costs of the Development). The term "operating costs" does not include; (i)
costs of alterations of tenants' premises; (ii) costs of curing construction
defects; (iii) interest and principal payments on mortgages, and other debt
cost; (iv) real estate brokers' leasing commissions or compensation; (v) any
cost or expenditure for which Landlord is reimbursed, whether by insurance
proceeds or otherwise; (vi) cost of any service furnished to any other occupant
of the Building which Landlord does not provide to tenant hereunder. Structural
repairs and replacements are repairs and replacements to the foundations,
load-bearing walls, columns and joists and replacement of roofing and roof deck.
Notwithstanding anything contained herein to the contrary, depreciation of any
capital improvements which are intended to reduce Operating Costs, or are
required under any governmental laws, regulations or ordinances which were not
applicable to the Building or the Development at the time it was constructed, or
are recommended by the N.F.P.A. Life Safety Code, shall be included in Operating
Costs. The useful life of any such improvement as well as all non-structural
replacements shall be reasonably determined by Landlord. In addition, interest
on the undepreciated cost of any such improvement or non-structural replacement
(at the prevailing construction loan rate available to Landlord on the date the
cost of such improvement was incurred) shall also be included in Operating
Costs. If Landlord selects the accrual method of accounting rather than the cash
accounting method for Operating Costs purposes, Operating Costs shall be deemed
to have been paid when such expenses have accrued. Landlord shall have the right
at any time and from time to time to elect, which election shall be subject to
revocation, to exclude that portion of Operating Costs attributable to any
separately assessed part of the Development and any separate building within the
Development. During any period that Operating Costs attributable to any
separately assessed part of the Development and/or separate building are so
excluded from Operating Costs, then for the purposes of calculating Tenant's
proportionate share of Operating Costs as provided in Section 7.02, the
denominator shall not include the rentable area of such separately assessed part
of the Development and/or such separate building. Landlord may, in a reasonable
manner, allocate insurance premiums for so-called "blanket" insurance policies
which insure other properties as well as the Development and said allocated
amount shall be deemed to be an Operating Cost.
If at any time during the term of this lease, the present method of taxation
shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based, shall be deemed to be included within
the term "taxes" for the purposes hereof.
7.02 TENANT'S PROPORTIONATE SHARE OF OPERATING COSTS. Tenant shall pay to
Landlord, as additional rent, its proportionate share of operating costs
calculated on the basis of the ratio set forth in Section 8.01. Any payments
with respect to any partial calendar year in which the Term commences or ends
shall be prorated. Tenant agrees to pay 1,403.52 per month as an escrow amount
for operating costs as defined in Article 7.01. Landlord may, at any time,
deliver to Tenant its estimate (or revised estimate) of such additional amounts
payable under this Section for each calendar year. On or before the first day of
the next month and on or before the first day of each month thereafter, Tenant
shall pay to Landlord as additional rent such amount as Landlord reasonably
determines to be necessary to bring and keep Tenant current. As soon as
practicable after the close of each calendar
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
----------------- ----------------
2
<PAGE> 3
year, Landlord shall deliver to Tenant a statement showing the total amount
payable by Tenant under this Article. If such statement shows an amount due from
Tenant that is less than the estimated payments previously paid by Tenant, it
shall be accompanied by a refund of the excess to Tenant or at Landlord's option
the excess shall be credited against the next monthly installment of rent. If
such statement shows an amount due from Tenant that is more than the estimated
payments paid by Tenant, Tenant shall pay the deficiency to Landlord, as
additional rent. In the event an amount is due and is not paid within thirty
(30) days after the date of Landlord's statement to tenant, the unpaid amount
shall bear interest at the rate of eighteen (18%) percent per annum from the
date of such statement until payment by tenant. Landlord and Tenant acknowledge
that certain of the costs of management, operation and maintenance of the
Development are allocated among all of the buildings in the Development using
methods of allocation that are considered reasonable and appropriate under the
circumstances. Tenant hereby consents to such allocations provided that the
determination of such costs and the allocation of all or part thereof to
Operating Costs hereunder shall be in accordance with generally accepted
accounting principles applied on a consistent basis. Tenant or its'
representatives shall have the right after seven (7) days prior written notice
to Landlord to examine Landlord's books and records of Operating Costs during
normal business hours within twenty (20) days following the furnishing of the
statement to Tenant. Unless Tenant takes written exception to any item within
thirty (30) days following the furnishing of the statement to Tenant (which item
shall be paid in any event), such statement shall be considered as final and
accepted by Tenant. The taking of exception to any item shall not excuse Tenant
from the obligation to make timely payment based upon the statement as delivered
by Landlord.
8.01 TENANT'S PROPORTIONATE SHARE. (a) Tenant's "proportionate share" as used in
this Lease with respect to the Building shall mean a fraction the numerator of
which shall be the rentable area contained in the Premises and the denominator
of which shall be the rentable area contained in the Building, as determined by
Landlord. Tenant's "proportionate share" as used in this Lease with respect to
costs relating to more than the Building, shall mean a fraction the numerator of
which shall be the rentable area contained in the Premises and the denominator
of which shall be the rentable area of all buildings, as determined by Landlord,
within the Development. Notwithstanding anything contained in the Lease to the
contrary, Landlord shall have the right, from time to time, to add to or exclude
from the Development real property and any buildings constructed thereon. In
the event Landlord elects to add to or exclude from the Development, Landlord
shall notify Tenant in writing of any such addition or exclusion which notice
shall describe the property added or excluded.
9.01 TENANT'S OBLIGATIONS. (a) Tenant shall at its own cost and expense keep and
maintain all parts of the Premises and such portion of the Development within
the exclusive control of Tenant in good condition, promptly making all necessary
repairs and replacements, whether ordinary or extraordinary, with materials and
workmanship of the same character, kind and quality as the original, including
but not limited to, windows, glass and plate glass, doors, skylights, any
special office entries, interior walls and finish work, floors and floor
coverings, heating and air conditioning systems, electrical systems and
fixtures, sprinkler systems, water heaters, dock board, truck doors, dock
bumpers, and plumbing work and fixtures. Tenant as part of its obligation
hereunder shall keep the whole of the Premises in a clean and sanitary
condition. Tenant will as far as possible keep all such parts of the Premises
from deteriorating, ordinary wear and tear excepted, and from falling
temporarily out of repair, and upon termination of this Lease in any way, Tenant
will yield up the Premises to Landlord in good condition and repair, loss by
fire or other casualty covered by insurance to be secured pursuant to Article 15
excepted (but not excepting any damage to glass or loss not reimbursed by
insurance because of the existence of a deductible under the appropriate
policy). Tenant shall not damage any demising wall or disturb the integrity and
supports provided by any demising wall and shall, at its sole cost and expense,
properly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees. Tenant shall, at its own cost and expense,
as additional rent, pay for the repair of any damage to the Premises, the
Building, or the Development resulting from and/or caused in whole or in part by
the negligence or misconduct of Tenant, its agents, servants, employees,
patrons, customers, or any other person entering upon the Development as a
result of Tenant's business activities or caused by Tenant's default hereunder.
(b) Tenant at its own cost and expense, enter into a regularly scheduled
preventive maintenance/service contract with a maintenance contractor approved
by Landlord, for servicing all heating and air conditioning systems and
equipment servicing the Premises and an executed copy of such contract shall be
delivered to Landlord. This service contract must include all services suggested
by the equipment manufacturer within the operations/maintenance manual and must
become effective within thirty (30) days of the date Tenant takes possession of
the Premises. Landlord may (but shall not be required to), upon notice to
Tenant, elect to enter into such a maintenance service contract on behalf of
Tenant or perform the work itself and, in either case, charge Tenant therefore,
together with a reasonable charge for overhead.
9.02 LANDLORD'S OBLIGATIONS. Landlord shall maintain in good repair,
reasonable wear and tear and any casualty covered by the provisions of Article
15 excepted, all parts of the Development, other than tenants' demised premises
or portions of the Development within the exclusive control of tenants of the
Development, making all necessary repairs and replacements, whether ordinary or
extraordinary structural or nonstructural, including roof, foundation, walls,
downspouts, gutters, regular mowing of any grass, trimming, weed removal and
general landscape maintenance, including any rail spur areas, exterior painting,
exterior lighting, exterior signs and common sewage plumbing and the maintenance
of all paved areas including driveways and alleys, including, but not limited
to, cleaning, repaving, restripping and resealing. Tenant shall immediately give
Landlord written notice of any defect or need for repairs, after which Landlord
shall have a reasonable opportunity to repair the same or cure such defect.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible under any of the provisions of this Lease shall be
limited to the cost of such repairs or maintenance or the curing of such defect.
The term "walls" as used herein shall not include windows, glass or plate glass,
doors, special store front or office entry.
10.01 ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises (including, without limitation, the roof and wall
penetrations) without the prior written consent of Landlord. If Landlord shall,
consent to any alterations, additions or improvements proposed by Tenant, Tenant
shall construct the same in accordance with all governmental laws, ordinances,
rules and regulations and all requirements of Landlord's and Tenant's insurance
policies and only in accordance with plans and specifications approved by
Landlord; and any contractor or person selected by Tenant to make the same, or,
at Landlord's option and discretion, the alterations, additions or improvements
shall be made by Landlord for Tenant's account and Tenant shall fully reimburse
Landlord for the entire cost thereof. Tenant may, without the consent of
Landlord, but at its own cost and expense and in good workmanlike manner erect
such shelves, bins, machinery and other trade fixtures as it may deem advisable,
without altering the basic character of the Building or Development and without
overloading the floor or damaging such Building or Development, and in each case
after complying with all applicable governmental laws, ordinances, regulations
and other requirements. All shelves, bins, machinery and trade fixtures
installed by Tenant may be removed by Tenant prior to the termination of this
Lease if Tenant so elects, and shall be removed by the date of termination of
this Lease or upon earlier vacating of the Premises if required by Landlord;
upon any such removal Tenant shall restore the Premises to their original
condition. All such removals and restoration shall be accomplished in a good
and workmanlike manner so as not to damage the primary structure or structural
quality of the Building.
11.01 SIGNS AND WINDOW TREATMENT. Tenant shall not install any signs upon
the Building or Development. Landlord will provide, at Tenant's request and
cost, Landlord's standard identification sign, which sign shall be removed by
Tenant upon termination of this Lease at which time Tenant shall restore the
property to the same condition as prior to installation of said sign. Tenant
shall not install drapes, curtains, blinds or any window treatment without
Landlord's prior written consent. Landlord may from time to time require Tenant
to change its signage to conform to a revised standard for the Building,
provided Landlord pays
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
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the cost of removing and replacing such signs. Landlord shall maintain all signs
and the cost thereof shall be charged to Tenant.
12.01 INSPECTIONS. Landlord and Landlord's agents and representatives shall
have the right to enter and inspect the premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6) months
prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall give written notice to Landlord at least thirty (30)
days prior to vacating the premises and shall arrange to meet with Landlord for
a joint inspection of the premises prior to vacating. In the event of Tenant's
failure to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant's vacating the premises shall be conclusively
deemed correct for purposes of determining Tenant's responsibility for repairs
and restoration.
13.01 UTILITIES. Tenant shall pay for all gas, heat, light, power,
telephone, and other utilities and services used on or from the Premises,
including without limitation, Tenant's proportionate share as determined by
Landlord for the use of such utilities which are not separately metered and any
central station signaling system installed in the Premises or the Building,
together with any taxes, penalties and surcharges or the like pertaining thereto
and any maintenance charges for utilities. Tenant shall furnish and install all
electric light bulbs, tubes and ballasts, other than those originally provided
to the Premises by Landlord. Landlord shall in no event be liable for any
interruption or failure of utility services on or to the Premises.
14.01 ASSIGNMENT AND SUBLETTING. (a) Tenant shall not have the right to
assign, sublet, transfer or encumber this lease, or any interest therein,
without the prior written consent of Landlord. Any attempted assignment,
subletting, transfer or encumbrance by Tenant in violation of the terms and
covenants of this Paragraph shall be void. All cash or other proceeds of any
assignment, such proceeds as exceed the rentals called for hereunder in the case
of a subletting and all cash or other proceeds of any other transfer of Tenant's
interest in this lease shall be paid to Landlord, whether such assignment,
subletting or other transfer is consented to by Landlord or not, unless Landlord
agrees to the contrary in writing, and Tenant hereby assigns all rights it might
have or ever acquire in any such proceeds to Landlord. Any assignment,
subletting or other transfer of Tenant's interest in this lease shall be for an
amount equal to the then fair market value of such interest. These covenants
shall run with the land and shall bind Tenant and Tenant's heirs, executors,
administrators, personal representatives, representatives in any bankruptcy
proceeding, successors and assigns. Any assignee, sublessee or transferee of
Tenant's interest in this lease (all such assignees, sublessees and transferees
being hereinafter referred to as "successors"), by assuming Tenant's obligations
hereunder shall assume liability to Landlord for all amounts paid to persons
other than Landlord by such successors in contravention of this Paragraph. No
assignment, subletting or other transfer, whether consented to by Landlord or
not, shall relieve Tenant of its liability hereunder. Upon the occurrence of an
"event of default" as hereinafter defined, If the premises or any part thereof
are then assigned or sublet, Landlord, in addition to any other remedies herein
provided, as provided by law, may at its option collect directly from such
assignee or subtenant all rents becoming due to Tenant under such assignment or
sublease and apply such rent against any sums due to Landlord for Tenant
hereunder, and no such collection shall be construed to constitute a novation or
a release of Tenant from the further performance of Tenant's obligations
hereunder.
(b) If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. 101 et seq., (The "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and be promptly
paid or delivered to Landlord.
(c) Any person or entity to which this lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this lease on and after the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Landlord an instrument confirming such assumption.
15.01 FIRE AND CASUALTY DAMAGE. (a) Landlord agrees to maintain insurance
covering the building of which the premises are a part in an amount not less
than eighty (80%) percent (or such greater percentage as may be necessary to
comply with the provisions of any co-insurance clauses of the policy) of the
replacement cost thereof, insuring against the perils of Fire, Lightning,
Extended Coverage, Vandalism and Malicious Mischief, extended by Special
Extended Coverage Endorsement to insure against all other Risks of Direct
Physical Loss, such coverages and endorsements to be as defined, provided and
limited in the standard bureau forms prescribed by the insurance regulatory
authority for the state in which the premises are situated for use by insurance
companies admitted in such state for the writing of such insurance on risks
located within such state, Subject to the provisions of subparagraphs 15.01(c),
15.01(d), and 15.01(e) below, such insurance shall be for the sole benefit of
Landlord and under its sole control.
(b) If the building situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, tenant shall give written notice
thereof to Landlord.
(c) If the buildings situated upon the premises should be totally destroyed
by fire, tornado or other casualty, or if they should be so damaged thereby that
rebuilding or repairs cannot in Landlord's estimation be completed within two
hundred (200) days after the date upon which Landlord is notified by Tenant of
such damage, this lease shall terminate and the rent shall be abated during the
unexpired portion of this lease, effective upon the date of the occurrence of
such damage.
(d) If the buildings situated upon the premises should be damaged by any
peril covered by insurance to be provided by Landlord under subparagraph 15.01
(a) above, but only to such extent that rebuilding or repairs can in Landlord's
estimation be completed within two hundred (200) days after the date upon which
Landlord is notified by Tenant of such damage, this lease shall not terminate,
and Landlord shall at its sole cost and expense thereupon proceed with
reasonable diligence to rebuild and repair such buildings to substantially the
condition in which they existed prior to such damage, except that Landlord shall
not be required to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the premises by Tenant and except that Tenant shall pay to Landlord upon
demand any amount by which Landlord's cost of such rebuilding, repair and/or
replacement exceeds net insurance proceeds paid to Landlord in connection with
such damage and except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term of the lease exclusive of any option
which is unexercised at the time of such damage. If the premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. In the
event that Landlord should fail to complete such repairs and rebuilding within
two hundred (200) days after the date upon which Landlord is notified by Tenant
of such damage, Tenant may at its option terminate this lease by delivering
written notice of termination to Landlord as Tenant's exclusive remedy,
whereupon all rights and or obligations hereunder shall cease and terminate.
Should construction be delayed because of changes, deletions, or additions in
construction requested by Tenant, strikes, lockouts, casualties, acts of God,
war, material or labor shortages governmental regulation or control or other
causes beyond the reasonable control of Landlord, the period of restoration,
repair or rebuilding shall be extended for the time Landlord is so delayed.
(e) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or dead of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
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requirement is made by any such holder, whereupon all rights and obligations
hereunder shall cease and terminate.
(f) Each of Landlord and Tenant hereby releases the other from any loss or
damage to property caused by fire or any perils insured in policies of insurance
covering such property, even if such loss or damage shall have been caused by
the fault or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such times
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder and then only to the
extent of the insurance proceeds payable under such policies. Each of the
Landlord and Tenant agrees that it will request its insurance carriers to
include in its policies such a clause or endorsement.
16.01 LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees of any other person entering upon the
premises, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation the
trustee and beneficiaries if Landlord is a trust), Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses, including
without limitation attorney's fees and damages, both real and alleged, arising
out of any such damage or injury; except injury to persons or damage to property
the sole cause of which is the gross negligence of Landlord or the failure of
Landlord to repair any part of the premises which Landlord is obligated to
repair and maintain hereunder within a reasonable time after the receipt of
written notice from Tenant of needed repairs. Tenant shall procure and maintain
throughout the term of the lease a policy or policies of insurance, at its sole
cost and expense, insuring both Landlord and Tenant against all claims, demands
or actions arising out of or in connection with (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenant's liability assumed under this lease, the
limits of such policy or policies to be in the amount of not less than
$2,000,000 per occurrence in respect to injury to persons (including death), and
in the amount of not less than $250,000 per occurrence in respect to property
damage or destruction, including loss of use thereof. All such policies shall be
procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certified copies of such policies, together with receipt evidencing
payment of premiums therefore, shall be delivered to Landlord prior to the
commencement date of this lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of the renewal thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be cancelled or changed to reduce Insurance provided thereby.
17.01 CONDEMNATION. (a) If the whole or any substantial part of the
Premises or Building should be taken for any public or quasi-public use under
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof and the taking would prevent or materially
interfere with the use of the Premises or Building for the purpose for which
they are then being used, this Lease shall terminate effective when the legal
taking shall occur as if the date of such taking were the date originally fixed
in the Lease for the expiration of the Term.
(b) If the part of the Premises or Building shall be taken for any public
or quasi-public use under governmental law, ordinance or regulation, or by right
of eminent domain, or by private purchase in lieu thereof, and this Lease is not
terminated as provided above, this Lease shall not terminate but the rent
payable hereunder during the unexpired portion of this Lease shall be reduced to
such extent as may be fair and reasonable under all of the circumstances and
Landlord shall undertake to restore the Premises to a condition suitable for
Tenant's use, as near to the condition thereof immediately prior to such taking
as is reasonably feasible under all the circumstances.
(c) In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings; provided that Tenant shall not be
entitled to receive any award for the loss of any improvements paid for by
Landlord or for Tenant's loss of its leasehold interest, the right to such award
as to such items being hereby assigned by Tenant to Landlord.
18.01 HOLDING OVER. Tenant will, at the termination of this lease by lapse
of time or otherwise, yield up immediate possession to Landlord with all repairs
and maintenance required herein to be performed by Tenant completed. If Landlord
agrees in writing that Tenant may hold over after the expiration or termination
of this lease, unless the parties hereto otherwise agree in writing on the terms
of such holding over, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than (5) days advance written notice, or by
Tenant at any time upon not less than thirty (30) days advance written notice,
and all of the other terms and provisions of this lease shall be applicable
during that period, except that Tenant shall pay Landlord from time to time upon
demand, as rental for the period of any hold over, an amount equal to double the
rent in effect on the termination date, computed on a daily basis for each day
of the hold over period. Tenant shall also pay to Landlord all damages sustained
by Landlord resulting from retention of possession by Tenant, including the loss
of any proposed subsequent tenant for any portion of the Premises. No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this lease except as otherwise expressly provided. The preceding
provisions of this paragraph shall not be construed as consent for Tenant to
hold over.
19.01 QUIET ENJOYMENT. Landlord represents and warrants that it has full
right and authority to enter into this Lease and that Tenant, upon paying the
rental herein set forth and performing its other covenants and agreements herein
set forth, shall peaceably and quietly have, hold and enjoy the Premises for the
Term without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease. Landlord agrees to make reasonable efforts to protect
Tenant from interference or disturbance by other tenants or third persons;
however, Landlord shall not be liable for any such interference or disturbance,
not shall Tenant be released from any at the obligations of this Lease because
of such interference or disturbance. In the event this Lease is a sublease, then
Tenant agrees to take the Premises subject to the provisions of the prior lease.
20.01 EVENTS OF DEFAULT. The following events shall be deemed to be events
of default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due and such failure shall continue for a period of five (5) days from the date
such payment was due.
(b) Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
creditors; or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor to adjudicate it as bankrupt or insolvent, or seeking reorganization or
relief of debtors or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any substantial part of its
property; or Tenant or any such guarantor shall take any action to authorize
or in contemplation of any of the actions set forth above in this paragraph; or
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
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(c) Any case, proceeding or other action against Tenant or any guarantor
of Tenant's obligations hereunder shall be commenced seeking to have an order
for relief entered against it as debtor or to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
(d) A receiver or trustee shall be appointed for all or substantially all
of the assets of the Tenant.
(e) Tenant shall desert or vacate any substantial portion of the premises.
(f) Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 26.01 hereof within twenty (20) days after any such lien
or encumbrance is filed against the premises.
(g) Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 20.01, and shall not
cure such failure within twenty (20) days after written notice thereof to
Tenant.
(h) Tenant shall fail to continuously operate its business at the premises
for the permitted use set forth in Paragraph 5.01 whether or not Tenant is in
default of the rental payment due under this lease.
20.02 Remedies. (a) Upon the occurrence of any of such events of default
described in Paragraph 20.01 hereof, Landlord shall have the option to pursue
any one or more of the following remedies without any notice or demand
whatsoever;
(1) Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord, and if Tenant fails so to do,
Landlord may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of
the premises and expel or remove Tenant and any other person who may
be occupying such premises or any part thereof, by force if necessary,
without being liable for prosecution or any claim of damages therefore.
(2) Enter upon and take possession of the premises and expel or remove
Tenant and any other person who may be occupying such premises or any
part thereof, by force if necessary, without being liable for
prosecution or any claim for damages therefore, and relet the premises
and receive the rent therefore.
(3) Enter upon the premises, by force if necessary, without being liable
for prosecution or any claim for damages therefore, and do whatever
Tenant is obligated to do under the terms of this lease; and Tenant
agrees to reimburse Landlord on demand for any expenses which Landlord
may incur in thus effecting compliance with Tenant's obligations under
this lease, and Tenant further agrees that Landlord shall not be liable
for any damages resulting to the Tenant from such action, whether
caused by the negligence of Landlord or otherwise.
(4) Alter all locks and other security devices at the premises without
terminating this lease.
(b) In the event Landlord may elect to regain possession of the premises
by a forcible detainer proceeding, Tenant hereby specifically waives any
statutory notice which may be required prior to such proceeding, and agrees
that Landlord's execution of this lease is, in part, consideration for this
waiver.
(c) In the event Tenant fails to pay any installment of rent hereunder as
when such installment is due, to help defray the additional cost to Landlord
for processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five (5%) percent of such installment; and the
failure to pay such amount within five (5) days after demand therefore shall be
an event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
(d) In the event Tenant's check, given to Landlord in payment, is returned
by the bank for non-payment, Tenant agrees to pay all expenses incurred by
Landlord as a result thereof.
(e) Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No such alteration of locks or other security devices and
no removal or other exercise of dominion by Landlord over the property of
Tenant or others at the premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby consenting, after any event of default, to the
aforesaid exercise of dominion over Tenant's property within the premises. All
claims for damages by reason of such re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. Tenant agrees
that any re-entry by Landlord may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as Landlord may elect, and Landlord shall not be liable for
trespass or otherwise.
(f) In the event Landlord elects to terminate the lease by reason of an
event of default, then notwithstanding such termination, Tenant shall be liable
for and shall pay to Landlord at the address specified for notice to Landlord
herein, the sum of all rental and other indebtedness accrued to date of such
termination, plus, as damages, an amount equal to the greater of (i) the total
rental hereunder for the remaining portion of the lease term (had such term not
been terminated by Landlord prior to the date of expiration and (ii) the then
present value of the then fair rental value of the premises for such period.
(g) In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental
and other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease
term until the date of expiration of the term as stated in Section 3.01
diminished by any net sums thereafter received by Landlord through reletting
the premises during said period (after deducting expenses incurred by Landlord
as provided in subparagraph 20.02(h). In no event shall Tenant be entitled to
any excess of any rental obtained by reletting over and above the rental herein
reserved. Actions to collect amounts due by Tenant to Landlord under this
subparagraph may be brought from time to time, on one or more occasions,
without the necessity of Landlord's waiting until expiration of the lease term.
(h) In case of any event of default or breach by Tenant, or threatened or
anticipatory breach or default, Tenant shall also be liable for and shall pay
to Landlord, at the address specified for notice to Landlord herein, in
addition to any sum provided to be paid above, brokers' fees incurred by
Landlord in connection with reletting the whole or any part of the premises;
the costs of removing and storing Tenant's or other occupant's property; the
cost of repairing, altering, remodeling or otherwise putting the premises into
condition acceptable to a new tenant or tenants, and all reasonable expenses
incurred by Landlord in enforcing or defending Landlord's rights and/or
remedies including reasonable attorney's fees.
(i) In the event of termination or repossession of the premises for an
event of default, Landlord shall not have any obligation to relet or to attempt
to relet the premises, or any portion thereof, or to collect rental after
reletting; and in the event of reletting, Landlord may relet the whole or any
portion of the premises for any period to any tenant and for any use and
purpose.
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
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(j) If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligations to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
(k) In the event that Landlord shall have taken possession of the premises
pursuant to the authority herein granted then Landlord shall have the right to
keep in place and use all of the furniture, fixtures and equipment at the
premises, including that which is owned or leased to Tenant at all times prior
to any foreclosure thereon by Landlord or repossession thereof by any lessor
thereof or third party having a lien thereon, Landlord shall also have the
right to remove from the premises (without the necessity of obtaining a distress
warrant, writ of sequestration or other legal process) all or any portion of
such furniture, fixtures, equipment and other property located thereon and to
place same in storage at any premises within the County in which the premises
is located; and in such event, Tenant shall be liable to Landlord for costs
incurred by Landlord in connection with such removal and storage. Landlord
shall also have the right to relinquish possession of all or any portion of
such furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or an predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which Claimant purports to act; and Tenant agrees to indemnify
and hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. Any and all
property which may be removed from the Premises by Landlord pursuant to the
authority of this Lease or of Law, to which Tenant is or may be entitled, may
be handled, removed and stored, as the case may be, by or at the direction of
Landlord at the risk, cost and expense of Tenant, and Landlord shall in no
event be responsible for the value, preservation or safekeeping thereof. Tenant
shall pay to Landlord, upon demand any and all expenses incurred in such
removal and all storage charges against such property so long as the same shall
be in Landlord's possession or under Landlord's control. Any such property of
Tenant not retaken by Tenant from storage within thirty (30) days after the
removal from the Premises shall conclusively be presumed to have been conveyed
by Tenant to Landlord under this Lease as a bill of sale without further
payment or credit by Landlord to Tenant. The rights of Landlord herein stated
shall be in addition to any and all other rights which Landlord has or may
hereafter have at law or in equity; and Tenant stipulates and agrees that the
rights herein granted Landlord are commercially reasonable.
21.01 RIGHTS RESERVED TO LANDLORD. Landlord reserves and may exercise the
following rights without affecting Tenant's obligations hereunder:
(a) To change the name or the street address of the Building or the
Development;
(b) To install and maintain a sign or signs on the exterior of the
Building;
(c) To designate all sources furnishing sign painting and lettering,
lamps and bulbs used on the Premises;
(d) To retain at all times pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building or the Development;
(f) To change the arrangement and/or location of entrances and
corridors in and to the Building and to add, remove, rename or
modify buildings, roadways, parking areas, walkways, landscaping,
lakes, grading and other improvements in or to the Development.
22.01
23.01 LANDLORD'S LIEN. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the Premises, and such property shall
not be removed therefrom without the consent of Landlord until all arrearages
in rent as well as any and all other sums of money then due to Landlord
hereunder shall first have been paid and discharged. In the event of a default
under this Lease, Landlord shall have, in addition to any other remedies
provided herein or by law, all rights and remedies under the Uniform Commercial
Code, including without limitation the right to sell the property described in
this Section at public or private sale upon five (5) days notice to Tenant.
Tenant hereby agrees to execute such financing statements and other instruments
necessary or desirable in Landlord's discretion to perfect the security
interest hereby created.
24.01 SUBORDINATION. Tenant accepts this Lease subject and subordinate to
any mortgage and/or deed of trust now or at any time hereafter constituting a
lien or charge upon the Development, the Building, or the Premises, without the
necessity of any act or execution of any additional instrument of subordination;
provided, however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the purpose of evidencing
the subjection and subordination of this Lease to the lien of any such mortgage
or for the purpose of evidencing the superiority of this Lease to the lien of
any such mortgage as may be the case.
25.01 MECHANICS LIENS AND OTHER TAXES. (a) Tenant shall have no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind the interests of Landlord in
the premises or to charge the rentals payable hereunder for any claim in favor
of any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of
any labor performed or materials furnished in connection with any work
performed on the premises on which any lien is or can be validly and legally
asserted against its leasehold interest in the premises or the improvements
thereon and that it will save and hold Landlord harmless from any and all loss,
cost or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of the Landlord in
the premises or under the terms of this lease. Tenant agrees to give Landlord
immediate written notice if any lien or encumbrance
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
----------------- ------------------
7
<PAGE> 8
is placed on the premises.
(b) Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if
the assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
26.01 NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making of
any payment shall be deemed to be complied with when and if the following steps
are taken:
(a) All rent and other payments required to be made by Tenant to Landlord
shall be payable to: Regent Holding Corporation or to such other entity at the
such other address as Landlord may specify from time to time by written notice
delivered in accordance herewith.
(b) Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered, whether actually received or not, when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out
below, or at such other address as they have theretofore specified by written
notice delivered in accordance herewith:
LANDLORD: TENANT:
Regent Holding Corporation Daleen Technologies, Inc.
- ----------------------------------- --------------------------------
c/o Trammell Crow Company 902 Clint Moore Road
- ----------------------------------- --------------------------------
1515 S. Federal Highway, Suite 113 Suite 230
- ----------------------------------- --------------------------------
Boca Raton, FL 33432 Boca Raton, FL 33487
- ----------------------------------- --------------------------------
- ----------------------------------- --------------------------------
- ----------------------------------- --------------------------------
If and when included within the term "Landlord", or "Tenant", as used in
this Instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments. All parties included within the terms "Landlord" and "Tenant",
respectively, shall be bound by notices given in accordance with the provisions
of this paragraph to the same effect as if each had received such notice.
27.01 MISCELLANEOUS. (a) Words of any gender used in this Lease shall be
held or construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.
(b) The terms, provisions and covenants and conditions in this Lease shall
apply to, inure to the benefit of, and be binding upon, the parties hereto and
upon their respective heirs, legal representatives, successors and permitted
assigns, except as otherwise herein expressly provided. Landlord shall have the
right to assign any of its rights and obligations under this Lease and
Landlord's grantee or Landlord's successor, as the case may be, shall upon such
assignment, become Landlord hereunder, thereby freeing and relieving the
grantor or assignor, as the case may be, of all covenants and obligations of
Landlord hereunder. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or
other appropriate documentation evidencing the due authorization of such party
to enter into this Lease. Nothing herein contained shall give any other tenant
in the Development or the Building any enforceable rights either against
Landlord or Tenant as a result of the covenants and obligations of either party
set forth herein. If there is more than one Tenant, the obligations of Tenant
shall be joint and several. Any indemnification of, insurance of, or option
granted to Landlord shall also include or be exercisable by Landlord's agents
and employees.
(c) The captions inserted in this Lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent or this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
(d) In no event shall Landlord's liability for any breach of this Lease
exceed the amount of rental then remaining unpaid for the then current Term
(exclusive of any renewal periods which have not then actually commenced). This
provision is not intended to be a measure or agreed amount of Landlord's
liability with respect to any particular breach and shall not be utilized by
any court or otherwise for the purpose of determining any liability of Landlord
hereunder, except only as a maximum amount not to be exceeded in any event. In
addition, it is expressly understood and agreed that nothing in this Lease shall
be construed as creating any liability against Landlord, or its successors and
assigns, personally, and in particular without limiting the generality of the
foregoing, there shall be no personal liability to pay any indebtedness
accruing hereunder or to perform any covenant, either express or implied,
herein contained, and that all personal liability of Landlord, or its
successors and assigns, of every sort, if any, is hereby expressly waived by
Tenant, and that so far as Landlord, or its successors and assigns is concerned
Tenant shall look solely to the Building for the payment thereof.
(e) Except as set forth in Section 8.01 above, this Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
(f) All obligations of Tenant not fully performed as of the expiration or
earlier termination of the term of this Lease shall survive the expiration or
earlier termination of the Term, including without limitation, all payment
obligations with respect to Operating Costs and all obligations concerning the
condition of the Premises. Upon the expiration or earlier termination of the
Term, and prior to Tenant vacating the Premises, Landlord and Tenant shall
jointly inspect the Premises and Tenant shall pay to Landlord any amount
estimated by Landlord as necessary to put the Premises, including without
limitation heating and air conditioning systems and equipment therein, in good
condition and repair. Any work required to be done by Tenant prior to its
vacation of the Premises which has not been completed upon such vacation, shall
be completed by Landlord and billed to Tenant at cost plus fifteen percent.
Tenant shall also, prior to vacating the Premises, pay to Landlord the amount,
as estimated by Landlord, of Tenant's obligation hereunder for Operating Costs.
All such amounts shall be used and held by Landlord for payment of such
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
---------------- ----------------
8
<PAGE> 9
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefor upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any security deposit held by Landlord shall be credited against
the amount payable by Tenant under this Section.
(g) If any clause, provision or portion of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable under
applicable law, such event shall not affect, impair or render invalid or
unenforceable the remainder of this Lease nor any other clause, phrase,
provision or portion hereof, nor shall it affect the application of any clause,
phrase, provision or portion hereof to other persons or circumstances, and it is
also the intention of the parties to this Lease that in lieu of each such
clause, phrase, provision or portion of this Lease that is invalid or
unenforceable, there be added as a part of this Lease a clause, phrase,
provision or portion as similar in terms to such invalid or unenforceable
clause, phrase, provision or portion as similar in terms to such invalid or
unenforceable clause, phrase, provision or portion as may be possible and be
valid and enforceable.
(h) Submission of this Lease shall not be deemed to be a reservation of
the Premises. Landlord shall not be bound hereby until its delivery to Tenant of
an executed copy hereof signed by Landlord, already having been signed by
Tenant, and until such delivery Landlord reserves the right to exhibit and lease
the Premises to other prospective tenants. Notwithstanding anything contained
herein to the contrary Landlord may withhold delivery of possession of the
Premises from Tenant until such time as Tenant has paid to Landlord the security
deposit required hereunder and the first month's rent as required hereunder, and
any other sums required hereunder.
(i) Tenant shall at any time and from time to time within ten (10) days
after written request from Landlord, execute and deliver to Landlord an
estoppel certificate, in form reasonable satisfactory to Landlord.
(j) Whenever a time period is prescribed for action to be taken by
Landlord, Landlord shall not be liable or responsible for, and there shall be
excluded from the computations for any such time period, any delays due to
causes beyond the control of Landlord.
(k) Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over a time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit. The above statement is incorporated in the
lease as a requirement in order to comply with Florida Statute 404.056(8).
(l) Attached hereto and made part of this Lease is a Rider to Lease.
28.01 EFFECTIVE DATE. All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the last date in point of time,
on which all parties hereto have executed this Lease.
The parties intending to be bound hereby execute or cause this Lease to be
executed this 27 day of August, 1998.
WITNESSES: LANDLORD:
/s/ [ILLEGIBLE] Regent Holding Corporation
- ------------------------------ a Florida Corporation
/s/ [ILLEGIBLE]
- ------------------------------
By: /s/ [ILLEGIBLE]
------------------------------------
Vice President
---------------------------------------
Title:
TENANT:
/s/ PATRICIA A. HARRELL Daleen Technologies, Inc.
- ------------------------------ ---------------------------------------
/s/ LAURA L. KACAT a Florida Corporation
- ------------------------------ ---------------------------------------
By: /s/ [ILLEGIBLE]
------------------------------------
VP-Finance/CFO
---------------------------------------
Title:
Landlord: [ILLEGIBLE] Tenant:
------------- ------------
9
<PAGE> 10
CCP Phase II Building 4
EXHIBIT A
LEGAL DESCRIPTION
Approximately 4,896 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as Suite 138 as shown
in Exhibit B. Further described as Congress Corporate Plaza, Phase II situated
within a development known as Congress Corporate Plaza consisting of
approximately 106,044 square feet.
<PAGE> 11
EXHIBIT B
[Architectural Design of Space]
<PAGE> 12
RIDER TO THE LEASE AGREEMENT BETWEEN REGENT HOLDING
CORPORATION, A FLORIDA CORPORATION, "LANDLORD") AND
DALEEN TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT")
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITE 138, BOCA RATON, FLORIDA 33487
29.0 DELETED
29.01 AMERICANS WITH DISABILITIES ACT: Tenant, at Tenant's sole expense,
shall comply with all laws, rules, orders, ordinances, directions,
regulations and requirements of federal, state, county and municipal
authorities as applicable now in force or which may hereafter be in
force, which shall impose any duty upon the Landlord or Tenant with
respect to the use, occupation or alteration of the premises. If
compliance with such laws require construction, such cost will be borne
by the Landlord, unless such requirements are the results of the
specific usage of premises by Tenant.
30.01 ACCEPTANCE OF PREMISES: Tenant acknowledges that it has inspected the
Premises, knows the condition thereof, and accepts such Premises, and
specifically the buildings and improvements comprising the same, in
their present condition, as suitable for purposes for which the
Premises are leased. Taking of possession by Tenant shall be deemed
conclusively to establish that said buildings and other improvements
are in good and satisfactory condition as of when possession was taken.
Tenant further acknowledges that no representations as to the repair
of the Premises, nor promises to alter, remodel or improve the Premises
have been made by Landlord, unless such are expressly set forth in this
lease. If this lease is executed before the Premises become vacant or
otherwise available and ready for occupancy, or if any present tenant
or occupant of the Premises holds over, and Landlord cannot, using good
faith efforts, acquire possession of the Premises prior to the date
above recited as the commencement date of this lease, Landlord shall
not be deemed to be in default hereunder, nor in any way liable to
Tenant because of such failure, and Tenant agrees to accept possession
of the Premises at such time as Landlord is able to tender the same,
which date shall thenceforth be deemed the "commencement date"; and the
term of this lease shall automatically be extended so as to include the
full number of months herein before provided for, except that if the
commencement date is other than the first day of calendar month, such
term shall also be extended for the remainder of tile calendar month in
which possession is tendered. Landlord hereby waives payment of rent
covering any period prior to such tendering of possession. After the
commencement date, Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises.
31.01 ENVIRONMENT MATTERS: Tenant hereby agrees to conform and comply with
all provisions of Exhibit E, known herein as Environmental Matters.
32.01 LANDLORD'S LIEN PROTECTION: Neither Tenant nor anyone claiming by,
through or under Tenant, including, without limitation, contractors,
subcontractors, material men, mechanics and laborers, shall have any
right to file or place mechanic's, material men's or other liens of any
kind whatsoever upon the demised premises or upon the tract of land
described on Exhibit A, or any portion thereof; on the contrary, any
such liens are specifically prohibited and shall be null and void and
of no further force or effect.
Tenant has no power to subject Landlord's interest in the demised
premises to any claim or lien of any kind or character and any persons
dealing with Tenant must look solely to the credit of the Tenant for
payment.
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
-------------------- --------------------
<PAGE> 13
RIDER TO THE LEASE AGREEMENT BETWEEN REGENT HOLDING
CORPORATION, A FLORIDA CORPORATION, ("LANDLORD") AND
DALEEN TECHNOLOGIES, INC., AN ILLINOIS CORPORATION ("TENANT")
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITE 138, BOCA RATON, FLORIDA 33487
(CONTINUED)
33.01 INSURANCE REQUIREMENT: Certified copies of insurance policies, as
described in paragraph 16.01, together with receipt evidencing payment
of premiums therefore, shall be delivered to Landlord prior to Tenant
taking possession of the Premises. Tenant's failure to provide proof of
insurance shall not delay the Rent Commencement date as defined in
paragraph 2.02 above. In the event Landlord notifies Tenant in writing
that the Premises are ready for occupancy, but Tenant has not furnished
Landlord with proof of insurance, all rent and other charges due under
the lease shall begin to accrue as if Tenant had taken possession of
the Premises as of the date of Landlord's notice.
34.01 ASSIGNING, MORTGAGE & SUBLETTING: Any transfer, sale, pledge, or other
disposition, in any single transaction or cumulatively during the term
of the Lease or any renewal or extension thereof, of a legal or an
equitable interest in an equitable interest in as much as fifty percent
(50%) of the shares or assets of Tenant shall be deemed an assignment
of the Lease, and prohibited without the express written consent of
Landlord, as provided in paragraph 14.01 of the Lease.
35.01 DELETED
36.01 DELETED
37.01 Miscellaneous: This Lease Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter
hereof, and supersedes all other negotiations, understandings, and
representations (if any) made by and between such parties. Should there
be any conflicts between the Lease and this Rider, this Rider shall
control.
38.01 DELETED
39.01 DELETED
The parties intending to be bound hereby execute or cause this Rider to be
executed this 27th day of August, 1998.
WITNESS LANDLORD
By: /s/[ILLEGIBLE] REGENT HOLDING CORPORATION
----------------------------- a Florida corporation
By: /s/[ILLEGIBLE] By: /s/[ILLEGIBLE]
----------------------------- ---------------------------------
Title: Vice President
------------------------------
WITNESS TENANT
By: /s/[ILLEGIBLE] DALEEN TECHNOLOGIES, INC.,
----------------------------- a Florida corporation
By: /s/[ILLEGIBLE] By: /s/[ILLEGIBLE]
----------------------------- ---------------------------------
Title: Vice President of Finance and
------------------------------
Chief Financial Officer
<PAGE> 14
CCP Phase II Building 4
EXHIBIT A
LEGAL DESCRIPTION
Approximately 4,896 square feet of office and/or warehouse space located in a
building containing approximately 53,022 square feet situated on a portion of
approximately 9.49 acres on a parcel of land lying in Section 6, Township 47
South, Range 43 East and being more particularly described as Suite 138 as shown
in Exhibit B. Further described as Congress Corporate Plaza, Phase II situated
within a development known as Congress Corporate Plaza consisting of
approximately 106,044 square feet.
<PAGE> 15
EXHIBIT E
ENVIRONMENTAL MATTERS
(1) Tenant's Covenants Regarding Hazardous Materials.
(A) Compliance with Environmental Laws. Tenant shall at all times and
in all respects comply with all federal, state and local laws, ordinances and
regulations ("Hazardous Materials Laws") relating to industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any oil, flammable explosives, asbestos,
urea formaldehyde, radioactive materials or waste, or other hazardous, toxic,
contaminated or polluting materials, substances or wastes, including, without
limitations, any "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under any such laws, ordinances or regulations
(collectively, "Hazardous Materials").
(B) Hazardous Materials Handling. Tenant shall at its own expense
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals required for
Tenant's use of the Premises, including, without limitation, discharge of
(appropriately treated) materials or wastes into or through any sanitary sewer
serving the Premises. Except as discharged into the sanitary sewer in strict
accordance and conformity with all applicable Hazardous Materials Laws, Tenant
shall cause any and all Hazardous Materials removed from the Premises to be
removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal of such materials and wastes. Tenant shall in all
respects handle, treat, deal with and manage any and all Hazardous Materials in,
on under or about the Premises in total conformity with all applicable Hazardous
Materials Laws and prudent industry practices regarding management of such
Hazardous Materials. All reporting obligations imposed by Hazardous Materials
Laws are strictly the responsibility of Tenant. Upon expiration or earlier
termination of the term of the Lease, Tenant shall cause all Hazardous Materials
to be removed from the Premises and transported for use, storage or disposal in
accordance and compliance with all applicable Hazardous Materials Laws. Tenant
shall not take any remedial action in response to the presence of any Hazardous
Materials in or about the Premises or any Building, nor enter into any
settlement agreement, consent decree or other compromise in respect to any
claims relating to any Hazardous Materials in any way connected with the
Premises or Building, without first notifying Landlord of Tenant's intention to
do so and affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereto. In
addition, at Landlord's request, Tenant shall remove any tanks or fixtures which
contain or contained, or are contaminated with Hazardous Materials.
(C) Notices. Tenant shall immediately notify Landlord in writing of:
(i) any enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Tenant, the Premises or
Building relating to damage, contribution, cost recovery compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any reports made to any environmental agency arising out of or in
connection with any Hazardous Materials; and (iiii) any reports made to any
environmental agency arising out of or in connection with any Hazardous
Materials in, on or removed from the Premises or Building, including any
complaints, notices, warnings, reports or asserted violations in connection
therewith. Tenant shall also supply to Landlord as promptly as possible, and in
any event within five (5) business days after Tenant first receives or sends the
same, with copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Premises, Building or Tenant's
use thereof. Tenant shall promptly deliver to Landlord copies of hazardous waste
manifests reflecting the legal and proper disposal of all Hazardous Materials
removed from the Premises.
INITIALS: Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
--------------- ---------------
<PAGE> 16
(2) Indemnification of Landlord. Tenant shall indemnify, defend (by counsel
acceptable to Landlord), protect, and hold Landlord, and each of Landlord's
partners, employees, agents, attorneys, successors and assigns, free and
harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death of or
injury to any person or damage to any property whatsoever (including water
tables and atmosphere), arising from or caused in whole or in part, directly or
indirectly, by (A) the presence in, on, under or about the Premises or Building
or discharge in or from the Premises or Building of any Hazardous Materials or
Tenant's use, analysis, storage, transportation, disposal, release, threatened
release, discharge or generation of Hazardous Materials to, in, on, under, about
or from the Premises or Building, or (B) Tenant's failure to comply with any
Hazardous Materials Law whether knowingly or unknowingly, the standard herein
being one of strict liability. Tenant's obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary repair, cleanup or detoxification or decontamination of
the Premises or Building, and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith, and shall
survive the expiration or earlier termination of the term of the Lease. For
purposes of the release and indemnity provision hereof, any acts or omissions of
Tenant, or by employees, agents, assignees, contractors or subcontractors of
Tenant or others acting for or on behalf of Tenant (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable to
Tenant.
(3) Additional Insurance or Financial Capacity. If at any time it
reasonably appears to Landlord that Tenant is not maintaining sufficient
insurance or other means of financial capacity to enable Tenant to fulfill its
obligation to Landlord hereunder, whether or not then accrued, liquidated,
conditional or contingent, Tenant shall procure and thereafter maintain in full
force and effect such insurance or other form of financial assurance, with or
from companies or persons and in forms reasonably acceptable to Landlord, as
Landlord may from time to time reasonably request. Landlord may procure such
insurance if Tenant fails to meet its obligation hereunder and the cost thereof
shall be passed through to Tenant.
(4) Environmental Audit; Right of Entry. Landlord shall have the right to
require Tenant to undertake and submit to Landlord a periodic environmental
audit from an environmental company approved by Landlord, which audit shall
cover Tenant's compliance with this Section. Tenant shall promptly comply with
all requirements of such audit and cure all matters raised therein at Tenant's
sole cost.
(5) Radon Gas - Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
The above statement is incorporated in the lease as a requirement in
order to comply with Florida Statute 404.056(8).
INITIALS: Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
--------------- ----------------
<PAGE> 17
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, dated this _______, of ______________ 1998,
by and between Regent Holding Corporation, c/o Trammell Crow Company whose
address is 1515 South Federal Highway, Suite 113, Boca Raton, Florida 33432
(Landlord), and Daleen Technologies, Inc. whose address is 902 Clint Moore Road,
Suite 138, Boca Raton, Florida 33487 (Tenant).
WITNESSETH:
Landlord hereby demises and leases unto Tenant and Tenant hereby hires
and takes from Landlord, upon and subject to the covenants and agreements set
forth in that certain Lease dated 27 of August, 1998, (the "Lease"), made
between Landlord and Tenant, certain premises (Demised Premises) comprising part
of the commercial real property known as Congress Corporate Plaza II, located
upon the tract of land described in Exhibit A attached hereto and made a part
hereof, and consisting of the parcel of land, together with the building(s)
erected thereon.
Landlord and Tenant desire to record this Memorandum of Lease for the
purpose of placing the public on notice of inquiry as to the specific
provisions, terms, covenants and conditions of the Lease, all of which are
incorporated herein by reference with the same force and effect as if herein set
forth in full. Specifically, the Lease contains, among others, the following
covenants and agreements between the parties:
Neither Tenant nor anyone claiming by, through or under Tenant,
including, without limitation, contractors, subcontractors, materialmen,
mechanics and laborers, shall have any right to file or place mechanic's,
materialmen's or other liens of any kind whatsoever upon the demised premises or
upon the tract of land described on Exhibit A, or any portion thereof; on the
contrary, any such liens are specifically prohibited and shall be null and void
and of no further force or effect. Notice is hereby given pursuant to Section
713.10, Florida Statutes, that the Lease contains the following provision:
"Tenant has no power to subject Landlord's interest in the
demised premises to any claim or lien of any kind or character and any
persons dealing with Tenant must look solely to the credit of the
Tenant for payment."
This Memorandum of Lease is being recorded in lieu of recording the
Lease itself for the purpose of placing the public on notice or inquiry as to
the specific provisions, terms, covenants and conditions thereof, and nothing
herein contained is intended to or does change modify or affect any of the terms
or provisions of the Lease or the rights, duties, obligations, easements and
covenants running with the land created hereby, all of which remain in full
force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and sealed
this Memorandum of Lease as of the day and year first above written.
TENANT:
Daleen Technologies, Inc.
a Florida corporation
By: /s/ RICHARD A. SCHELL
---------------------------------
Signature
Richard A. Schell
------------------------------------
Printed Signature
Its: Vice President of Finance/CEO
--------------------------------
Chief Financial Officer
902 CLINT MOORE RD. SUITE 230
BOCA RATON, FL. 33487
--------------------------------
Post Office Address
<PAGE> 18
As to Tenant TENANT
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this 25th day of
August, 1998, by Richard A. Schell, an Officer of Daleen Technologies, Inc. on
behalf of the Corporation. The above-named individual [x] is personally known to
me, or [ ] has produced the following identification ___________________ which
is current or has been issued within the past five years and bears a serial or
other identifying number and did (did not) take an oath.
/s/ PATRICIA A. HARRELL
--------------------------------------
Print Name: Patricia A. Harrell
-------------------------
NOTARY PUBLIC-STATE OF Florida
----------------
Commission Number:
--------------------
My Commission Expires:
[NOTARY STAMP]
LANDLORD:
REGENT HOLDING CORPORATION,
a Florida corporation
By: /s/ [ILLEGIBLE]
---------------------------------
Title: Vice President
------------------------------
As to Landlord LANDLORD
(NOTARIAL SEAL) -----------------------------------
STATE OF FLORIDA
COUNTY OF __________
The foregoing instrument was acknowledged before me this ____ day of
___________, 1998, by _________________, a _______ of _________________________
on behalf of the __________. The above-named individual [ ] is personally known
to me, or [ ] has produced the following identification ___________________
which is current or has been issued within the past five years and bears a
serial or other identifying number and did (did not) take an oath.
--------------------------------------
Print Name:
---------------------------
NOTARY PUBLIC-STATE OF
----------------
Commission Number:
--------------------
My Commission Expires:
(NOTARIAL SEAL)
<PAGE> 1
EXHIBIT 10.21
FIRST AMENDMENT TO THE LEASE
between
REGENT HOLDING CORPORATION,
a Florida corporation
and
Daleen Technologies, Inc.
a Florida Corporation
for premises located at
902 Clint Moore Road
Suite 138
Boca Raton, Florida 33487
Submission of this First Amendment for examination does not constitute an offer
to amend the lease, and this First Amendment shall become effective only upon
execution and delivery hereof by Landlord to Tenant
<PAGE> 2
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN REGENT HOLDING CORPORATION,
A FLORIDA CORPORATION ("LANDLORD") AND
DALEEN TECHNOLOGIES, INC.,
A FLORIDA CORPORATION ("TENANT"),
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITE 138, BOCA RATON, FLORIDA 33487
THIS FIRST AMENDMENT TO LEASE IS MADE THIS 2ND DAY OF DECEMBER, 1998 IS MADE
BETWEEN REGENT HOLDING CORPORATION, A FLORIDA CORPORATION ("LANDLORD"), AND
DALEEN TECHNOLOGIES, INC., A FLORIDA CORPORATION ("TENANT").
BACKGROUND
A. By (the Lease agreement dated August 27, 1998, Landlord leased to
Tenant a portion of space in the building known as Congress Corporate
Plaza, Building Four located at 902 Clint Moore Road, Suite 138, Boca
Raton, Florida comprising approximately 4,896 rentable square feet (the
"Premises").
B. At this time, Landlord and Tenant wish to extend the Lease and modify
the Base Rent.
WITNESSETH
In consideration of the mutual promises of the parties and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties intending to be legally bound, hereby agree as
follows:
1. LEASE TERM: The lease shall be extended for a period of Nine (9) months
from the date of current lease expiration for the period September 1,
1999 through and including May 31, 2000 (the "Extended Term").
2. BASE RENT: Tenant agrees to pay Base Rent during the Extended Term
according to the following schedule:
<TABLE>
<CAPTION>
MONTH OF MONTHLY ANNUAL
EXTENDED TERM BASE RENT BASE RENT
------------- --------- ---------
<S> <C> <C>
Months 1-9 $4,031.04 $48,372.48
</TABLE>
3. LANDLORD'S LIEN PROTECTION: Neither Tenant nor anyone claiming by,
through or under Tenant, including, without limitation, contractors,
subcontractors, materialmen, mechanics and laborers, shall have any
right to file or place mechanic's, materialmen's or other liens of any
kind whatsoever upon the demised premises or upon the track of land
described on Exhibit A, or any portion thereof; on the contrary, any
such liens are specifically prohibited and shall be null and void and
of no further force or effect. Tenant has no power to subject
Landlord's interest in the demised premises to any claim or lien of
any kind or character and any persons dealing with Tenant must look
solely to the credit of the Tenant for payment.
4. OPERATING COSTS: Tenant agrees to continue paying its proportionate
share of Operating Costs as defined in the Lease, subject to adjustment
as defined in the Lease.
5. Except as described herein, the Lease has not been amended in any way.
Landlord: /s/ [ILLEGIBLE] Tenant: /s/ [ILLEGIBLE]
--------------- ---------------
<PAGE> 3
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN REGENT HOLDING CORPORATION,
A FLORIDA CORPORATION ("LANDLORD") AND
DALEEN TECHNOLOGIES, INC.,
A FLORIDA CORPORATION ("TENANT"),
FOR PREMISES LOCATED AT
902 CLINT MOORE ROAD, SUITE 138, BOCA RATON, FLORIDA 33487
(continued)
The parties intending to be bound hereby execute or cause this First Amendment
to be executed this 2nd day of December, 1998.
WITNESSES: LANDLORD:
/s/[ILLEGIBLE] REGENT HOLDING CORPORATION,
- ----------------------------- a Florida Corporation
/s/[ILLEGIBLE] By: /s/[ILLEGIBLE]
- ----------------------------- ---------------------------------
Title: Vice President
------------------------------
TENANT:
/s/[ILLEGIBLE] DALEEN TECHNOLOGIES, INC.,
- ----------------------------- a Florida Corporation
/s/[ILLEGIBLE] By: /s/ R. A. Schell
- ----------------------------- ---------------------------------
Title: Vice President of Finance and
------------------------------
Chief Financial Officer
<PAGE> 4
CCP Phase II, Building 1
EXHIBIT A
LEGAL DESCRIPTION
Approximately 4,896 rentable square feet of office and/or warehouse space
located in a building containing approximately 53,022 square feet situated on a
portion of approximately 9.49 acres on a parcel of land lying in Section 6,
Township 47 South, Range 43 East and being more particularly described as 902
Clint Moore Road, Suite 138, Boca Raton, Florida. Further described as Congress
Corporate Plaza, Phase II situated within a development known as Congress
Corporate Plaza containing of approximately 106,044 square feet.
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES
Daleen International, Inc.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND
REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Daleen Technologies, Inc.
The audits referred to in our report dated May 10, 1999 except as to notes 2,
and 15, which are as of June 30, 1999, included the related financial statement
schedule for each of the years in the three-year period ended December 31, 1998,
included in the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Experts" and "Selected Financial Data" in the
prospectus.
KPMG LLP
Miami, Florida
July 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DALEEN TECHNOLOGIES INC. FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 723
<SECURITIES> 5,753
<RECEIVABLES> 1,211
<ALLOWANCES> 9
<INVENTORY> 0
<CURRENT-ASSETS> 8,357
<PP&E> 4,128
<DEPRECIATION> 1,612
<TOTAL-ASSETS> 11,025
<CURRENT-LIABILITIES> 3,125
<BONDS> 0
21,797
5,301
<COMMON> 32
<OTHER-SE> (19,229)
<TOTAL-LIABILITY-AND-EQUITY> 11,025
<SALES> 2,100
<TOTAL-REVENUES> 5,231
<CGS> 149
<TOTAL-COSTS> 4,242
<OTHER-EXPENSES> 13,911
<LOSS-PROVISION> 247
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> (12,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,169)
<EPS-BASIC> (3.76)
<EPS-DILUTED> (3.76)
</TABLE>
